As investors, one of our first tasks when evaluating a prospective new portfolio candidate is to ascertain where the company's sales are headed. There are plenty of other considerations, of course. But first, we need to make some educated assumptions about how many widgets will be going out the door.
Fortunately, we have plenty of tools at our disposal.
We can track inventory turnover rates and tune into conference calls discussing new product development. Sometimes analysts go a step further and conduct channel checks, a fancy way of saying they talk to the company's suppliers to find out if they are ordering more (or fewer) raw materials and components. They might also query customers to see how fast certain products are moving. By collecting information from the supply chain and distribution channels, it's possible to gain valuable insights on volume and pricing trends.
But sometimes, the most obvious solution is right in front of us. When companies are struggling, they often reduce their workforce. Conversely, when business is picking up, they expand and bring in new employees to meet the increased workload. So, you can gauge demand just by examining hiring trends -- simple, but effective.
Between 2011 and 2014, HP (NYSE: HPQ) downsized its labor pool by 85,000 people. Those layoffs reflected decreased demand for the company's PCs and printers. Indeed, annual sales fell markedly over that time frame -- and the stock tumbled.
At the other end of the spectrum, Amazon.com (Nasdaq: AMZ) started hiring 120,000 seasonal workers last October. The additional hands were sent to the firm's 75 fulfillment centers in anticipation of surging demand to help pack and ship orders.
And not a moment too soon -- Amazon was swamped with orders for 180 million items between Thanksgiving and Cyber Monday alone. Since Christmas Eve, the stock has jumped from $1,344 to $1,700.
Whether it's a mom-and-pop diner or a multinational conglomerate, any growing business must sooner or later put out help-wanted signs. Here are five solid dividend payers that have been gearing up.
As always, the stocks in the table above meet certain screening criteria that make them worthy of a closer look. But they haven't been fully researched and shouldn't necessarily be considered official portfolio recommendations. Like any screen, this one has its limitations. Payroll numbers tell us nothing about expenses or operating margins or valuation. But they do often reflect a sunny outlook -- after all, businesses don't bring in hundreds or thousands of new workers if they're staring into the face of a storm.
We could make a strong case for several companies on this list (Crown Castle is actually a former holding). But right now, I'm most interested in the oilfield equipment and services sector, which was hammered late last year over falling oil prices.
But crude has rebounded sharply since then. And even before that, companies such as Baker Hughes (NYSE: BHGE) were seeing encouraging signs. The company was awarded some big contracts last quarter from the Middle East to the North Sea.
Here's what management had to say:
"We expect both the North American and International markets to grow in 2019 as customers increase spending and overall rig and well counts grow. The offshore market is the strongest it has been in many years and the improving tender and order activity is an encouraging sign as we look out to 2019 and beyond."
That might explain why the HR office has been busy interviewing thousands of job applicants.
I'll be watching BHGE as a possible future addition to my High-Yield Investing portfolio. I see the stock bouncing back toward the $30 level (it was there just a few months ago). In the meantime, you can lock in an above-average dividend yield of 3.1%.