3 Stocks That Offer Big Dividends
After a year of uncertainty brought about by the global COVID-19 pandemic, income investors now have more clarity about the trajectory of their income portfolios.
Many companies that have cut profits to counter the negative financial impact of shutdowns and business disruption are slowly resuming payments, as economic reopening gathers pace in the US.
Cash dividend payments in July were also up 10.6% from a year earlier, according to a report via CNBC.com, citing Howard Silverblatt, chief index analyst at S&P and Dow Jones Indies. The average profit increase in July was 11.1%, up from 8.3% last month and 6.3% in July 2020.
“Dividends were strong for the month, as banks followed up on Fed-approved increases. The actual payment for the third quarter of 2021 looks like a potential record.”
Also, if vaccinations continue and the economy reopens, Silverblatt expects dividend payments to increase by 5% for 2021, a new annual record for payments.
In this environment conducive to income above earnings, we analyze below three preferred stocks that could prove to be suitable for any retirement portfolio.
1. International Business Machines
International Business Machines (NYSE: IBM) has been in a state of transformation for many years now. The uncertainty of legacy IT infrastructure businesses and their slow transition to cloud computing has kept their dividend yield high compared to other tech giants.
But there are now clear signs that this 109-year-old tech giant is succeeding in its turnaround effort, making its 4.5% dividend yield attractive to long-term investors. New York-based Armonk last month posted the largest quarterly increase in revenue in three years, buoyed by strong demand for cloud computing.
These numbers have also helped push shares of International Business Machines up 14% this year. In fact, the company’s stock has fared better than many other big tech stocks.
Arvind Krishna, who took over as CEO from Ginni Rometty last April, focuses on artificial intelligence and cloud computing to fuel growth. Krishna reorganized the company’s business around a hybrid cloud strategy, which allows customers to store data in private servers and on multiple public clouds.
International Business Machines is, in our view, a safe haven, especially after the apparent shift of its new management to cloud computing, which is a high growth business. These steps are encouraging and could unleash the value of the shares of International Business Machines, which have been driving dividends for 26 years in a row.
International Business Machines also pays a quarterly dividend of $1.66 per share when trading at $144.09 as of Friday’s close.
2. Lockheed Martin (NYSE: LMT )
Lockheed Martin (NYSE: LMT) is not the kind of stock — or company — that makes daily headlines. But it’s definitely one of those names that fits well in a long-term retirement portfolio.
The aerospace and defense giant pays a quarterly dividend of $2.6 per share, which translates to a 3% annual return. This payment is supported by the firm’s strong cash flows and recession-proof business.
Lockheed has reported profits, sales and cash flow that have continued to rise during the pandemic, helped in part by accelerated progress payments from the US Department of Defense, which were then passed on to suppliers.
While Lockheed still trades at 14 times its price-to-earnings ratio, indicating that this stock is inexpensive and could be a solid addition to a fixed income portfolio. Lockheed Martin shares closed Friday at $362.05.
In a recent analysis of the company, The Wall Street Journal said:
“While all major arms makers are trading at a huge discount on the S&P 500, which is common in peak defense budgets, Lockheed has become the cheapest of them all, both in terms of free cash flow and profits relative to enterprise value. . “
According to the report, Lockheed Martin remains well positioned in space and hypersonics, areas where spending is almost certain to increase to keep pace with China and Russia.
3. Procter & Gamble
Procter & Gamble (NYSE: PG), the primary consumer giant, is another solid stock with which to earn a steadily increasing income for the retirement portfolio. The Ohio-based company has increased dividends for 66 consecutive years.
Procter & Gamble pays a quarterly dividend of $0.87 per share, returning 2.47% annually. Its stock value has more than doubled, over the past decade, including dividends, giving its shareholders an impressive total return. Shares of Procter & Gamble also closed Friday at $141.41.
The company’s growth momentum suggests that stocks of the maker of household staples like Bounty paper towels, Gillette razors and Tide laundry detergent are a safe bet for long-term investors.
Also, the company’s organic sales grew 4% in the quarter ending in June, topping the 3% estimate of analysts. Growth was also faster than expected in the Personal Care, Healthcare, Textile and Home Care segments of the business.