For investors who tied most of their savings to growth stocks, 2020 was a peak year. But many are now wondering what to do next. While demand for mega-cap technology companies remains strong, their near-term outlook has become uncertain due to the surge in bond yields.
This potential threat is forcing investors to reduce their positions in high-growth stocks for fear of the end of an era of very low interest rates. Should that happen, it would make rising megacap tech stock valuations more difficult to justify. That shift in sentiment has already begun to make growth investors expensive. It covered a third consecutive week of declines, taking $ 1.6 trillion in market value over that period.
These kinds of wild moves affect retirees when they own a large number of shares of a handful of mega caps. shares in their retirement portfolios. Technology stocks now make up a large percentage of some of the most popular actively managed mutual funds in retirement savings, according to a recent report from Bloomberg.
The $ 132 billion, for example, has 31.3% in six stocks – the same heavyweights that rule, including Apple (NASDAQ :), Amazon (NASDAQ 🙂 and Facebook (NASDAQ :). As of December 31, these stocks made up nearly 24% of the fund's holdings, the report said.
Therefore, we always recommend retirees to keep their portfolios diversified, with some exposure to solid quality dividend-paying stocks represented in the. These blue chip companies are constantly paying dividends – and in most cases, they keep increasing their payouts to beat inflation, providing more money to retirees.
Below are three stocks with the highest dividend growth that are worth adding to your buy list to continue earning rising earnings each year.
1. Home Depot
Home improvement giant Home Depot (NYSE 🙂 has been paying out continuous dividends for over 30 years, while also registering 20% ??+ annual dividend growth over the following 20-year period.
Last month, the Atlanta-based retailer increased his quarterly dividend by 10% from $ 1.50 to $ 1.65 a share. The stock, which returns 2.6%, has a very manageable payout ratio of 50%, suggesting that there is a lot of room to offer future dividend increases, especially when things are well underway.
In the most recent quarter, same-store sales in the US, a key measure of store performance, increased 25% – better than the consensus estimate of 19.1%. The home improvement chain is well protected from the e-commerce attack as many of its products are cumbersome and thus cannot be economically shipped to individual consumers. With that, it has a huge range of specialist products for contractors that make up a significant and growing part of its customer base.
2. Visa
The global pandemic has forced many companies to cut or suspend their dividends, creating more uncertainty for fixed income investors . Still, many companies have continued to distribute dividends, thanks to sustainable businesses and very strong cash-generating capabilities.
One of those companies is the payment giant Visa (NYSE 🙂 which, despite facing the pandemic while people cut their travel expenses, increased the payout by more than 6% to $ 0.32 per share per share. quarter.
If you had to judge the stock by its meager 0.6% return, Visa doesn't look like an attractive dividend choice. But that does not give a complete picture.
Visa has a 20% payout ratio, which is extremely durable and gives the company more room to grow future payouts. In the past three years alone, Visa's dividend is up nearly 80%. Over the past five years, the stock has achieved a total return of 177%.
With the pandemic coming under control and people spending normal again, Visa is likely to resume double-digit dividend growth. That makes it a good stock to buy now and keep in your portfolio.
3. Coca-Cola
Atlanta-based food and beverage giant Coca-Cola (NYSE 🙂 is another solid dividend-growing stock to buy now and long-term.
Like many major consumer brands, Coca Cola is suffering as a result of the COVID-19 pandemic as revenues from theme parks and theaters dry up during lockdowns. But the company's balance sheet remains strong and management is confident in its liquidity position.
Also, at a time when health-conscious consumers are forgoing sugary drinks, the company is expanding its healthy offering. As part of its drive to grow beyond its eponymous brand and become a “total beverage company,” Coke is acquiring beverage start-ups to better resonate with health-focused customers and find new areas of growth. Recent investments include Honest Tea, Fairlife Dairy and Suja Life LLC.
The company's latest investor presentation assured investors of its commitment to dividends, which remains a top priority as KO strives to grow its dividend as a function of free cash flow, with a 75% payout ratio in the over time.
At $ 50.79 per share, Coke & # 39; s stock returns 3.31% annually. That return may not look too exciting, but the company has a long track record of increasing payout – for 58 consecutive years. The quarterly dividend of $ 0.42 per share has more than doubled in the past five years.
