Apple (AAPL) was one of few major stocks that did not participate in the major stock market rally Wednesday. Investors obviously were disappointed that the company did not announce a major dividend hike and/or other shareholder friendly actions at their shareholder meeting or in the Q&A session with Tim Cook Wednesday afternoon. Bernstein Research estimates that at Apple's current rate of free cash flow, it will have $250B in cash on the books in three years if it does not change its capital allocation policies. Investors should also keep in mind that Apple did not announce its major dividend hike in 2012 until after its shareholder meeting last year. I believe Apple will give investors what they want within a month and it is one of three things I believe it needs to do to halt the slide in its shares. While Apple investors patiently await this to happen, they should consider two stocks that did announce major dividend hikes this week. It may be just the ticket to take their minds off Apple's current underperformance.
Ensco (ESV) provides offshore contract drilling services to the oil and gas industry worldwide. It owns and operates an offshore drilling rig fleet of approximately 77 rigs, including 7 drill ships, 13 dynamically positioned semisubmersible rigs, 7 moored semisubmersible rigs and 49 jack up rigs.
4 reasons ESV provides value at $60 a share:
- The company just announced a 33% dividend hike to $2 a share annually. The stock now yields over 3.3%.
- Analysts believe revenues will increase nearly 20% this year and over 10% in FY2014. The stock sports a minuscule five-year projected PEG (.30).
- The company has tripled operating cash flow (OCF) since FY2010 and ESV is priced at under 7x OCF.
- The 14 analysts that cover the stock have a median price target of $70 on the shares. The company has also easily beat earnings estimates each of the last three quarters.
Cedar Fair, L.P. (FUN) owns and operates 11 amusement parks, 4 outdoor water parks, 1 indoor water park, and 5 hotels.
4 reasons FUN is a good addition to an income portfolio at $37 a share:
- The company announced Wednesday a better than 50% increase in its quarterly cash distribution. The shares will now yield approximately 6.5%.
- FUN sells at around 9x operating cash flow. It also is seeking to take advantage of the easy credit markets to refinance approximately 70% of its overall debt which should bring a significant decrease in interest costs once accomplished.
- Earnings are showing solid growth. The company made $1.81 a share in FY2012 but analysts believe that will climb to $2.37 in FY2013 and $2.76 in FY2014. Consensus earnings estimates for both FY2013 and FY2014 have crept up over the last three months.
- Insiders have been net buyers of the stock over the last six months.