I recommend retirees consider companies possessing high growth rate dividends. Proper research can provide ideas to ensure retirees have a growing income portfolio to offset the costs of rising everyday living expenses. I will address 4 companies possessing an average dividend growth rate exceeding 20% per annum over the past 10 years. In addition, I will highlight one stock that is benefiting due to the historical low Treasury Bond yields.
I firmly believe a retiree's portfolio should have cash cow stocks. These are stocks that offer high yield dividends but aren't growing in revenues or profits They pay a significant percent of their net income per share as dividends. They also commonly possess a high debt to market capitalization level. Secondly a portfolio should have dividend stocks for the "economic moment". Every economic cycle has specific stocks which are doing very well due to specific economic data. For example, oil stocks should excel when oil prices are high.
1. FactSet Research Systems Inc. (FDS)
FactSet Research Systems provides integrated financial information, analytical applications, and client service to buy side and sell side customers. Buy side customers represent 80% of the company's customer base. The sell side represents the other 20%.
The company grew their client count by 53 accounts for the second quarter of 2012. This data is as of February 29th.
The company continues to provide a vital product to the financial community. The product is not an inexpensive offering. This allows the company to grow earnings per share and increase dividends on an annual basis. The company purchased 507,800 shares during the second quarter.
I recommend these shares due to the company's focus and success. The product is a necessary tool for the buy side and sell side financial community. The company had 50 million shares in 2002. Through buybacks, the company has 45 million shares in 2012. The stock is trading at a 21x price to earnings ratio.
FactSet has zero debt on its balance sheet. The company has over $200 million to make acquisitions to bolster the net income for future years.
2. Expeditors International of Washington Inc. (EXPD)
Expeditors International is a global logistics company headquartered in Seattle, Washington. The company's logistics are based on air freight, which was 47% of 2011's revenues. Ocean flight accounted for 31% of 2011's revenues. Customer brokerage and important offerings accounted for 22% of 2011 revenues.
The company has 13,000 employees across 250 global locations. The company ensures products reach their desired location. The company operates in a global economy that is experiencing lack of significant growth due to a slowing economy. This provides an excellent opportunity to enter a vibrant company at stock prices reflecting short term concerns due to a weaker logistics global need. The dividend growth reflects company's management to reward the shareholders.
The company has a pristine balance sheet. The company has zero debt and $1.2 billion in net cash. This is a significant percentage based upon a $9.8 billion market cap entity.
I recommend investors establish a position due to the management's desire to maintain a balance sheet absent of debt. In addition, the company is a logistics leading entity which will only benefit with global economic pickup. The shares are trading at a 25x price to earnings multiple. I am personally buying shares due to the focus upon streamlining operations without the need to require debt for daily operations.
3. CH Robinson Worldwide Inc. (CHRW)
C.H. Robinson is one of the largest logistics companies in N. America. The company offers transportation and logistics services to third party customers. Logistic services include truck load, rail, ocean, and air freight.
The company has zero debt and a history of increasingly paying out a higher dividend each year. The management team is intensely focused upon acquisitions, astute capital allocation of cash, and providing significant long term shareholder results.
The company offers logistic solutions to over 37,000 customers through over 200 global offices. The company focuses upon ensuring an effective supply change, identifying the ideal outsourcing solutions, offering results driven produce sourcing, and offering time sensitive freight services for each customer. The company developed Beyond Brokerage to innovate new ideas for positive logistic performance.
Per a February 22nd presentation, management highlighted the long term success of the business model. On page 4 of the presentation, investors can confirm the outstanding results of C.H. Robinson's management team over the course of 30 years.
I recommend investors consider establishing an investment in C.H. Robinson. I have been adding to my position as the stock price has decreased due in part to the tough global economy. The company is a leading enterprise with a proven track record to reward their shareholders. The company has zero debt on its balance sheet and continues to increase their dividend.
4. Teva Pharmaceutical Industries (TEVA)
Teva Pharmaceutical Industries develops, manufacturs, and sells pharmaceutical products worldwide. Teva is known for its number one ranking as a generic pharma company in the world. The company has operations in 60 countries and has over 46,000 employees.
Products include generic pharma prescriptions in various dosage forms, including tablets, capsules, ointments, creams, liquids, injectables, and inhalants. Most U.S. consumers know the cost savings of paying for a generic prescription versus the name brand product. I know I am very grateful once a drug is cheaper after generics are available!
Teva does offer proprietary, brand name drugs too. 2011 was a difficult year due to the company's leading brand name drug: Copaxone. The drug is used for multiple sclerosis (MS). Teva dealt with significant competition from rival oral formulations of the multiple sclerosis therapy.
Teva has a $3 billion dollar stock buyback plan in place. The completion is expected to extend over the course of 3 years. I have added to shares due to the continued generic sales presence. The company is active in ongoing research and development projects. This will only fund new branded names to hit the market. This should allow the company to continue to grow and prosper with a strong generic and growing branded name portfolio.
Special Situation: Annaly Capital Management, Inc. (NLY)
Annaly Capital is a name which is familiar to income investors. Annaly Capital Management was formed in February 1997 as a real estate investment trust (REIT) and is one of the largest REITs on the NYSE. Annaly primarily invests in various agency and non agency mortgage related securities such as collateralized mortgage obligations (CMOs), agency debentures, mortgage pass through certificates, etc. As a qualified REIT, Annaly is not taxed on certain exempt portions of its income that it distributes as dividends to shareholders.
Annaly has seven subsidiaries - RCAP Securities which is a broker dealer, Merganser Capital Management and FIDAC which are SEC registered investment advisors, Shannon Funding LLC that provides mortgage warehouse financing, Charlesfort Capital Management for customized debt financing to middle market companies, Chimera Investment Corporation for residential mortgages (CIM) and Crexus Investment Corporation for commercial mortgages (CXS).
Annaly's REIT business involves borrowing capital at a certain cost and investing that capital in suitable mortgage based securities to generate higher returns than its cost of capital. In addition, Annaly receives dividends from its subsidiaries and substantially distributes its profits to shareholders as dividends.
Annaly is excelling due to the historic low Treasury Bond market yields.Summary
A retiree does not have to accept a stagnant dividend income. The retiree must research, confirm the research findings, and constantly improve their portfolio holdings. Nobody is going to do this for you. A healthy, vibrant, growing dividend stream can add a spark to the cash cow dividend names. The retiree should embrace both approaches and have the best of both worlds: a solid blue chip income and a growing dividend income stream.
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