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The Top 10 stock performers for dividends

A high-dividend income is a thing of beauty in today’s low-interest rate world.

Many top blue-chip companies offer income streams of between 3 and 6 per cent a year to reward investors for holding their stock, a far higher return than you will get from any savings account.

Dividends also offer the prospect of a rising income stream, as most companies aim to increase the size of their payouts year after year.

Yet too many investors fixate on share price growth when deciding which stocks to buy, and ignore the income on offer.

Over the longer run, dividend payments can account for three-quarters of your total return from stocks and shares, provided you automatically reinvest them back into the stock for future growth. After you have retired, the dividends can top-up your pension.

While investing in stocks and shares will always be riskier than leaving your money in the bank, it may be more rewarding in the longer run.

You can reduce the dangers by holding for the long term, at least five years and preferably 10 years or longer and further limit your risk by picking a diversified range of stocks covering different markets, sectors and geographical regions.

Dividend income is not guaranteed: companies may cut their payouts if, say, profits fall, although management is reluctant to do so as this sends out negative signals and punishes the share price. Dividend income is also potentially exposed to taxes.

Here, the experts select 10 global companies that could help you come out on top.

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US Bancorp (NYSE: USB)

Tom Anderson, investment manager at UK-based Killik & Co, which has clients in the UAE, rates Bancorp as a top income stock.

Mr Anderson says the US banking sector looks attractive right now, with the US Federal Reserve the only central bank in the world that is actually looking to increase interest rates.

Higher rates will benefit US banks because they give them an opportunity to increase their margins on the money they lend to personal and business customers, he says. “Bancorp is a high-quality play on domestic US banking and looks set to continue generating healthy cash returns.”

Bancorp currently trades at a 15 per cent premium to larger rival US banks, Mr Anderson notes. “We believe this premium is justified given the group’s industry leading returns and lower risk profile. It also offers high returns on tangible equity, which are now close to 20 per cent.”

The prospective dividend yield is relatively low at 2.3 per cent but Anderson expects this to rise at a rapid rate, between, say, 7 and 9 per cent a year, giving investors a rising income stream. “Bancorp is a high quality play on the US banking sector under a Donald Trump presidency, offering a combination of both income and share price growth.”

Income yield: 2.3 per cent

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Novo Nordisk (OMX: NOVO.B)

Mr Anderson also picks the global health care company, Novo Nordisk, as one of his top global income plays.

The company, headquartered in Denmark, employs approximately 42,600 people in 75 countries and markets its products in more than 180 countries. “It is one of the world’s largest health care companies, with an industry-leading position in treatment of diabetes, one of the world’s fastest-growing health threats.” The rising cost of prescription drugs is a major concern and Trump threatened on the campaign trail to squeeze prices, which knocked its share price, although it is still up 80 per cent over the past five years.

Mr Anderson says recent slippage could be a good buying opportunity. “The company now trades at the lowest valuation in 10 years, putting it in line with its peers. Yet we believe the shares deserve to trade at a premium given the long-term growth opportunity in diabetes.”

Novo Nordisk also has a strong track record of generating cash and returning this to shareholders. “As well as a progressive dividend, with a current yield of 2.5 per cent, the company uses 95 per cent of free cash flow after dividends for share buy-backs, further boosting shareholder returns.”

Income yield: 2.5 per cent

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Intel (NASDAQ: INTC)

Chipmaker Intel Corporation was a key figure in computing until recently, dominating the PC sector along with Microsoft.

However, it has been hit by the slowdown in global shipments of desktops and laptops, failing to cash in on the surge in tablet and smartphone sales.

Intel’s PC chip business is still profitable, making up around half of company revenues, but management is now looking elsewhere for growth.

Profits fell sharply last year but Chris Beauchamp, market analyst at online trading platform IG, which recently opened offices in Dubai, says Intel is now putting recent troubles behind it and is looking to complete the shift from a PC company to one that powers the cloud and billions of smart, connected computing devices.

“Intel has re-energised its performance with a focus on chips for data centres and on automation technologies that are a key part of the shift to the Internet of Things and cloud computing,” he says.

The share price is up 40 per cent over the past five years. Mr Beauchamp adds: “The current yield of 2.85 per cent is lower than in previous years, but this is a sign of increasing investor confidence, which has pushed the stock price higher with hopes of more to come.”

Income yield 2.85 per cent

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ExxonMobil (NYSE: XOM)

It is has been a tough few years for the oil industry, with the price of a barrel of crude plunging below $30 in January last year.

Brent crude has since recovered to trade above $55 a barrel and this has helped oil stocks away from their recent lows. Mr Beauchamp picks ExxonMobil as one of his favourite global income plays.

The US oil giant has inevitably been hit by the slump in oil prices, with its share price up just 13 per cent over the past five years. However, it has just posted healthy full-year earnings of $7.8 billion and fourth-quarter earnings of $1.7bn, while cash flow more than covered the company’s dividends and net investments.

Quarterly earnings actually fell due to a one-off $2 billion impairment charge but Mr Beauchamp says the outlook for ExxonMobil should continue to improve. “Production costs have fallen over the past year, while there are signs that emerging market demand is picking up. With a current yield of around 3.60 per cent and an oil market that is far healthier than it was a year ago, ExxonMobil seems to be reclaiming its place as one of the key income stocks.”

Income yield: 3.60 per cent

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Johnson & Johnson (NYSE: JNJ)

Another health care stock selected by Mr Anderson is Johnson & Johnson, one of the largest and most diversified health care companies in the world.

The company is split into three divisions covering pharmaceuticals, medical devices such as surgical instruments, and consumer health care and beauty products. “Diversification is strength because the company is not dependent on the success of a small number of products.”

J&J, as it is known, is one of only two US companies to be rated “AAA” by all three major ratings agencies, Fitch Group, Moody’s and Standard & Poor’s. Microsoft is the other. “Income seekers have benefited from rising cash flows and a shareholder-friendly approach, with dividends and share buy-back payouts totalling over $57 billion in the last five years, equating to over 80 per cent of free cash flow.”

The company’s share price is up nearly 75 per cent over the past five years, it has just reported a steady 1.7 per cent rise in sales during the final quarter of last year and it yields 3 per cent – something Mr Anderson expects to grow as the company’s earnings should continue to rise.

Income yield: 3 per cent

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NestlÃ© (VTX: NESN)

Swiss-based international NestlÃ© is the world’s largest food company, measured by revenues, offering everything from baby food to bottled water, breakfast cereals, coffee and tea, ice cream, frozen food and snacks.

Top brands include Nespresso, NescafÃ©, Kit Kat, Smarties, Maggi, Carnation, Vittel, Häagen-Dazs and Mövenpick.

The share price has performed solidly, rising 36 per cent over the past five years, and Mr Beauchamp describes the company as a steady income play. “Consumer staples never go out of vogue, and NestlÃ©’s broad suite of products means it is relatively immune to changing fashions,” he says.

He warns that NestlÃ© may not grow as rapidly as some companies, but investors will enjoy the taste of its progressive income stream, with a current yield of 3.2 per cent a year.

Income yield: 3.2 per cent

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National Grid (LSE: NG)

Publicly-quoted utility companies are considered one of the steadiest income sources of all, offering a basic service to millions of customers.

London-listed National Grid is a twist on this theme because it doesn’t actually supply gas and electricity. Instead, its job is to operate essential infrastructure that keeps the energy flowing in both the UK and north-eastern US.

Helal Miah, investment research analyst at UK stockbrokers The Share Centre, says it manages an everyday necessity for which there is constant demand. “This gives it relatively steady earnings and cash flow streams. In effect, National Grid is a natural monopoly.”

National Grid currently yields a steady income of 4.67 per cent, and aims to increase this each year in line with the UK’s retail price index (RPI), which stood at 2.5 per cent in December.

Mr Miah says the company recently announced plans to sell a majority stake in its gas distribution business and return Â£4 billion from the sale to shareholders, probably in the form of a special dividend.

Recent share price performance has disappointed but National Grid continues to benefit from recent weakness in sterling, which boosts the value of its US dollar earnings.

Income yield: 4.67 per cent

Source: The National

The Top 10 stock performers for dividends was originally published on JMM Group of Companies

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martinfzimmerman · 8 years

Text

The Top 10 stock performers for dividends

A high-dividend income is a thing of beauty in today's low-interest rate world.

Many top blue-chip companies offer income streams of between 3 and 6 per cent a year to reward investors for holding their stock, a far higher return than you will get from any savings account.

Dividends also offer the prospect of a rising income stream, as most companies aim to increase the size of their payouts year after year.

Yet too many investors fixate on share price growth when deciding which stocks to buy, and ignore the income on offer.

While investing in stocks and shares will always be riskier than leaving your money in the bank, it may be more rewarding in the longer run.

Here, the experts select 10 global companies that could help you come out on top.

newslide

US Bancorp (NYSE: USB)

Tom Anderson, investment manager at UK-based Killik & Co, which has clients in the UAE, rates Bancorp as a top income stock.

Mr Anderson says the US banking sector looks attractive right now, with the US Federal Reserve the only central bank in the world that is actually looking to increase interest rates.

Higher rates will benefit US banks because they give them an opportunity to increase their margins on the money they lend to personal and business customers, he says. "Bancorp is a high-quality play on domestic US banking and looks set to continue generating healthy cash returns."

Bancorp currently trades at a 15 per cent premium to larger rival US banks, Mr Anderson notes. "We believe this premium is justified given the group's industry leading returns and lower risk profile. It also offers high returns on tangible equity, which are now close to 20 per cent."

The prospective dividend yield is relatively low at 2.3 per cent but Anderson expects this to rise at a rapid rate, between, say, 7 and 9 per cent a year, giving investors a rising income stream. "Bancorp is a high quality play on the US banking sector under a Donald Trump presidency, offering a combination of both income and share price growth."

Income yield: 2.3 per cent

newslide

Novo Nordisk (OMX: NOVO.B)

Mr Anderson also picks the global health care company, Novo Nordisk, as one of his top global income plays.

The company, headquartered in Denmark, employs approximately 42,600 people in 75 countries and markets its products in more than 180 countries. "It is one of the world's largest health care companies, with an industry-leading position in treatment of diabetes, one of the world's fastest-growing health threats." The rising cost of prescription drugs is a major concern and Trump threatened on the campaign trail to squeeze prices, which knocked its share price, although it is still up 80 per cent over the past five years.

Mr Anderson says recent slippage could be a good buying opportunity. "The company now trades at the lowest valuation in 10 years, putting it in line with its peers. Yet we believe the shares deserve to trade at a premium given the long-term growth opportunity in diabetes."

Novo Nordisk also has a strong track record of generating cash and returning this to shareholders. "As well as a progressive dividend, with a current yield of 2.5 per cent, the company uses 95 per cent of free cash flow after dividends for share buy-backs, further boosting shareholder returns."

Income yield: 2.5 per cent

newslide

Intel (NASDAQ: INTC)

Chipmaker Intel Corporation was a key figure in computing until recently, dominating the PC sector along with Microsoft.

However, it has been hit by the slowdown in global shipments of desktops and laptops, failing to cash in on the surge in tablet and smartphone sales.

Intel's PC chip business is still profitable, making up around half of company revenues, but management is now looking elsewhere for growth.

"Intel has re-energised its performance with a focus on chips for data centres and on automation technologies that are a key part of the shift to the Internet of Things and cloud computing," he says.

The share price is up 40 per cent over the past five years. Mr Beauchamp adds: "The current yield of 2.85 per cent is lower than in previous years, but this is a sign of increasing investor confidence, which has pushed the stock price higher with hopes of more to come."

Income yield 2.85 per cent

newslide

ExxonMobil (NYSE: XOM)

It is has been a tough few years for the oil industry, with the price of a barrel of crude plunging below $30 in January last year.

Brent crude has since recovered to trade above $55 a barrel and this has helped oil stocks away from their recent lows. Mr Beauchamp picks ExxonMobil as one of his favourite global income plays.

Quarterly earnings actually fell due to a one-off $2 billion impairment charge but Mr Beauchamp says the outlook for ExxonMobil should continue to improve. "Production costs have fallen over the past year, while there are signs that emerging market demand is picking up. With a current yield of around 3.60 per cent and an oil market that is far healthier than it was a year ago, ExxonMobil seems to be reclaiming its place as one of the key income stocks."

Income yield: 3.60 per cent

newslide

Johnson & Johnson (NYSE: JNJ)

Another health care stock selected by Mr Anderson is Johnson & Johnson, one of the largest and most diversified health care companies in the world.

The company is split into three divisions covering pharmaceuticals, medical devices such as surgical instruments, and consumer health care and beauty products. "Diversification is strength because the company is not dependent on the success of a small number of products."

J&J, as it is known, is one of only two US companies to be rated "AAA" by all three major ratings agencies, Fitch Group, Moody's and Standard & Poor's. Microsoft is the other. "Income seekers have benefited from rising cash flows and a shareholder-friendly approach, with dividends and share buy-back payouts totalling over $57 billion in the last five years, equating to over 80 per cent of free cash flow."

The company's share price is up nearly 75 per cent over the past five years, it has just reported a steady 1.7 per cent rise in sales during the final quarter of last year and it yields 3 per cent - something Mr Anderson expects to grow as the company's earnings should continue to rise.

Income yield: 3 per cent

newslide

Nestlé (VTX: NESN)

Swiss-based international Nestlé is the world's largest food company, measured by revenues, offering everything from baby food to bottled water, breakfast cereals, coffee and tea, ice cream, frozen food and snacks.

Top brands include Nespresso, Nescafé, Kit Kat, Smarties, Maggi, Carnation, Vittel, Häagen-Dazs and Mövenpick.

The share price has performed solidly, rising 36 per cent over the past five years, and Mr Beauchamp describes the company as a steady income play. "Consumer staples never go out of vogue, and Nestlé's broad suite of products means it is relatively immune to changing fashions," he says.

He warns that Nestlé may not grow as rapidly as some companies, but investors will enjoy the taste of its progressive income stream, with a current yield of 3.2 per cent a year.

Income yield: 3.2 per cent

newslide

National Grid (LSE: NG)

Publicly-quoted utility companies are considered one of the steadiest income sources of all, offering a basic service to millions of customers.

London-listed National Grid is a twist on this theme because it doesn't actually supply gas and electricity. Instead, its job is to operate essential infrastructure that keeps the energy flowing in both the UK and north-eastern US.

Helal Miah, investment research analyst at UK stockbrokers The Share Centre, says it manages an everyday necessity for which there is constant demand. "This gives it relatively steady earnings and cash flow streams. In effect, National Grid is a natural monopoly."

National Grid currently yields a steady income of 4.67 per cent, and aims to increase this each year in line with the UK's retail price index (RPI), which stood at 2.5 per cent in December.

Mr Miah says the company recently announced plans to sell a majority stake in its gas distribution business and return £4 billion from the sale to shareholders, probably in the form of a special dividend.

Recent share price performance has disappointed but National Grid continues to benefit from recent weakness in sterling, which boosts the value of its US dollar earnings.

Income yield: 4.67 per cent

from Personal Finance RSS feed - The National http://www.thenational.ae/business/personal-finance/the-top-10-stock-performers-for-dividends

#Personal Finance RSS feed - The National

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