3 sizzling dividend stocks
The highest-yielding issues aren't necessarily the best. Go for these solid and steady picks that pay out consistently, year after year.
By Karen Riccio
In 2013, companies spent $750 billion in share buybacks -- an amount not seen since shortly before the financial crisis -- and the spree is continuing this year.
For the most part, the $750 in share buybacks in 2013 were perceived as investor-friendly moves designed to boost share prices.
However, when shares are bought back under less-desirable circumstances, it could be way to artificially boost value when a company anticipates a sell-off in shares from a poor earnings report or drained pipeline that doesn't bode well for future growth.
Dividends, on the other hand, are tangible. An enterprising corporate accountant can't fake a dividend. Earnings, wages, revenue, taxes, accounts payable, accounts receivable, business write-offs -- all these entries -- can be manipulated to the point that an investor can spend hours poring over financial statements to ensure what's reported is real.
Cash speaks loudly
But you can't fake a cash payment -- either you have the cash or you don't.
Given all the uncertainty surrounding the stock market, it seems all the sweeter to quickly and regularly recoup a portion of your initial investment in dividend income.
It's not always best to seek out the highest-yielding stocks, but rather those that have long histories of consistent increases. Here are golden dividend payers to consider:
PetMed Express (PETS)
Dog is man's best friend, and PetMed Express is a great companion for any investor seeking growth and income. Buoyed by a thriving pet market $53 billion strong, the cash-rich company has increased its dividend by 70 percent since 2009 with its most recent 13 percent hike coming last November.
PETS delivers a 5.2 percent yield and finished last year up 45 percent. Its customers are loyal, as illustrated by consistently rising reorder sales. For the third-quarter fiscal 2014, online sales remained the largest source of income for the company as they grew 2.1 percent to $39.5 million and represented 78.8 percent of total sales.
Although sales did rise, they were adversely affected by the unavailability of branded products from Novartis due to the suspension of its production. With plans to expand its pharmaceutical line, the $302 million company will be in a better position to compete with PetSmart (PETM), the industry's other top dog and MWI Veterinary Supply (MWIV).
The Verizon story is very much a tale of two segments. The $196 billion communications behemoth separates its operating revenue between its wireless and wireline divisions. The 2013 total: $120.6 billion.
Verizon Wireline contributed $2.8 billion, a 15 percent year-over-year gain buoyed by higher demand for speedier broadband and its fiber optic offering, FiOs.
Revenue from Verizon Wireless, on the other hand, accounted for $117.6 billion as it provides service for 97 percent of the entire mobile population of America. This is, by far, the bigger of the two tales and poised to grow even more.
Its recent purchase of 45 percent equity share of Vodafone for $130 billion will push Verizon into growth markets like China and India to its current 31 percent global market (on top of 97 percent in the U.S.). The potential for highest growth in mobile traffic will be the Asia Pacific region, growing at a CAGR of 67 percent.
One research study indicates that in China approximately 3 billion devices will be connected to the Internet by the end of 2016 compared to just 1.5 billion devices (approximately) in 2011.
Although the stock has struggled in 2014, Verizon delivers a 4.5 percent dividend.
No one has mastered the mundane task of selling food on the quick like McDonald's -- the world's No. 1 hamburger purveyor with over 35,000 restaurants worldwide. McDonald's restaurant count far exceeds No. 2 industry player Burger King Worldwide (BKW), which has 13,000 restaurants, and No. 2 Wendy's (WEN), with a footprint of 6,500 locations.
Size doesn't always correlate positively with performance, but in McDonald's case, it does. In the realm of publicly traded fast-food stocks, McDonald's has not only been a top performer, it’s been a consistent one.
While the company's growth is impressive, McDonald's commitment to its dividend policy, one that management has engaged with renewed vigor over the past 11 years, is more impressive.
In 2003, McDonald's paid 40 cents a share in dividends. In 2012, it paid $2.87, having raised its dividend from $2.54 the year before. Today, MCD pays out $3.24 a share to its investors. When you consider the long-term -- the past 13 years -- you see that McDonald's raised its annual dividend at an average rate of 23 percent, roughly doubling the dividend every three-and-a-half years. That's something shareholders can be happy about.
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Do it once a year. This allows the best-performing asset classes to take off and run.
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