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The Holy Grail for income investors finds quality businesses with significant payments that will continue to generate long-term revenues. It is important to remember, however, that companies with large dividends are not all created equal. In some cases, a high return may be a red flag that indicates problems in the underlying business.
Separating the wheat from the chaff can be an arduous and tedious process, but we are here to help you. We asked three contributors from Fool.com to choose the best companies with high earnings. Read on to find out why they chose Carnival Corporation (NYSE: CCL) The Procter & Gamble Company (NYSE: PG) and Digital Realty Trust ] (NYSE: DLR) .
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for this 3% yield
Demitri Kalogeropoulos (Carnival): Concerns about rising fuel prices have brought down Carnival's action this year while helping to raise its dividend by more than 3%. However, nothing in the recent operating results of the cruise ship's giant suggests that there is something fundamentally wrong in the case.
On the contrary, sales growth overturned management's expectations for a second consecutive quarter. The carnival also finds other ways to boost spending on board, with a double-digit rise in the second fiscal quarter.
Of course, fuel costs will hurt profits if oil prices continue to rise, but Carnival is not struggling. its basic expenses to its customers. In fact, management has increased its forecast for the full year on June 25 and now expects a 3% increase in net revenues, while cruise costs (excluding fuel) will only increase by 1%.
Image Source: Carnival.
In the long term, Carnival aims to reduce its exposure to oil prices by building more fuel-efficient ships. Eighteen of these vessels are expected to be launched over the next five years, which is expected to be a steady pace that will protect profitability by matching supply growth with demand. Meanwhile, a bit of earnings volatility is a small price for investors to pay for above average returns and a strong underlying business.
Investing in this household name
Dan Caplinger (Procter & Gamble): Space consumer products, it is difficult to find a larger stock than Procter & Gamble. The company sports nearly two dozen billionaire brands globally, with products like Pampers diapers and Crest toothpaste that are found in homes around the world. The consumer giant is a member of the Dow Jones Industrial Average and has achieved a business turnover of more than $ 66 billion over the last 12 months, with a less competitive global presence.
On the dividend front, Procter & Gamble is also exceptional. The stock is currently posting a 3.7% return and the company has been generous in sharing its long-term growth with shareholders by steadily increasing its dividends. For 62 consecutive years, P & G shareholders recorded annual increases in their payments, including a 4% increase last spring, to $ 0.7172 per quarterly share. Not only is P & G an Aristocrat of Dividends, but it is also among the top six with the highest dividend growth in the market.
Image Source: P & G.
Procter & Gamble has had some difficulties lately. which explains its collapse in share prices and the rise in yields. Still, the company has a long-term strategy of focusing on its most successful brands. This sounds promising, and this creates an opportunity for potential P & G investors to buy at relatively advantageous prices in the hope of achieving long-term success.
Leveraging Cloud Growth
Danny Vena (Digital Realty Trust): It can be difficult for dividend investors to find a high-yielding income payer an opportunity for growth and a level of security. One way to narrow the field is by looking at a group of companies that have qualified for a special tax treatment known as Real Estate Investment Trust (REIT). These companies enjoying tax benefits are required by the IRS to pay at least 90% of their earnings to investors in the form of dividends.
Digital Realty Trust, a company specializing in the burgeoning field of data centers, which are large specialized buildings that host servers and other networking equipment used in cloud computing. These locations require highly reliable and secure environments that contain redundant backup systems for mechanical, cooling, electrical, and network connections, all necessary to protect the data stored on the servers.
Source of Image: Digital Realty Trust
is important and growing, with public cloud revenues in the world are expected to reach $ 411 billion by 2020, compared with just $ 260 billion in the world. last year. Ongoing developments in the areas of artificial intelligence, the Internet of Things, autonomous cars and virtual and augmented reality should accelerate the need for additional data centers in the coming years.
Digital Realty provides more than 200 data centers in 12 countries and 32 metropolitan areas, totaling 32 million rentable square feet. The company has increased its rents by 2% to 4% per annum and its remaining average term is 4.9 years.
Even more impressive is the growth of the company. It has increased its cash flow from operations (funds from operations – the REIT's earnings measure) by 12.3% per year over the past 12 years. Digital Realty Trust has increased its dividend at about the same rate, and its rate of return is currently 3.6%.
The company's client list reads like a Who's who of the technology and telecommunications industries, with IBM Facebook Verizon AT & T and Comcast among his best customers.
With a high return, an important track for growth, and a stable and growing payment, Digital Realty Trust is a superior stock to buy now.
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