Dividend stocks have been one of the least volatile and best-performing sectors in the market for the past year or so. This trend is likely to continue, as yield-starved investors look for places where their money can actually earn income and preserve capital. The Federal Reserve has implemented low-rate policies that punish anyone who keeps their money in certificates of deposit, savings accounts and even many bonds. Even if you can afford to get paid extremely low rates, when you factor in the effects of taxes and inflation, those more traditional savings vehicles could even be losing you money.
Thanks to this near-zero interest policy, many investors have been forced to consider alternatives. Dividend paying stocks have been the solution for many of those seeking income and inflation protection. While stocks have risks, that can be said of everything. For investors willing to keep money in a CD or a savings account that often pays less than .5% in returns, the risk is that taxes and inflation will actually result in losses, if you consider that purchasing power has historically declined over time due to inflation. For investors seeking income and safety in bonds, the risk is not just inflation, but also the potential for rising rates which could result in a loss of principal if bond prices drop. I bring this up, because it's important for investors to consider the risks of "safe" investments, and perhaps realize that dividend stocks might not be as risky when all these other factors are considered.
While many investors look mostly for stocks that pay a high-yield now, they might be missing somethin even more important, which is the safety and stability of the dividend, as well as the ability for dividend growth. It's easy to see a stock that yields 5% or more and want to buy it for the yield, while overlooking a stock that might only yield half that amount. However, if a stock that yields 2.5% can grow earnings and has historically seen solid dividend growth, it might provide much higher returns in the long-term. I have been researching a number of stocks that have dividend payouts which appear safe, and also offer a strong history of dividend growth. By investing in stocks with dividend growth, it's possible to build a portfolio that protects against inflation, and also offers solid and rising income, along with the potential for capital gains. Here are some stocks to consider for income and dividend growth:
Comcast Corporation (NASDAQ:CMCSA) is mostly known for providing cable television and high-speed Internet services, however, this company also operates USA Network, Syfy, E!, Bravo, CNBC, MSNBC and many more stations. Comcast has an Internet division which includes popular sites such as DailyCandy, Fandango and iVillage. In 2009, the quarterly dividend payment was just 6.25 per share, but Comcast has raised the dividend each year, and it now pays 16.25 cents per quarter. That is almost 300% growth in the dividend payment in just about 3 years. In 2012 alone, the dividend was increased by 44%, to 65 cents annually. With the earnings estimates coming in at about 3 times the current dividend, there is plenty of room for the company to continue raising the dividend for years to come. The company also announced plans to buyback about $6.5 billion worth of stock. Comcast shares have been in a strong uptrend, rising from about $21 in December to over $29 per share recently. Because of that, it makes sense to wait for short-term pullbacks, but longer-term, this stock looks promising for dividend growth investors.
Here are some key points for CMCSA: Current share price: $29.24. The 52 week range is $19.19 to $29.92. Earnings estimates for 2012: $1.87 per share. Earnings estimates for 2013: $2.18 per share. Annual dividend: 65 cents per share, which yields 2.2%
Sherwin-Williams (NYSE:SHW) provides paints, stains and specialty finishes for marine, industrial, automotive and aerospace uses. It sells under many brand names which include: Krylon, Dutch Boy, Miniwax and others. This company was established in 1866, and it has increased dividends annually since 1979. Sherwin-Williams has been posting strong results, and it recently announced that revenues jumped by about 12.7% to a record $8.77 billion. This resulted in earnings of $4.14 per share in 2011. Not surprisingly, the Latin American division posted very strong growth of about 22.7% in 2011, thanks to acquisitions, organic growth and other factors. The company provided earnings guidance for 2012, at a range between $5.37 to $5.67 per share. Furthermore, it purchased about 4.7 million shares of common stock in 2011, which can help boost future results. In 2003, the *annual dividend * was 62 cents per share. However, this company has been raising the dividend every year since, and it now stands at $1.56 per share. This stock has been on an uptrend since December, when it traded at about $83, so it makes sense to wait for pullbacks.
Here are some key points for SHW: Current share price: $102.44. The 52 week range is $69.47 to $103.63. Earnings estimates for 2011: $5.72 per share. Earnings estimates for 2012: $6.65 per share. Annual dividend: $1.56 per share, which yields 1.5%
Analog Devices Inc., (ADI) makes specialized digital signal processing [DSP] integrated circuits, which are used in a variety of electronic devices, such as digital cameras, televisions, mobile phones and more. These circuits provide clearer sound, better pictures and other enhancements. This company recently announced a 20% increase in the dividend, as well as first quarter revenues of $648 million for 2012, which resulted in earnings of 46 cents per share. Management expects second quarter earnings to rise, and provided earnings guidance of 48 to 53 cents per share. Since demand for this company's products is likely to remain strong, and with the earnings estimates at nearly double the dividend payout, income investors could continue to be well-rewarded. Historically, this stock has a strong track record, for example, in 2006, the quarterly dividend was 12 cents per share. However, this company has been raising the dividend every year since, and it now stands at 30 cents per share each quarter, or $1.20 on an annual basis. This stock appears to have strong support around $36 per share, so pullbacks to that level look attractive.
Here are some key points for ADI: Current share price: $38.66. The 52 week range is $29.23 to $43.28. Earnings estimates for 2012: $2.19 per share. Earnings estimates for 2013: $2.71 per share. Annual dividend: $1.20 per share, which yields 3.1%
Abbott Laboratories (NYSE:ABT) is a leading pharmaceutical company based in the U.S. Even though many pharma companies are feeling the impact of patent expirations for a number of key products, Abbott is seeing growth. The company recently reported earnings per share growth of 11.5% for the fourth quarter. Earnings came in at the high range of estimates at $1.45 per share. This company has been able to raise the dividend every year for decades, and it has been paying a dividend since 1924. The dividend has jumped from about 20 cents per share in 1990, to $2.04 annually. That is an incredible track record, especially when you consider that dividends were paid during periods like the Great Depression, wars, recessions, etc. This stock appears to have support at about $55 per share, which is right around the 50-day moving average. Patient investors should consider waiting for pullbacks to that level before buying this solid dividend stock.
Here are some key points for ABT: Current share price: $57.39. The 52 week range is $46.29 to $57.52. Earnings estimates for 2011: $5.02 per share. Earnings estimates for 2012: $5.35 per share. Annual dividend: $2.04 per share, which yields 3.6%
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.