Some investors are waiting for Google (GOOG) to start paying a dividend with the reasoning that this monster cap stock, while having decent growth of over 16% expected for this and next year, is not the high-growth earner it once was. With high free cash flow they could easily disperse a sustainable dividend.
Others say that Berkshire Hathaway (BRK.A, BRK.B) should also pay a dividend. Shares climb when Warren buys a wonderful company at a discount price and then waits for the market to correct from irrationality. If the market keeps rising, Warren may not see a good bargain and will be forced to pay dividends...at least until he finds another use for his cash. Unfortunately, he will have to declare a lot of taxes since he holds a whopping amount of shares himself.
Some claim that Apple (AAPL) is hoarding cash with almost 27 billion in reserves and a trailing operating cash flow of 22.59 billion dollars.
While we might not be inclined to sit around waiting for these companies to pay dividends, here are a few picks that might be good choices in the near future…
Three Income Investing Picks
Bristol-Myers has one key difference when comparing it to another dividend paying giant LLY… and that is a good pipeline of potential cash-makers which include a treatment for skin cancer, a diabetes treatment, and one for blood clot prevention. Although growth for this company is forecast to be low single digits this year and perhaps a decline in 2012, it could also come out with positive earnings surprises that we have seen a few times in 2010. With a healthy forward annual dividend of 5% this could make a good future play. If you are worried about the market, sell some long term LEAPS thereby lowering your net cost and effectively boosting your dividend yield per invested dollar.
Fidelity National Financial is another company offering decent dividends with a forward yield of 5.2%. With an only 49% payout ratio, there is a lot of room to raise the dividend. With plans to repurchase 10 million shares growth rates will be pumped, even if artificially. With a book value per share exceeding current trading value and three quarters of massive earnings surprises, this appears like a good buy. It might get slightly cheaper still if we enter into a correction after retreating from the 1300 level on the S&P 500.
Weyerhaeuser is the third pick. If you follow Cramer, he thinks this lumber producing giant will rebound from current depressed lumber prices from the housing lull because of the demand related to the rebuilding work in Australia. While not currently a great pick for dividend investors with a yield under 1%, the future growth this year and next year being 4x the industry average indicates it might be a good time to buy before a potential earnings pop and a larger dividend is announced that is more in line with historical yields of just below 5%. Some might prefer to wait and see, but that often leads to chasing trains that have already left the station.
Still, even after doing your due diligence, you just may want to wait to see if the market corrects so you can pick up your wonderful dividend paying company at an even more wonderful price.