4 Growth Stocks Paying Healthy Dividends
December 01, 2020 at 10:20 AM EST
Concerns over a second wave of the coronavirus and a near-zero interest rate environment are prompting investors to seek equity income as a safer investment. But it’s important to ensure future growth potential of dividend-paying stocks before investing in one. Four stocks that offer both steady income and growth are AbbVie (ABBV), VALE S.A. (VALE), H&R Block (HRB), and M.D.C. Holdings (MDC).
As the year draws to an end, expectations of a COVID-19 vaccine in 2021 is gaining steam. Based on announcements by Moderna (MRNA) and Pfizer (PFE), the much-awaited vaccine against the deadly disease could be finally here. However, concerns over the second wave of the coronavirus increased as many people traveled over Thanksgiving leading to a spike in the number of cases.
While the arrival of vaccines could put the economy back on track, there are still uncertainties over the timeliness and effectiveness of the vaccines. This, coupled with a near-zero interest rate, has led many investors to consider dividend paying stocks. Although dividend stocks could be great stocks in the current environment, investors should also consider the future growth potential of a company before buying a stock.
AbbVie Inc. (ABBV), VALE S.A. (VALE), H&R Block, Inc. (HRB), and M.D.C. Holdings, Inc. (MDC) are four such stocks from varied geographies and sectors that have immense growth potential and a history of consistent dividend payments.
AbbVie Inc. (ABBV)
ABBV is a pharmaceutical company involved in discovering, developing, manufacturing, and commercializing drugs. The company operates across leading countries like the United States, Brazil, Canada, Japan, France, Germany, Spain, Italy, the Netherlands, and the United Kingdom. Some of the popular drugs manufactured by ABBV include HUMIRA, a therapy for autoimmune and intestinal Behcet's diseases, SKYRIZI a treatment for moderate to severe plaque psoriasis, as well as IMBRUVICA, a treatment for chronic lymphocytic leukemia (CLL).
Since its inception in 2013, AbbVie has been paying a quarterly dividend and increased its dividend by 225% since then. On October 30th, the company declared a dividend of $1.30, which cumulates to an annual dividend of $4.72, and yields 4.5%. The company’s 3-year and 5-year divided CAGRs stand at 23.4% and 20.9%, respectively. Over the past 6 years, ABBV has returned more capital to shareholders through dividend issuances than 98.3% of other dividend-paying US stocks in the StockNews.com universe.
During the third quarter that ended September 2020, ABBV’s revenue surged 52.1% year-over-year to $12.9 billion, driven by its revenue from the Hematologic Oncology and Immunology portfolio. The company’s EPS for the third quarter was $1.29, an increase from the $1.26 posted in the same period last year. ABBV also announced a dividend increase of 10.2% for its dividend in 2021. The company plans to start paying the dividends by February 2021.
The consensus estimate for ABBV revenue for the fourth quarter indicates a 57.6% increase year-over-year to $13.7 billion. EPS for the quarter is expected to grow 29.4% to $2.86. ABBV surged 18.5% so far year-to-date, to close at $104.58 yesterday. It is trading close to its 52-week high of $105.42. Over the past six months, the stock has rallied 16.6%.
How does ABBV stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
The stock is also ranked #4 out of 240 stocks in the Medical - Pharmaceuticals industry.
VALE S.A. (VALE)
VALE is a Brazilian miner that produces and sells iron ore and iron ore pellets as raw materials used in steelmaking in its home country, as well as internationally. Ferrous Minerals, Base Metals, and Coal are the key segments in which the company operates. VALE also mines platinum group metals.
VALE stated that it has resumed its full operations at its Viga iron ore concentration plant in Brazil's Jeceaba City. The resumption happened after a judge lifted an order that had suspended operations there. The company stated that the operational halt resulted in a reduced iron ore fine production of 11K metric tons/day.
VALE started paying dividends in 2002. The company declared a dividend of BRL 2.4075 per share on September 21st. This results in an annual dividend of $0.47 and a yield of 3.19%. VALE has a payout ratio of 20%.
The EPS estimate for the quarter ending December 2020 indicates a 700% increase to $0.72, while the street estimates revenue to rise 17.8% year-over-year to $11.7 billion. On a year-to-date basis, VALE climbed 11.6% to close yesterday’s trading session at $14.56. During the past six months, the stock gained 53.9%.
It’s no surprise that VALE is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. In the 33-stock Industrial - Metals industry, it is ranked #3.
H&R Block, Inc. (HRB)
HRB offers assisted income tax preparation services to professionals across the United States, Canada, and Australia. Some of its other services include a do-it-yourself (DIY) tax return which includes federal and state income tax returns, and a virtual tax preparation service either directly or through its franchisees. HRB also provides tax guidance, advice, and tax related news, tax calculators, and error checking services.
The company has been paying dividends since its IPO in 1962. On October 15th, HRB declared a cash dividend of $0.26 per share. The company will pay this dividend on January 4, 2021 to stockholders of record as of December 7, 2020. This cumulates to an annual dividend of $1.04 and yields 5.47%. HRB generated more cash flow over the past 12 months than 91.6% of US dividend stocks in the stockNews.com universe.
HRB’s revenue during the first quarter that ended July 2020 surged 300% year-over-year to $601 million, owing to the extension of the most recent tax season to July 15. This led HRB to serve more clients this year. The company’s EPS during the quarter was $0.48 compared to the loss per share of $0.72 reported in the prior year period. HRB ended the quarter with a $2.6 cash balance. During the first quarter, the company entered into a long-term agreement with MetaBank, N.A to act as the bank provider of its suite of financial services products.
HRB is estimated to see revenue growth of 34.6% in 2021 to $3.6 billion. The company’s EPS is expected to rise at a rate of 10% per annum over the next five years. On a year-to-date basis, HRB dropped 19.1% to close yesterday’s trading session at $18.80. Over the past six months, the stock rose 5.7%.
In our POWR Ratings system, HRB has been accorded a grade of “A” for Industry Rank and a “B” for Trade Grade. Within the Consumer Financial Services industry, it’s ranked #26 out of 46 stocks.
M.D.C. Holdings, Inc. (MDC)
MDC is in the homebuilding and financial services businesses, which include purchasing finished lots, or developing construction lots to sell single-family detached homes to first-time homebuyers in Arizona, California, Nevada, Washington, Oregon, Colorado, Utah, Virginia, Maryland, and Florida. MDC’s financial services unit entails originating mortgage loans for homebuyers as well as providing them home insurance coverage.
MDC has been consistently paying quarterly dividends since 1987. On October 29, the company declared a dividend of $0.40, which cumulates to an annual dividend of $1.60 and yields 3.24%. The latest dividend indicates a 21.2% increase from the previous dividend. The company’s 3-year and 5-year divided CAGRs are 13% and 7.6%, respectively.
During the third quarter that ended September 2020, the company’s home sale revenue climbed 33.3% year-over-year to $1 billion. MDC’s dollar value of net new orders jumped 89.3% to $1.65 billion. The EPS for the period dropped to $0.79, compared to $1.49 in the same period last year.
Analysts estimate MDC’s fourth quarter revenue to be $1.2 billion, up 10.4% year-over-year. The EPS estimate for the quarter ending December 2020 is likely to grow 22.5% to $1.74.
MDC ended yesterday’s session at $48.27, rising 29.5% on a year-to-date basis. Over the past six months, MDC has rallied 34.7%. MDC’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with a “A” for Trade Grade, and a “B” for Buy & Hold Grade and Peer Grade. It is ranked #10 out of 21 stocks in the Homebuilders industry.
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ABBV shares were trading at $104.24 per share on Tuesday afternoon, down $0.65 (-0.62%). Year-to-date, ABBV has gained 24.25%, versus a 15.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.4 Growth Stocks Paying Healthy Dividends appeared first on StockNews.com