Dividend-Growth Is On The Table In 2021
While the average market participant may sit back wondering whether dividends or growth is the better position for 2021 there is a third choice that investors should consider. Dividend-Growth stocks. Dividend-Growth stocks offer the best of both worlds by combining a dividend payment with an outlook for growth. The growth could come in the form of business expansion or acquisition, or it could come in the form of increasing distribution amounts. In either case, the opportunity for long-term gains is very high.
With the economic rebound well underway and another round of stimulus checks on the way, there is no reason to think that dividends won’t be increased in 2021. The trick is finding just the right dividend-growth stocks to fit your portfolio. The stocks I want to highlight today represent not only opportunities for dividend-growth but for high yields and diversification as well.
Juniper Networks, Inc Is An IT Infrastructure Play With 3.5% Yield
Juniper Networks (NYSE:JNPR) has a lot of things going for it that begin with its position as an IT infrastructure play and end with its safely growing 3.5% yield. Looking at Juniper from the business perspective, its position as a network infrastructure manufacturer and service provider makes it a fundamental part of the ongoing shift to digital. The shift that was accelerated by the pandemic and driving double-digit gains across the industry.
Looking at Juniper from the investment perspective, the stock offers a good value at 15X this year’s earnings while most other tech-related dividend stocks are well above the broad market average. Juniper Networks has only been paying a dividend for 7 years but the outlook for future payments is good. The company embarked on a cycle of distribution increases three years ago and is on track for a fourth during the calendar 1st quarter of 2021. The payout ratio is a very manageable 50% so there is ample room for another 5% increase and the balance sheet is a fortress.
Duke Energy Powers A 4.25% Yield
Duke Energy (NYSE:DUK) isn’t exactly what I would call a growth stock. The company has yet to see it business fully recover from the pandemic and when it does the best we can expect is low-single-digit YOY gains. Duke is also not what I would call a great dividend-grower as well. The company has been increasing the payment for 9 years and is expected to continue doing so but at a low single-digit CAGR. What’s great about Duke Energy as a dividend-growth stock is that its high 4.25% yield is safe and there is an outlook for growth. 4.25% is nearly 3X the broad market average and very attractive from the income perspective.
The outlook for share prices is tepid but there is a ray of light at the end of the tunnel. While price action will be hampered over the winter with COVID-related conditions persisting in the economy the reopening is just around the corner. The approved vaccines are slowly making their way through the system are more are on track for approval. When the economic reopening hits full stride we can expect demand from the industrial/commercial sector to surge.
Abbvie: Undervalued, High-Yield, Double-Digit Growth
I think the words undervalued, high-yield, and double-digit growth just about say it all for Abbvie (NYSE:ABBV). This company is the biopharma spin-off from Abbott Laboratories and it is on fire. The company received expanded approval for two of its pipeline drugs that have revenue up 10% in Q1 2020, 25% in Q2 2020, and 51% YOY in Q3 2020. The two main drivers of the growth are Rinvoz and Skyrizi which each grew more than 100% and together amount to about 5% of the net. Growth in these two products should continue at a high double-digit rate over the next several quarters. The two biggest sellers, Humira and Imbruvica grew 4.1% and 9.0% and continue to underpin the company’s revenue.
Regarding the value and the dividend. The stock is trading at only 10X this year’s earnings and 8.5X next year’s offering deep value for the growth and yield. The yield is just over 5.0% and comes with a healthy 50% payout ratio, a robust earnings outlook, a 7-year history of increases (not counting the 20 year’s Abbot increased its distribution before the spin-off), a 20% distribution CAGR, and a healthy balance sheet. Shares of the stock made a strong rally following the Q3 earnings report and look like they are setting up for another move higher.
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20 "Past Their Prime" Stocks to Dump From Your Portfolio
Did you know the S&P 500 as we know it today does not look anything close to what it looked like 30 years ago? In 1987, IBM, Exxon, GE, Shell, AT&T, Merck, Du Pont, Philip Morris, Ford, and GM had the largest market caps on the S&P 500. ExxonMobil is the only company on that list to remain in the top 10 in 2017. Even 15 years ago, companies like Radio Shack, AOL, Yahoo, and Blockbuster were an important part of the S&P 500. Now, these companies no longer exist as public companies.
As the years go by, some companies lose their luster, and others rise to the top of the markets. We've already seen this in the last few decades, with tech companies surpassing industrial and energy companies that once dominated the S&P 500. It's hard to know what the next mega-trend will be that will knock Apple, Google, and Amazon off the top rankings of the S&P 500, but we know that companies won't stay on the S&P 500 forever.
We've identified 20 companies that are past their prime. They aren't at risk of a near-term delisting from the S&P 500, but they show negative earnings growth for the next several years. If you own any of these stocks, consider selling them now before they become the next Yahoo, Radio Shack, Blockbuster, AOL and are sold off for a fraction of their former value.
View the "20 "Past Their Prime" Stocks to Dump From Your Portfolio".