Three stocks for those who love dividends and growth
Growth stocks aren’t for everyone, but if you’re also paying dividends they can start to get interesting, according to Jame Brumley in The Motley Fool.
And some of those new names include First Horizon, Cardinal Health, and Broadcom.
First Horizon (3.2% dividend yield)
The Memphis-based entity only has $ 82 billion in assets and operates approximately 500 branches, offering banking services primarily to retail clients in the southern United States.
What it may lack in size and firepower, it makes up for in other ways: growth. Last year’s gross revenue growth of 4.5% easily outpaced the 2.6% average growth of its peers, and the company’s total deposits rank in the top five within 10 of the top 20 southern metropolitan markets. The return on equity (ROE) for the first quarter of its regional banking operations is 24%. That’s more than double the typical ROE produced by larger banks such as Bank of America or Wells Fargo. You are clearly doing something right; That may have a lot to do with its small size, allowing the bank to offer a more specialized and locally minded service.
“More importantly, this successful differentiation, particularly when combined with the company’s ability to integrate acquisitions, easily supports strong dividend growth. First Horizon skipped its usual quarterly dividend increase earlier this year, opting to keep it at $ 0.15 per share, ”Brumley says.
But the decision was made more out of precaution than anything else. Before that, he increased his pay for six years in a row, and even last year’s strained earnings per share of $ 1.22 would still have easily covered this year’s current common stock payment of $ 0.60, a payment that tripled during that time period.
The medical supply distributor will never be an award-winning growth stock. It just isn’t that kind of business. However, it is a business that is always in demand despite persistent concerns that legislation may alter the need for its services.
“The healthcare industry is a mess. And not only in the United States. It’s a disaster in the 40-plus countries in which Cardinal Health operates also, with hospitals, drug manufacturers, pharmacies, doctors, and governments or insurers fighting each other (and their own inefficiencies) for a larger share of the market. It is conceivable that a network of hospitals or clinics could do for itself what Cardinal currently does for them. However, given the more pressing priorities of primary and secondary caregivers, it is unlikely that a clinic or hospital will be able to do the job of logistics and supply sourcing as well or as cost-effectively as Cardinal can do it for them. This is the case even in markets where healthcare has been nationalized under a single payer system, ”Brumley notes.
And that’s why it has mostly undergone a host of industry changes since its inception 50 years ago, including including the Affordable Care Act of 2012, which was supposed to reshape the United States healthcare market. United. That was about the only time revenue had run into a headwind since 1980, and even then it was a temporary hiatus. While operating profit has not grown as steadily, but it has grown. The same goes for the dividend, which has risen every year since 1986. The streak is not likely to end now.
Broadcom (3.1% dividend yield)
While it is unlikely that you will be able to stop by your favorite consumer electronics store and purchase a branded product, you are most likely using a Broadcom-made product right now without even realizing it. The company makes items ranging from Wi-Fi antennas to optical sensors to cable boxes, just to name a few.
It’s relatively boring stuff, but that’s the point: it’s perpetually marketable. This dynamic supports revenue and earnings that have mostly grown each year since its merger with Avago was born in 2016. Additionally, this relatively reliable earnings stream supports surprisingly strong dividend growth. The company’s pay has improved at an annualized rate of nearly 50% over the five years since the two companies became one.
“Don’t expect the payment to keep growing at that rate. It’s been slowing down for some time, and the last 12-month dividend of $ 13.54 is eating up a sizable chunk of the company’s annual operating profit of around $ 22 a share. Shareholders should want Broadcom to reinvest part of their earnings in new growth opportunities, ”says Brumley.
Still, it’s not doing too badly on the forward-looking front despite the chip shortage currently shaking many tech companies. Broadcom announced last month that it is collaborating with Google to improve its combined cloud computing offering. Comcast was also testing company-made hardware capable of handling multi-gigabit broadband connection speeds. Both are just a sample of Broadcom’s future-proof technology.