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As my birthday approaches on May 14, I find myself reflecting not just on another year gone by but also on the smart moves I can make for my financial future. Celebrating a birthday can be about more than just cake and candles—it can also be an excellent opportunity to review one's investment portfolio.
In this spirit, I am excited to share with you my top three picks for dividend stocks that not only pay out dividends around my birthday but also promise potential for a steady income and long-term growth. These picks are particularly relevant for those looking to receive dividend payouts near their special dates, making the occasion even more rewarding.
Dividend stocks are favored choices among investors who appreciate the dual benefits of income generation through regular dividend payments and potential capital appreciation. They are especially valuable in a well-rounded investment portfolio for their ability to provide returns even in volatile market conditions, offering a semblance of stability amidst the stock market's inherent unpredictability. With careful selection, these stocks can serve as a financial gift that keeps on giving, year after year.
Before I reveal my picks, I invite you to join my dividend-investing community. That way, you will not miss any essential articles and will learn to become a better investor. You will also receive a FREE welcome bonus—a 10-step guide to financial freedom.
For this article, I have chosen three companies that stand out for their robust dividend policies and strategic market positions: American Express Company (AXP), Nucor Corp (NUE), and CVS Health Corp (CVS). Each of these stocks not only offers dividends around the time of my birthday but also exhibits strong business models and growth trajectories that could benefit shareholders.
In this article, we'll examine the reasons why these stocks deserve a place in your investment portfolio, closely examining their financial health, dividend history, and growth prospects.
American Express Company (AXP)
American Express Company (AXP) recently announced an increase in its dividend payment to $0.70, scheduled for May 10, 2024. This represents a rise from last year's comparable payout.
Despite this increase, the dividend yield remains modest at 1.3%. For income investors, this yield might seem low, but it's crucial to consider the stock's performance, which has seen a 33% increase in the last three months. This substantial price appreciation contributes to the lower yield, as the increased stock price dilutes the yield percentage.
The sustainability of American Express' dividends is well-supported by its financials. Before this latest increment, the dividends were comfortably funded by both cash flow and earnings, allowing a significant portion of profits to be reinvested into the company.
Future projections are also promising, with an anticipated 50.4% rise in earnings per share over the next year. This forecast suggests that the payout ratio might stabilize at a sustainable 16%, assuming dividends follow recent trends.
Over the past decade, American Express has maintained a consistent dividend policy, with annual payments growing from $0.80 in 2014 to $2.80 in the most recent fiscal year. This growth represents a compound annual growth rate (CAGR) of approximately 13%, highlighting a stable and increasing dividend payout without any reductions during this period.
The company's track record of dividend payments, combined with a consistent increase in earnings per share (EPS) of 7.5% per year over the past five years, positions American Express favorably for future dividend growth. The current low payout ratio and upward earnings trend provide ample room for further dividend increases, making it an attractive option for investors looking for reliable income stocks.
Overall, American Express stands out as a solid dividend-paying stock due to its ability to sustainably increase dividends, supported by strong earnings coverage and a positive growth trajectory.
The company's ability to generate substantial cash flow and maintain a low payout ratio assures investors of the potential for ongoing dividend growth, reinforcing its appeal as a compelling choice for those seeking steady income investments. This blend of dividend sustainability and potential for growth makes American Express an attractive option for income-focused portfolios, particularly as it continues to demonstrate financial robustness and shareholder value enhancement.
Nucor Corp (NUE)
Nucor Corp (NUE), a key player in the steel industry, recently declared a dividend of $0.54 per share, set to be distributed on May 10, 2024, with shareholders needing to be on record by March 27, 2024.
The company has a robust history in steel manufacturing and also deals in direct reduced iron for its steel mills, with business segments spanning steel mills, steel products, and raw materials.
A "dividend king," Nucor has increased its dividends annually since 1973, reflecting a longstanding commitment to returning value to shareholders. This consistency is underscored by its continuous quarterly dividend payments.
Despite these increases, the current 12-month trailing dividend yield stands at 1.04%, and the forward yield is projected at 1.09%. These figures are relatively low, placing the yield near a 10-year low and below the average for the global steel industry.
Over the past decade, Nucor's annual dividend growth rate has been modest, registering at 3.30%, with a slight increase to 6.60% over the last five years and an 8.70% rate over the last three years. This growth trajectory suggests a careful balance between rewarding shareholders and retaining earnings for future expansion and stability, as indicated by a healthy dividend payout ratio of 0.12 as of the end of 2023.
Nucor's financial strength is further evidenced by its impressive profitability and revenue metrics. It has maintained a positive net income consistently over the past decade, contributing to a high profitability rank among its peers.
The company's revenue has grown by an average of 27.80% annually, outperforming 85.49% of global competitors. Moreover, its earnings have surged by an average of 67.40% annually over the past three years, and its 5-year EBITDA growth rate stands at 40.10%.
In conclusion, despite a relatively low dividend yield, Nucor's reliable dividend history, combined with strong financial health and growth metrics, positions it as an attractive option for investors seeking steady income with long-term growth potential. The company's well-managed financial strategy ensures the sustainability of its dividends, making it a solid choice for income-focused investors.
CVS Health Corp (CVS)
CVS Health Corp (CVS) recently declared a dividend of $0.67 per share, set to be paid on May 1, 2024, with shareholders needing to be on record by April 19, 2024.
The company is a major player in the healthcare sector, operating over 9,000 retail pharmacy stores across the U.S., and is the largest pharmacy benefit manager through its Caremark unit, processing over 2 billion adjusted claims annually. Additionally, CVS manages a top-tier health insurer via its Aetna acquisition, serving about 26 million medical members, and has recently expanded into primary care services by acquiring Oak Street Health, enhancing its integrated healthcare services model.
Since 1986, CVS Health has maintained a consistent quarterly dividend payment schedule and has increased its dividend annually since 1997, earning it the title of a dividend aristocrat.
Currently, the stock has a 12-month trailing dividend yield of 3.61% and a forward dividend yield of 3.89%, indicating expectations of continued dividend growth.
The company's dividend growth over various periods reflects a stable yet varying growth trajectory: a 6.60% annual growth rate over the past three years, decreasing to 3.60% over the past five years, and an overall growth rate of 8.60% over the past decade. This gives a yield on cost of approximately 4.31% based on the past five years.
Analyzing CVS Health's dividend sustainability involves examining the dividend payout ratio, which stood at 0.32 as of the end of 2023. This moderate payout ratio suggests that the company retains a significant portion of earnings for future growth and stability, supporting continued dividend payments.
Despite a strong profitability track record, with net profit reported in 9 out of the last 10 years, CVS Health's growth metrics present a mixed picture. The company's revenue has grown by about 10.70% annually, underperforming 63.16% of its global competitors. Furthermore, its 3-year earnings per share (EPS) growth rate is around 3.50%, underperforming 57.89% of global competitors. However, its 5-year EBITDA growth rate stands at 13.80%, outperforming 66.67% of its peers.
In conclusion, CVS Health Corp stands out as a robust dividend payer with its consistent history of dividend payments and aristocratic status. While the dividend yields and growth rates are promising, the mixed growth metrics in revenue and earnings growth rates indicate some challenges. Nonetheless, the solid payout ratio and strong profitability position CVS Health as a viable option for investors seeking a reliable dividend-paying stock with long-term sustainability. This balance of dividend consistency and financial health makes CVS Health an attractive choice for income-focused investors.
Conclusion about Dividend Stocks on Your Birthday
I hope this article was interesting to you and perhaps inspired you to find some great dividend stocks that pay around your birthday so that you can buy a gift for yourself that will pay out every year from now on.
It is imperative that you educate yourself, become aware of your cognitive biases, and learn about investing before putting your hard-earned money at risk. I recommend you to check out my book, Live Off Dividends, where I dive into more details and prepare the reader for the investment journey.
I wish you reach your Dividend Horizon,
Artenie Alexandru
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