Target Dividend Stocks for Portfolio - Analyst Blog
February 21 2013 - 11:46AM
Zacks
It’s a flagging economy and thus investors will obviously prefer
to bet their bucks in the safer counters. Investors, in order to
shield themselves from the upheavals in the financial world, are
now diligently choosing their portfolio of stocks that can give
them the best returns.
On that note, while building the portfolio, one should not
ignore the underlining dividend growth potential, which can also
enhance the total return.
Investors prefer an income generating stock, and a dividend
paying stock is always a preferable option. Meanwhile, keeping the
hard cash in the bank’s locker is much a safer alternative than
investing in stocks, so offering higher return on stocks becomes
obvious to compensate for the risk undertaken.
Higher dividend growth companies have a better chance to attract
investors that in turn provides an impetus to the share price.
Through this strategy, the companies bolster investors’ confidence
on the stock, thereby persuading them to either buy or hold the
scrip instead of selling them.
A consistent dividend payment and increasing the same at regular
intervals primarily reflect the company’s sound financial position,
defined future prospects and intention to enhance shareholders’
value. But what might hurt shareholders’ sentiment is a dividend
hike in one year, followed by a cut in the next year.
However, not all companies pay dividend regularly, and
furthermore some companies do not declare dividend. Nonetheless,
this never suggests that the stock is devoid of growth
propositions, unless the underlying fundamentals indicate so. It
might be that the companies want to preserve the earnings for
future expansions rather than to payout in the form of dividend.
So, do consider all the factors while picking the stocks.
Every stock has its own strengths and weaknesses that need to be
evaluated. Dividend increase remains one of the criterions to be
considered before taking any investment decision, but apart from
that an investor must take into account the top and bottom lines’
growth potential, free cash flow generation capability, cash flow
per share, return on capital and debt-to-total capital ratio to
name a few. A diligent use of these tools will help in assessing
and scrutinizing equity investments.
Dividend increases have now become a common trend among
companies boasting a stable cash position and healthy cash flows.
These strategies not only enhance shareholders’ return but also
raise the market value of the stock.
The companies which recently increased quarterly dividend
include, video game and entertainment software retailer,
GameStop Corporation (GME) by 10% to 27.5 cents;
textbook publisher and financial information provider, The
McGraw-Hill Companies, Inc. (MHP) by 9.8% to 28 cents;
media and marketing company Meredith Corporation
(MDP) by 6.5% to 40.75 cents; specialty retailer of women’s apparel
Limited Brands Inc. (LTD) by 20% to 30
cents; two beverage companies PepsiCo Inc.
(PEP) by 5.6% to 56.75 cents and Dr Pepper Snapple Group,
Inc. (DPS) by 12% to 38 cents a share.
Few other stocks that are worth a look on the dividend platform
include Comcast Corporation (CMCSA), which raised
its quarterly dividend by 20% to 19.5 cents; oil and gas
exploration company, Occidental Petroleum
Corporation (OXY) that raised its dividend by 18.5% to 64
cents; and Canadian communications and media company,
Rogers Communications Inc. (RCI) hiked its
dividend by 10% to 43.5 cents.
COMCAST CORP A (CMCSA): Free Stock Analysis Report
DR PEPPER SNAPL (DPS): Free Stock Analysis Report
GAMESTOP CORP (GME): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
MEREDITH CORP (MDP): Free Stock Analysis Report
MCGRAW-HILL COS (MHP): Free Stock Analysis Report
OCCIDENTAL PET (OXY): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
ROGERS COMM CLB (RCI): Free Stock Analysis Report
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