Articles filed under "dividend growth"



Late-Cycle Nirvana: Moaty Dividends on the Cheap

With economic growth picking up a smidge, and seemingly stable enough for the Federal Reserve to get serious about a potential rate rise in the first half of next year, there’s little to suggest any need to get your inner bear on. But at the same time, with valuations anything but cheap, getting a bit more smart/defensive in your stock allocation seems like a reasonable pursuit.

Enter, the Schwab U.S. Dividend Equity ETF (SCHD). Its got the sort of high-quality large cap issues -- Johnson & Johnson (JNJ), Microsoft (MSFT) and Chevron (CVX) -- that participate plenty on the upside, but also have the nice habit of holding on better when the markets correct. And as Morningstar Analyst Abby Woodham recently noted in Morningstar magazine, about two-thirds of the portfolio is invested in stocks that have been designated by Morningstar to have a wide moat. That compares to less than 50% of the S&P 500.

For income investors, the Schwab US Dividend ETF does indeed provide a dividend yield premium to the SPDR S&P 500 ETF:

SCHD Dividend Yield (TTM) Chart

SCHD Dividend Yield (TTM) data by YCharts

The projected yield for the Schwab portfolio is an even more compelling 3.1%. (You can now find an ETF’s prospective yield on its main quote page, under the Fundamentals section on the right side of the page.)

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$150 Billion Bet: Wrong Place To Stretch For Yield

Retail yield chasers now have more than $150 billion riding on a risky income play that sure doesn't seem to provide commensurate reward opportunity. While junk-quality bank loans got some ink recently for net outflows in May, the $1.7 billion in outflows Morningstar (MORN) reported was barely a blip when measured against the $42 billion in net flows for the 12 months through May. Combined assets for retail bank loan funds and ETFs are now more than $150 billion.

Here’s what investors in the largest bank loan retail portfolio, the $7.2 billion PowerShares Senior Loan ETF (BKLN), earned in the 12 months through May, compared to the high-grade (read: boring) iShares Barclays Core Total U.S. Bond ETF (AGG):

BKLN Total Return Price Chart

BKLN Total Return Price data by YCharts

That’s pretty much all a function of yield, as the bank loan ETF has a trailing 12 month payout near 4.5%, compared to 2.2% for the high-grade portfolio that tracks the benchmark Barclays Aggregate Composite bond index of corporate and government issues.

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Mid-Year Report Part Two: Not All Stocks Overpriced

As we reported in our Mid-Year Report Part One, halfway through 2014, stocks are looking pricier. As investors who choose individual stocks mull the taking of profits, eating of losses and some judicious rebalancing, it’s worth asking very broadly: what’s still cheap?

^SPX Chart

^SPX data by YCharts

Rather than search for super-low-priced shares at this point, we’re looking at the S&P 500 components and using the YCharts Stock Screener to sort out companies trading at a forward PE ratio of below 15. That gives us a pretty big list, ordered by market cap here and also featuring dividend yield and payout ratio. There are 125 stocks in all.

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Mid-Year Report: Not All Stocks Overpriced

Halfway through 2014, stocks are looking pricier. As investors who choose individual stocks mull the taking of profits, eating of losses and some judicious rebalancing, it’s worth asking very broadly: what’s still cheap?

^SPX Chart

^SPX data by YCharts

Rather than search for super-low-priced shares at this point, we’re looking at the S&P 500 components and using the YCharts Stock Screener to sort out companies trading at a forward PE ratio of below 15. That gives us a pretty big list, ordered by market cap here and also featuring dividend yield and payout ratio. There are 125 stocks in all.

And it turns out, with YCharts’ focus on value investing, we’ve written about a fair number of these stocks during the last six months.

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Dividends, Strength, Late-Bull-Market Performance

Investors hungry for income know steady dividend payers such as AT&T (T), Coca-Cola (KO), Chevron (CVX) and Procter & Gamble (PG) can sate their appetite. All currently have dividend yields above the 2.6% level on the 10-year Treasury note:

T Dividend Yield (TTM) Chart

T Dividend Yield (TTM) data by YCharts

But knowing how best to feed on income payers can significantly boost a portfolio’s ultimate payout: total return.

High yielders are a bit like fried food: the fat income yield tastes great but is not necessarily the healthiest choice for long-term returns. Stocks with standout dividend growth are the smug grilled choice: good for your long-term health if not exactly super filling for those in pursuit of current income. A new piece of research from the Leuthold Group suggests the best way to feed on dividend paying stocks is to focus on companies that serve up key quality metrics, such as high return on equity, return on assets, solid cash flow and healthy debt to equity levels.

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Procter & Gamble: You Call This A Turnaround?

Procter & Gamble (PG) landed the 31st slot in this year’s Fortune 500 ranking of America’s biggest corporations. That’s down from 20th in 2009. In an industry where revenue growth has been muted, Procter & Gamble has been near radio silent, bring up the rear when compared to Unilever (UN), Clorox (CLX) and Kimberly-Clark (KMB):

PG Operating Revenue (5 Year Growth) Chart

PG Operating Revenue (5 Year Growth) data by YCharts

Not surprisingly that translates to an equally uninspiring showing for investors. Among the largest companies in the S&P 500 index, only Exxon Mobil (XOM) has had a weaker price gain since the beginning of this bull market in March 2009.

Ever since the financial crisis, Procter & Gamble’s skew toward higher-priced goods has been out of sync with consumers tightening their household budgets here and abroad. Long know for innovation -- who knew we needed a Swiffer till they arrived? – Procter & Gamble’s pipeline has also been slow to generate the next big thing.

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After The Rebound: A Look Ahead For Apple Stock

Through the first 15 weeks of 2014 Apple (AAPL) continued its lagging performance from last year, losing 6.5% while the S&P 500 and its technology subsector posted slightly positive price gains. All that changed in late April when Apple released its fiscal second quarter results. iPhone unit sales grew 17% year-over-year, pushing revenue for the phone segment up 14%. Overall company revenue grew at a solid 5% rate. And market sentiment shifted.

AAPL Chart

AAPL data by YCharts

Since bottoming out late last June, Apple shares are up 60%.

In the quarterly earnings release Tim Cook once again delivered his promising pipeline message: ““We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.” A month later we finally got confirmation of the Beats deal; a move that is more about rebooting Apple’s music initiative (iTunes has been a drag) through Beats’ promising streaming subscription model than the trendy headphones.

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PetSmart Stock: Seriously In The Dog House

Down 22% year-to-date, PetSmart (PETM) has looked like an Internet stock instead of the fat-margin specialty retailer it is. But even with a turnaround in sales growth not expected immediately, investors can look to PetSmart’s record of returning cash in the form of a rising dividend and aggressive buybacks.

Plus, the love-your-dog-or-cat craze is hardly over and PetSmart is well-positioned with upscale merchandise and doggie daycare services to continue to capitalize on that trend. The service element helps PetSmart hang onto customers in the face of online competition on products from Amazon (AMZN) and others.

PETM Chart

PETM data by YCharts

The dividend yield is just 1.4% but the payout has risen nicely since 2009, and there’s room for more increases with payout ratio remaining very low.

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Standout In Pharma Supply Chain’s Growth Story

A 22.5% earnings jump on the back of a 6% revenue gain in the first quarter has sent CVS Caremark shares (CVS) on a mini run since the May 2nd quarterly release. The largest retail pharmacy and second largest pharmacy benefit manager has bested rivals Walgreen’s (WAG) Rite-Aid (RAD) and Express Scripts (ESRX), as well as the S&P 500 and the SPDR Select Health Care ETF (XLV). CVS provided an unusual bit of good news in a mostly lackluster earnings season.

CVS Chart

CVS data by YCharts

A recent report from the Leuthold Group suggests there’s plenty more upside over the long-term as CVS Caremark is well positioned to be a continuing and major beneficiary of demographics (older folks = more prescriptions) and the growing role of generic drugs.

Back in August 2012 Leuthold made its first bull call on eight stocks along the pharmaceutical supply chain. In addition to the aforementioned stocks were Amerisource Bergen (ABC), Cardinal Health (CAH), McKesson (MCK) and Catamaran Corp (CTRX). Since that call, Leuthold’s weighted composite for the eight stocks gained nearly 72%, almost double the advance for the S&P 500 and 20 percentage points ahead of the S&P 500 Health Care Index. In its recent May note, Leuthold reiterated it still likes the theme, and called out CVS Caremark.

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Sell-In-May: Seasonal Winners and Losers Listed

In its May newsletter, the InvesTech investment management team pokes some telling holes in the Sell-in-May theory and finds a more nuanced sector rotation (or at least rebalancing) can take advantage of seasonal laggards and leaders.

While consumer discretionary stocks, such as Comcast (CMCSA), Disney (DIS) and Amazon (AMZN) -- the three largest positions in the Select SPDR S&P 500 Consumer Discretionary ETF (XLY) -- have gained an average of nearly 11% in the past 23 November-thru-April stretches, this sector also has an average loss of 0.3% in the May-Oct stretch dating back to 1990.

Granted, consumer discretionary bucked the trend last year. From November 2012 through April 2013 the SPDR Select Consumer Discretionary ETF outpaced the SPDR S&P 500 ETF (SPY).

XLY Chart

XLY data by YCharts

And it didn’t exactly slow down from May 2013 through October 2013 either:

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