The stock market has skyrocketed from its March lows and is pricing in continued economic improvements and further stimulus from Congress. If the economy falters or Congress doesn’t reach a deal, the stock market could have a nasty fall.
Therefore, a good option is to buy high-quality, dividend growth stocks. These stocks offer consistent income while having high-quality businesses that will grow in the long-run. Our POWR Ratings system can help you identify these stocks.
Apple Inc. (AAPL), Visa Inc. (V), Skyworks Solutions, Inc. (SWKS), and Werner Enterprises, Inc. (WERN) are the top 4 stocks rated a Buy or Strong Buy by POWR Ratings that offer above-average yields with the potential for long-term appreciation.
Apple Inc. (AAPL)
Apart from designing and manufacturing communication and media devices, AAPL also deals in software, services, accessories, networking solutions, and digital content and applications.
The stock has been uniformly paying dividends every quarter for the past couple of decades. During the past 5 years, the average dividends per share growth rate for AAPL was 10.7% per year. The company has consistently increased its dividend payout amount after its second-quarter each year. The most recent dividend declared by AAPL was $0.82 for its quarter ended June 2020, which translates into a forward annual dividend yield of 0.74%.
AAPL generated a free cash flow of $14.7 billion in its last reported quarter, registering a 53% growth from its comparable quarter last year. The company also generated $16.3 billion cash flow from operating activities during the quarter, accounting for a 40% rise, year-over-year. Moreover, AAPL is producing more trailing twelve-month cash flow than 98.25% of US dividend stocks in the StockNews.com universe.
AAPL recently announced results for its fiscal year third quarter ended June. The company posted a top-line of $59.7 billion, an increase of 11% from the year-ago quarter. International sales formed more than 54% of the total revenue.
The most recent launch of the fairly-budgeted iPhone SE has proved to be a huge success. The company generated $26 billion in phone sales in the June quarter alone. The pandemic also acted as a catalyst to drive up sales of MacBook and iPad. Both the products together contributed $13.6 billion in June quarter sales.
AAPL reported an earnings surprise of 26.5% in the last reported quarter, with an EPS of $2.58. The EPS is further expected to grow at 19.5% next year and hence, the dividend payout is also expected to rise.
AAPL is already 123% up from its 52-week low of $199.15 with a year-to-date gain of more than 51%.
How does AAPL stack up for POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
You can’t ask for better. It is ranked #1 out of 28 stocks in the Technology – Hardware industry.
Visa Inc. (V)
V is a global payments technology company working to enable consumers, businesses, banks, and governments to use digital currency. The company facilitates commerce through the transfer of value and information. It operates VisaNet, a processing network that enables authorization, clearing, and settlement of payment transactions. Also, the company offers card products, as well as value-added services.
The company has been increasing its dividends consistently over the last decade. Its dividend has grown at a CAGR of 20% over the last five years. The annual dividend aggregates to $1.2, yielding 0.61%. Moreover, V’s payout ratio accounts for 22%.
V’s free cash flow grew 127% in the last quarter to $2.8 billion and Cash flow from operations grew 105% in the same period to $3 billion, over its preceding quarter. Furthermore, V’s average cash flow over the past 5.75 years is greater than 95% of current dividend-paying US stocks in the StockNews.com universe.
V reported net revenue of $4.8 billion for the fiscal 2020 third quarter ended June. The total volume of payments and cash transactions for the US Visa Debit program grew 6.8% year-over-year to $667 billion. The company also reported an EPS of $1.07, beating the consensus estimate by 3.9%.
The consumer shift to digital commerce and social distancing, V recently concluded that 67% of small businesses and 78% of overall consumers worldwide have adopted new behaviors like contactless and/or online payments for groceries, pick-ups, and shopping to adjust to the pandemic. Hence, the street expects revenue to surpass the $5 billion mark in the current quarter.
The stock is presently trading at $196.36, an 8.3% discount from its 52-week high of $214.17.
V is rated “Buy” in our POWR Ratings system, consistent with its growth estimates. It is rated “A” in Trade Grade, Peer Grade, and Industry Rank, and “B” in Buy & Hold Grade. V is ranked #6 in the 45-stock Consumer Financial Services industry.
Skyworks Solutions, Inc. (SWKS)
SWKS is a wireless networking company that designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. The company sells its products for use in the aerospace, automotive, cellular infrastructure, industrial, medical, military, smartphone, and wearable markets.
The company declared a dividend of $0.5 per share in its most recent quarterly report, an increase of 13.6% from the year-ago quarter payment of $0.44. Before the last quarter, the company continued paying the $0.44 dividend in each of the trailing four quarters.
SWKS currently commands a dividend yield of 1.2%. During the past five years, the average dividends per share growth rate were 41.4% per year.
SWKS reported a free cash flow of $187 million in the last quarter, a year-over-year growth of 54%. The company’s free cash flow margin stood 25.4% in the same period. Cash flow from operating activities increased by more than 23% to $258.7 million, year-over-year.
The last earnings report by SWKS was for its third fiscal quarter ended June. The company delivered revenue of $736.8 million with a gross profit margin of 45%. SWKS beat the consensus EPS estimates in each of the trailing four quarters, with EPS of $1.25 and a positive surprise of 11.6% for the last reported quarter.
The company is uniquely positioned to capitalize on the immense 5G opportunity. It senses a significant infrastructure opportunity that will be created by the unleashing of 5G. It is ready to meet the next generation demand with an estimated EPS growth of more than 19% in the coming year.
SWKS has already recovered more than 109% from its March lows of $67.9 and is presently trading at $144.37.
SWKS’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade, Buy & Hold Grade, and Industry Rank. Among the 86 stocks in the Semiconductor & Wireless Chip industry, it’s ranked #10.
Werner Enterprises, Inc. (WERN)
WERN is a transportation and logistics company that engages in transporting truckload shipments of general commodities in interstate and intrastate commerce. It operates in the United States, Mexico, Canada, China, and internationally in two segments — Truckload Transportation Services and Werner Logistics.
The company has been consistently paying a dividend of $0.09 for the preceding five quarters. WERN’s annual dividend yield stands at 0.84%. WERN’s trailing 12-month dividends have averaged an annual growth rate of 45%.
The free cash flow, for the second quarter ended June, stood $65.2 million. This culminated in year-over-year growth of 2,429%.
Cash flow from operations in the last quarter was $154.0 million compared to $81.6 million in the year-ago quarter, accounting for an increase of 89%. The cash flow also grew more than 15% from the preceding quarter value.
Total revenue for WERN in the second quarter stood $569 million despite facing lockdowns. Operating margin increased by 0.7% year-over-year to 10.1%. The company reported an EPS of $0.62, beating the consensus estimate by 55%. Moreover, WERN has reported an earnings surprise in three of the trailing four quarters.
WERN’s EPS is expected to grow by 15.4% next year. The stock is presently trading at $42.85, an 8.7% discount from its all-time high.
It is rated “Buy” in our POWR Ratings system, with “A” in Trade Grade and Industry Rank, and “B” in Buy & Hold Grade. Out of 14 stocks in the Railroads industry, WERN is rated #7.
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AAPL shares fell $1.01 (-0.22%) in after-hours trading Monday. Year-to-date, AAPL has gained 54.61%, versus a 5.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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|SWKS||Get Rating||Get Rating||Get Rating|
|WERN||Get Rating||Get Rating||Get Rating|