4 Stocks That Could Be Tomorrow’s High-Yielders
As a group, dividend hunters tend to have a long-term investment perspective. There’s not much sense investing in a stock just to capture one quarterly payment and then part ways. When we find a strong business generating ample cash and sharing it generously with stockholders, we tend to stick around for a while.
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Case in point, I’ve held CME Group (NYSE: CME) in my High-Yield Investing portfolio for almost four years now. When I first took a position in the summer of 2014, the stock offered a regular quarterly dividend of $0.47 per share that added up to a modest yield of 2.6%. Many income investors skipped over it without a second glance.
#-ad_banner-#But I saw a dividend that had already doubled over the previous four years and was poised to rise even further. And this was just the “base salary”. CME also hands out a year-end bonus distribution tied to operating profits earned during the year. With an eye on the future, I added the stock to my portfolio.
Before long, the regular quarterly payout rose to $0.50 per share, then $0.60, then $0.66, and it now stands at $0.70 per share. That’s a healthy increase of nearly 50%. And those hikes attracted plenty of buyers, helping drive the shares from the lower $70’s to a recent close above $164.
If you look up CME on Yahoo Finance today, it shows a rather plain current yield of 1.7%. But counting the latest special dividend, readers who followed my initial recommendation to buy CME four years ago in my High-Yield Investing newsletter are pulling down an annual income stream of 8.5%.
The message here: dividend growth accounts for a large portion of your total returns over time. So if you’re planning to stay on board for a few years (and we often are), then potential distribution increases should be an important consideration when choosing portfolio candidates.
I know some of you may be retirees trying to draw the highest current income stream possible from your nest egg. But others are still in the wealth-accumulation phase and willing to trade a few points of yield today for superior dividend growth tomorrow. If you fall into the latter camp, then today’s stock screen is for you.
Tomorrow’s Best High-Yielders
The stocks in the table below all have an outstanding track record of boosting their payouts at a 10% or faster annual clip. They also have solid earnings growth forecasts to help support future increases.
The stocks in the table above haven’t been fully researched and shouldn’t necessarily be considered portfolio recommendations. They simply meet certain screening criteria.
But as criteria go, these are good ones.
Without looking at anything else, we can reasonably conclude these are financially healthy, shareholder-friendly businesses generating a growing pile of profits.
There were others with robust dividend growth and optimistic outlooks, such as Lowe’s (NYSE: LOW) and Boeing (NYSE: BA), but I didn’t include them in the table because their current yields just don’t measure up.
But stocks like Abbvie (Nasdaq: ABBV) offer the best of both worlds — a current yield that is already double the market average plus an impressive 23% annual dividend growth rate. Since it was spun off from Abbot Labs in 2013, the pharmaceutical company has grown by leaps and bounds, growing top-line revenues by more than $10 billion.
Best-known for its blockbuster arthritis drug Humira, Abbvie rakes in buckets of patent-protected cash flows. Those proceeds are funneled into a fruitful research and development (R&D) program that has a number of promising products in the pipeline for cancer treatment and immunology.
With a payout ratio of 75%, the company has no trouble covering its $3.84 per share annual dividend. And if distributions keep pace with earnings, which are projected to climb 16% annually over the long-haul, stockholders could be raking in $6.00 per share by 2021.
ABBV is a strong candidate that will likely find its way into my portfolio over the next few months.
Want The Best High-Yielders The Market Has To Offer?
The goal of my stock screens is to identify stocks that might be well-suited for my High-Yield Investing portfolio. But like any quantitative tool, this screen should not be used in isolation. You should also evaluate the fundamental characteristics of every potential investment opportunity. In addition, you should assess how well a particular stock or fund matches your investment needs. And do your own due diligence on a security to decide if it is right for your portfolio.
If I find a real gem within these screens, a stock that can actually maintain this level of yield through the years to come, my High-Yield Investing subscribers will be the first to hear about it.
So if you’d like to join us in our search for the best high yields the market has to offer, then I want to invite you to learn more about High-Yield Investing. Like the CME example above, some of our oldest holdings are pulling in “yields on cost” of 10%…13%…and one a nearly unbelievable 20.7%.
You don’t have to settle for the paltry yields offered by most stocks. The high yields are still out there. You just have to know where to look — and my staff and I are here to help you along.
Click here to see how High-Yield Investing can help you pull in 11.2% a year in dividends — and some impressive capital gains to boot.