As much as we have noticed a volatile market over the years, it still comes to no surprise when emotions take over investors. The S&P is down 10% from its 52-week high. Why is that a concern? Investors still are fearful when there is a dip in the market.
Although the Great Recession is behind us, according to most economists, it still remains that many investors are still emotionally and financially damaged from what occurred years ago. Let’s be honest, many have not bounced back from the Great Recession. It is often asked, “Where can I invest my money so that it is safe and still grow?” I hate to break it to you, but safety does not always guarantee drastic growth.
One of the best ways to gain is to focus on companies that have increasing dividend payments. This will avoid sleepless nights and constant checking the market for dips and gains. Don’t babysit your portfolio, instead look into these high yield dividend stocks as noted in The Street.
- Archer Daniels Midland (ADM)
Archer Daniels Midland is a key player in the agricultural market. It processes commodities such as corn, oil seeds and wheat into a variety of products for food, beverage, animal feed, chemical and energy uses.
Some of the company’s products include vegetable oil, protein meal, corn sweeteners, flour, starch, ethanol and a number of other food ingredients.
Archer Daniels Midland has been in operation for more than 100 years, which is often a sign of a persisting competitive advantage. The company owns the largest grain terminal and shipping network in North America and has extremely capital intensive operations, which limits its competition.
Archer Daniels Midland increased its dividend by 7% on Feb. 2 and has raised its dividend for more than 25 consecutive years. The company has plenty of room for future dividend growth as well because its earnings payout ratio is just 47% over the past 12 months.
Archer Daniels Midland has also increased its dividend at a 13% compound annual growth rate over the past 10 years, and we expect at least mid- to high-single digit annual dividend growth to continue.
The stock trades at 12.7 times forward earnings estimates and has a dividend yield of 3.6%, which is significantly higher than its five-year average dividend yield of 2.1%. The stock looks cheap relative to history and could see meaningful upside if macro factors start to go its way again.
- Cisco Systems (CSCO) Cisco sells a wide variety of products and services that help develop, connect and manage communication networks around the world. Some of its products include routers, software and switching products.
The company’s competitive advantages come from its size, diversified product portfolio and brand recognition. The company’s breadth of products helps it build more integrated and efficient solutions for customers, and its size keeps its production costs competitive.
As more data are consumed around the world, demand for Cisco’s products should grow.
Cisco boosted its dividend by a generous 24% on Feb. 10, continuing its streak of double-digit dividend growth. Cisco’s payout ratio is also below 40% over the past 12 months, which indicates that strong dividend growth is likely to continue over the next few years.
Thomson Reuters was created when Thomson acquired Reuters, a 160-year-old news and financial data service business, for about $17 billion in 2008. Today, Thomson Reuters sells a wide variety of content and services to professionals primarily in the financial, risk management and legal industries.
Thomson Reuters lifted its dividend by 1% on Feb. 10. Although this increase was nothing to get overly excited about, it represented the company’s 23rd consecutive dividend hike for shareholders.
Genuine Parts is a distributor of automotive and industrial replacement parts, office products and electrical materials with roots dating back to 1928. The company sells its products and services through a network of about 2,600 locations primarily in North America.
It also owns about 1,100 NAPA Auto Parts stores, which sell automotive replacement parts.
Genuine Parts increased its dividend by 7% on Tuesday, marking its 60th consecutive year of dividend increases and placing it near the top of the list of dividend kings, which comprises companies with at least 50 consecutive years of dividend increases.
Genuine Parts has increased its dividend at a 7% compound annual growth rate over the past decade. We think that this growth will prove to be sustainable, thanks to the company’s 50% earnings payout ratio and predictable earnings growth.
Praxair’s business was founded in 1907 and has grown to become one of the biggest producers of industrial gases in the world. Industrial gases are used by customers in a wide variety of end markets to keep their operations and manufacturing processes running.
Praxair boosted its dividend by 5% during the first week of February and has increased its dividend for 23 consecutive years. Dividend growth has averaged about 10% per year over the past five years, and we expect mid- to upper-single digit dividend growth over the next few years as Praxair continues dealing with a sluggish macro environment.
However, Praxair’s 53% earnings payout ratio provides it with plenty of dividend safety and room for expansion.
Cincinnati Financial has been in business for more than 65 years and is one of the largest property casualty insurers in the country. The company makes money by writing insurance premiums and investing the proceeds for income until the business needs to pay out claims.
Most of Cincinnati Financial’s premiums are commercial policies (67% of sales in 2014), but personal policies represent a meaningful 25% of total sales as well. The majority of the company’s business is conducted in the Midwest.
Cincinnati Financial raised its dividend by 4% in the beginning of February and is another dividend king with more than 50 consecutive dividend increases. The company has increased its dividend by 5% per year for each of the past few years, and we think that is a reasonable dividend growth rate to expect going forward, thanks to its 60% earnings payout ratio and mid-single-digit growth prospects.
Kimberly-Clark was founded in 1928 and is one of the biggest manufacturers of tissue and hygiene products such as diapers, baby wipes, paper towels and toilet paper. Some of its major brands include Cottonelle, Depend, Huggies, Kleenex, Kotex and Scott.
The company is also global, with more than half its revenue coming from outside North America.
Kimberly-Clark is a Dividend Aristocrat and most recently raised its dividend by 5% on Feb. 11. The company’s dividend has compounded at a mid-single digit rate over the past five years, which we think is a reasonable growth rate to expect going forward.
Kimberly-Clark’s payout ratio has averaged about 60% in recent years, which provides plenty of room for continued dividend growth despite sluggish revenue trends in the business.