May
8, 2021
5 min read
This story originally appeared on MarketBeat
Many investors like to focus on stocks that hike their dividends year after year. They typically are in excellent financial health and generate reliable income for a long-term portfolio.
A great place to find companies that are consistently paying higher dividends is the Nasdaq U.S. Rising Dividend Achievers index. It contains 50 stocks that have a history of raising their dividends and are in a position to maintain the pattern going forward. The index has posted a 15% annualized since its January 2014 inception.
Interestingly, about a quarter of the index is comprised of tech companies that offer not only increasing dividends but solid growth potential. Here we highlight three of those names that give growth and income investors the best of both worlds.
Did Qualcomm Increase its Dividend?
Over the past 12 months, Qualcomm (NASDAQ:QCOM) has paid quarterly dividends totaling $2.60. In the prior 12 months, dividends were $2.48, so that’s 5% year-over-year dividend growth.
Next month, Qualcomm’s quarterly dividend is slated to increase another $0.03 to $0.68. If we assume this dividend stays intact for the three quarters that follow, the wireless communications leader will pay out $2.72 in dividends over the next 12 months. This equates to a 2% forward dividend yield and compares favorably to the S&P 500’s 1.4% yield.
There’s good reason to believe Qualcomm’s rising dividend trend continues. That’s because the company’s cash position is strong relative to its debt load. Its 73% cash-to-debt ratio is comfortably ahead of the Rising Dividend Achievers threshold of 50%.
Aside from the income aspect of the investment, Qualcomm has strong upside potential as a smartphone chip supplier in the dawn of the 5G network buildout. The company is coming off a blowout fiscal 2021 second quarter in which it rode the success of Apple’s 5G iPhone 12 launch as one of Apple’s key suppliers. As 5G phones start to become the new must have device, look for Qualcomm’s earnings and dividends to keep growing.
Is it a Good Time to Buy Apple Stock?
Even a behemoth like Apple (NASDAQ:AAPL) with its $2.2 trillion market cap has room to grow and continue rewarding shareholders with higher dividends. It has hiked its dividend for eight straight years and certainly has the financial strength to continue doing so.
On May 7th, Apple went ex-dividend which means shareholders that held the stock prior to this date will receive a $0.22 per share payout on May 13th. Those that bought Apple on or after May 7th, will have to wait for next quarter’s dividend.
Since climbing to a split-adjusted record high around $145, Apple stock has corrected about 10%. If we’ve learned anything about Apple’s trading history, those rare corrections have been great buy opportunities.
Part of the reason Apple stock is relatively flat in 2021 is concern over its uncharacteristic appetite for debt in recent periods. Yet it’s hard to fault the company given the availability of low-interest rate financing and the growth prospects at hand.
While debt has swelled, Apple’s infamous cash hoard has been depleted due to its aggressive stock buyback program. But this too should be viewed as a positive because it signals management is confident in the company’s growth prospects and thinks its shares are undervalued.
Apple’s $0.88 annualized dividend and 0.7% forward yield aren’t much. But this cash cow is poised to pack on some pounds as iPhone 12 sales take off and recurring services revenue becomes a bigger part of the business. This time next year, Apple will once again be raising its dividend and far surpassing Street expectations as it so often does.
Does Activision Blizzard Pay a Dividend?
Activision Blizzard (NASDAQ:ATVI) is a lesser-known dividend grower that likely has many years ahead as one of the Nasdaq’s Rising Dividend Achievers. Thanks to the wild success of its video game portfolio, its cash position has swelled to more than $9 billion. This towers over its $3.6 billion long-term debt balance and gives the company plenty of room to increase its 23% dividend payout ratio.
The popularity of its globally recognized game franchise has gone to a whole other level during the pandemic. People spending more time at home have been spending more time, well, spending on game sensations like ‘Call of Duty’ and ‘World of Warcraft’. As a result, its recent earnings have been spectacular.
The 0.5% dividend yield is more of an afterthought in the case of Activision Blizzard given its growth profile. Nevertheless, investors can bank the dividend or, better yet, reinvest the money back into the cash machine that is Activision Blizzard.
Like other pandemic beneficiaries, there is likely to be a slowdown in growth as gamers emerge from their basements and venture outside in the post-COVID world. But Activision Blizzard will still be able to deliver strong growth by building off its massive customer base and cranking out new hit titles. For investors, any weakness in this rising dividend play is a call of duty to conquer some shares.
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