Emerson Electric (EMR): A Safe 4.1% Dividend Yield for Patient Investors
EMR’s stock price has plunged by more than 25% in 2015. Many of the company’s markets are being impacted by falling oil prices, sluggish industrial spending trends, manufacturing weakness in China, and a strong US dollar. We believe the company’s dividend is very safe and will continue to grow each year, maintaining EMR’s status as one of the 52 dividend aristocrats. Beyond the dividend, we think EMR’s current stock price offers attractive returns for long-term dividend investors who are willing to wait out volatility in the company’s markets. With so much attention being given to EMR’s challenging markets and dismal outlook for the next year, we believe the company’s restructuring activities, significant portfolio realignment, and opportunity for long-term earnings [...]
5 Tips to Find Safer Stocks
While dividends have historically accounted for 20-40% of the stock market's total return, dividend investors need to remember that changes in the stock's price still account for the majority of returns. In our opinion, some of the biggest factors that can determine how much a stock moves are: (1) the industry it operates in; (2) the amount of operating leverage in its business model; (3) the amount of financial leverage on the balance sheet; (4) the size of the company; and (5) the current valuation multiple. Many investors seeking sources of safe, current income focus almost exclusively on the current dividend yield, the payout ratio, and maybe the price-to-earnings ratio ("P/E"). And why not? After all, this is the easiest [...]
The 10 Best-Performing Dividend Stocks During Q3
With Q3 wrapping up last week, what did we learn from the market? One helpful form of analysis is to look at the best performing dividend stocks to see if any trends emerge. Our search for the 10 best dividend stocks of Q3 looked at dividend-paying stocks with market caps greater than $400 million and a current dividend yield of at least 2%. We also excluded stocks that received offers to be acquired. The third quarter was marked by extreme market volatility compared to recent years, and the S&P 500 ended up dropping by more than 6%. As Q3 progressed, stock market volatility increased as macro data continued disappointing, capped off by last week’s underwhelming US payroll report. According to an [...]
General Motors (GM) – An Unloved 4.6% Dividend Yield
GM has been nothing short of an extremely disappointing business (and investment) for more than a decade. Market share losses, chronically unprofitable operations, ballooning pension and healthcare obligations, safety issues, vehicle recalls, a massive government bailout during the financial crisis, and more have left investors’ skeptical of GM since its relisting in late 2010. More recently, uncertainty in China (GM’s second largest market) and a potentially peaking automotive market have created additional anxiety about making an investment in the company. We think the new GM is a much healthier, structurally more competitive company that is attractively priced with a 4.6% dividend yield and a 2016 forward earnings multiple of about 6x. GM was added to our Top 20 Dividend Stocks [...]
Omnicom (OMC) – A Dominant Dividend Payer
Rapid growth in digital advertising is sending ripples throughout the marketing landscape. This year has seen an unprecedented level of media reviews by some of the biggest advertisers in the world as they seek to optimize their marketing spend and partner with the most tech-savvy advertising agencies. Not surprisingly, the dominant advertising agencies are scrambling to build out their portfolios of digital services to evolve with the market’s changing trends and demands. In this piece, we will look at the historical strengths of the ad agencies and whether or not they still apply in an increasingly digital world. OMC is our favorite ad agency and was added to our Top 20 Dividend Stocks list on 6/24/15 at a price of [...]
T. Rowe Price (TROW) – A Dividend Aristocrat with Room to Run
TROW has raised its dividend each year for more than 25 consecutive years, qualifying it as one of the 52 dividend aristocrats. The stock has sold off with the market over the last six months, shedding more than 10%. While the stock is sensitive to the market's near-term gyrations, TROW's dividend is extremely safe and appears to offer very strong long-term growth potential. The actively-managed fund industry faces downward fee pressure and increasing competition from lower-cost passively-managed products, but several unique characteristics of TROW's business give us confidence that the company can continue chugging along. TROW was added to our Top 20 Dividend Stocks list on 7/29/15 at a price of $77.56. Business Overview TROW offers mutual funds [...]
Cyclical Fears Surrounding Cummins (CMI) Create Opportunity for Dividend Growth Investors
CMI’s stock has declined more than 20% over the past six months. Investors are concerned about the slowdown in China, softness in off-highway machinery markets caused by slumping commodity prices, and potentially peaking demand in the North American truck market. CMI serves a variety of cyclical markets around the world, and many of them have faced challenges in recent years. Investors are becoming increasingly impatient and uneasy wondering when the next leg of growth will occur. For long-term dividend growth investors willing to stomach some volatility, CMI’s 3.6% dividend yield is appealing given the dividend’s safety and growth potential. CMI was added to our Top 20 Dividend Stocks list on 7/9/15 at a price of $127.77. Business Overview [...]
Boeing’s (BA) Dividend Growth Continues Flying High
Building a large commercial jet is an unbelievable undertaking. While jet orders ebb and flow with the health of the global economy, we believe the long-term demand trajectory is up and to the right, and the jet industry’s competitive dynamics will ensure Boeing (BA) remains a key player in the market for decades to come. For these reasons, BA was added to our Top 20 Dividend Stocks list on 7/10/15 at a price of $144.48. Business Overview BA is the world’s largest aerospace company and leading manufacturer of commercial airplanes and defense, space and security systems. The single biggest exporter and the only large commercial jet manufacturer in the United States, BA supports airlines and U.S. and allied [...]
Broadridge Financial Solutions (BR): A Boring but Excellent Dividend Growth Stock
Dick Grasso, the former CEO and chairman of the New York Stock Exchange, called Broadridge “the most important firm on Wall Street that you’ve never heard of.” Sometimes, the most boring, under-the-radar businesses prove to be the best long-term investments. We think BR could be one of them...
5 Dividend Stocks that Powered Through the Financial Crisis
The following five dividend stocks grew sales, GAAP earnings per share, and free cash flow during the 2008-09 financial crisis, allowing them to raise their dividends and outperform the S&P 500 by more than 25% in 2008. With global economies facing increased uncertainty and stock markets showing higher volatility in recent weeks, maintaining a dividend portfolio that provides safe income and capital preservation in down markets is more important than ever. The five dividend stocks that breezed through the great recession are Bristol-Myers Squibb (BMY), Church & Dwight (CHD), Comcast Corporation (CMCSA), Rollins, Inc. (ROL), and Wal-Mart Stores, Inc. (WMT). WMT has even increased its dividend for more than 25 consecutive years, making it one of the 52 dividend aristocrats. [...]