[ad_1]
Sifting through the many stocks that pay dividends to find the best of the best is not easy. Some of our Motley Fool contributors have done the hard work for you and have found three top dividend stocks to add to your portfolio right now. Here is what you need to know about Partners of products of the company (NYSE: EPD), General Motors (NYSE: GM), and Cardinal health (NYSE: CAH).
Prepare well for the future while remaining generous to investors
Tyler Crowe (Enterprise Products Partners): It's really a fascinating time in the American oil and gas industry. The production is so important that there is not enough room in the pipelines to move everything. As a result, there is a construction boom to build pipes and treatment facilities. For companies that own this type of asset, it offers tremendous growth opportunities. The disadvantage, however, is that it takes monumental sums of capital to launch one of these new assets.
Source of the image: Getty Images.
This boom in construction means that some pipeline companies have had to choose where to use their cash flow. Continue to pay high-yield distributions to investors and increase them at a steady pace, in order to devote more money to construction? Fortunately, Enterprise Products Partners has not had to make such a choice because of the way its management team has approached the company for decades.
Enterprise Products Partners has historically maintained one of the best balance sheets in its pipeline business and has always retained a large amount of cash to reinvest in its business. This approach meant that when she wanted to increase her spending on new projects, she could do it simply by slowing the rate of growth of her distribution. This decision, made last year, coupled with several billion new projects put into operation, has allowed for a 27.7% increase in cash flow per unit in the first half of 2018 compared to the first half of the year. same period last year.
Management has stated that once it could have financed $ 2.5 billion of its capital expenditures each year with internally generated liquidity, it could be expected that new growth would be achieved. the distribution. With Enterprise currently selling 5.9%, this is a good dividend to consider.
A sustainable dividend
Tim Green (General Motors): New car sales are slowing, interest rates are rising and commodity prices such as steel are being pushed up by tariffs. But GM makes the most of a difficult situation. The automaker's third quarter report showed solid revenue growth, a clear improvement in net income and improved margins, as a result of a shift to larger, more expensive vehicles. GM expects to generate adjusted earnings of about $ 6 per share this year, but it could exceed expectations if things went well in the fourth quarter.
For investors in dividends, what matters is sustainability. GM pays a quarterly dividend of $ 0.38 per share, representing a dividend yield of about 4.2%. The yield is so high and GM's one-to-one price-earnings ratio is so low because the market is expecting big problems when the next downturn will occur. But GM is well placed to face any storm. A conservative dividend policy, coupled with abundant cash, will allow dividend checks to continue in the foreseeable future.
GM's dividend represents only 25% of its adjusted earnings guidance. In addition to this profit margin, the company's balance sheet can support the dividend for a while, even if profits fall. GM has about $ 18 billion in cash and intends to pay the dividend during a recession. The company expects its cash reserves to reach $ 5 billion during the first year of a moderate recession. In other words, the dividend will be safe in a wide range of scenarios.
GM is an action that is likely to rebound as the market reacts to commercial news and other developments. But if you can ignore the noise, GM is a low-cost, high-performance title that should pay off in the long run.
The short-term concern is that this stock of dividend value based on health care
Sean Williams (Cardinal Health): As investors worry about a potentially overturned market, it may be time to put valuable stocks back on your radar. And the best thing about value stocks is that they often pay a healthy dividend.
Take the example of Cardinal Health, a medical supply chain company. It has been left largely by a booming market since it is a one-digit average growth company. The fact that the company depreciated its Cordis medical device segment and the fact that generic drug prices were lower than expected in 2018 has not helped to offset Cardinal Health's deficit since the beginning. of the year. and it is more than 40% below its record level set in 2015.
Yet, despite all the worries surrounding Cardinal Health, from the price of generic drugs to increased competition, Wall Street continues to neglect the fact that almost all of its problems can be resolved in a short time.
For example, the problems of the company with Cordis and its supply chain have been much discussed. A handful of charges resulted in lower quarterly profits than expected. But what is overlooked is that even with Cordis' supply chain issues, the segment is progressing by a single digit percentage. Cardinal Health will eventually correct its supply chain for Cordis, which should lead to a temporary strengthening of operational efficiency.
We are also beginning to see what appears to be the end of the low price of generic drugs. The prices of generic drugs have been as low as recently in recent months, let us not forget that the use of generic drugs will only increase with time, brand drugs losing their exclusivity and the soaring prices of the drugs of origin. In the long run, manufacturers and suppliers of generic drugs are expected to enjoy significant benefits in terms of volume and pricing power.
Based on a price / earnings ratio of less than 10, the company is cheaper than it has been since 2008. Use a satisfactory return of 3.6% and you will get a value Intriguing dividend that's interesting to add to your wallet.
[ad_2]
Source link
