Who would like a few extra bucks to spend over the next few weeks? The answer is probably anyone, including retired investors needing a bit of extra income from dividends. And all the better if the stocks are on sale now or are poised to grow in a burgeoning industry.
Now might be a good time to consider Verizon Communications, Inc. (NYSE:VZ); WGL Holdings, Inc. (NYSE:WGL); and Aetna, Inc. (NYSE:AET), which have reasonable valuations, good prospects for growth, and upcoming ex-dividend dates.
Can you see me now?
Verizon, which just competed its acquisition of AOL, has struggled a bit lately. The stock has been relatively flat, as both revenue and earnings have declined over the trailing 12-month period, but the company still found room to boost the dividend by 3% to $2.20 a share. The stock now yields a hefty 4.6%, about double that of the 10-year Treasury note.
Things should improve going forward as the AOL deal takes hold and the company capitalizes on the continuing shift of advertising dollars to mobile and video delivery and consistent monetization of popular online content, which has been a strong point for AOL throughout its existence.
Verizon will still continue to benefit from its No. 1 position in the wireless industry with its 108 million subscribers and network coverage of 98%. Main rival AT&T (NYSE:T) is focused on its own acquisition of DirecTV (NYSE:DTV), and probably won't make major moves in the wireless market for the time being. No. 3 Sprint (NYSE:S) is having trouble with its upgrade plan and its network. Only T-Mobile (NASDAQ:TMUS), the fourth-ranked provider, seems to be doing anything at all by keeping up with Verizon in growth in the all-important category of postpaid subscriber additions. Verizon's popular "more everything" plans and superior network quality should keep paying off down the road.
VZ is reasonably priced compared to the overall market, and its P/E is below historical averages and that of its main rivals in the wireless space.
Hurry, the ex-dividend date is July 8.
WGL Holdings supplies natural gas- and energy-related products to customers in Washington, DC and the surrounding areas of Virginia and Maryland, one of the most affluent parts of the country. It pays a $1.85 dividend and yields 3.4%. The dividend has been growing at a 4% clip over the last five years, easily exceeding inflation.
Growth should continue into the future as the area economy, one of the strongest in the country, continually improves and its residential and commercial customers use more energy.
Earnings, revenue, and cash flow are all trending positively right now. For example over the past half-decade, revenue and EPS growth have compounded at an average rate of around 5%. The long-term debt to equity situation is improving as the ratio is now below 1.0.
Shares are on sale now. The trailing P/E of 16 is below the overall market composite of 20, the industry average of 22, and recent historical average of 21 for the company. With an ex-dividend date of July 8, investors have to decide soon if they want to make a purchase and get the August 1 dividend check.
Health insurance is a growth industry
Health insurance stocks are getting a lot of attention right now after the Supreme Court recently ruled that Obamacare subsidies for low-income Americans can continue and as rumors of industry consolidation fly.
Hartford, Conn-based Aetna will continue to sell Obamacare-backed plans helped by those subsidies, and wants to participate in the merger mania by acquiring Humana, Inc., one of the top players in the Medicare Advantage market.
The deal, which has the approval of the Humana board of directors, would provide a nifty growth opportunity for Aetna as more and more baby boomers turn 65 and become eligible for Medicare benefits. This would offset a downward trend in the number of corporate group policies that the industry is underwriting.
Not that Aetna is suffering now. Obamacare has been very, very good for the company. Over the past five years, annual revenue is up an average of 11% and EPS has grown about 8%. That won't change all that much going forward, according to company management and analysts, as government-mandated insurance policies are likely to stay in place for the foreseeable future.
Aetna is not a big divided payer. The stock yields less than 1%, but there is plenty of room to boost payments in the future based on a payout ratio of under 25% and free cash flow available. The company doesn't have to worry about debt, either. Shares are reasonably priced right now as the trailing P/E of 21 is inline with the market and the industry.
Investors will want to pay attention to the merger mania, but can definitely plan for Aetna to ride the Obamacare coattails no matter what happens regarding the Humana deal.
Shareholders could pick up a little extra cash in the form of a dividend payment if they buy before July 14. A check will arrive by the end of the month.
Verizon, WGL Holdings, and Aetna have ex-dividend dates coming up within the next few weeks. Investors might be wise to consider picking up shares in those three companies relatively cheaply, and at the same time take advantage of growth drivers and industry trends available.
Disclosure: I am/we are long VZ.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.