Test Your Investing Knowledge: Stock Ticker Quiz
The Wide World of Dividend Stocks
Invest in a Cure for Obesity
Dividend-paying stocks are more popular today than ever, thanks to the Fed’s zero interest rate policy and the growing number of aging investors. Stocks that pay dividends also outperform those that don’t over most time periods longer than a year.
Noting the demand, more and more stocks have initiated dividends in recent years, with even high-tech companies like Apple getting in on the act. In fact, you might be surprised just how many stocks there are in the dividend-paying universe, and how varied they are. I put together the little quiz below to introduce you to some stocks that you might not know are dividend payers. Can you name the symbol for each of the dividend-paying companies, and figure out what companies each of the symbols represent?
4. Southwest Airlines
7. Anheuser-Busch InBev
11. Harley Davidson
1. Aloca’s symbol AA puts them at the beginning of a lot of lists. They’re also traditionally the first big company to report earnings each quarter.
2. BID is the thematic symbol used by Sotheby’s, a dividend payer since 2006.
3. It’s not British Airways: BA is the symbol for Boeing Co.
4.Southwest Airlines’ symbol, LUV, honors its home airport, Love Field in Dallas. LUV’s dividend only yields half a percent right now, but the company is growing.
5. LINE is the symbol for MLP Linn Energy, which pays distributions monthly.
6. A is the symbol for Agilent Technologies, a dividend payer since 2012.
7. Anheuser-Busch InBev appropriately uses BUD as its stock symbol.
8. LVS is the symbol for Las Vegas Sands, which has paid dividends since 2012 and yields a generous 4.9%.
9. M is Macy’s.
10. V is Visa.
11. You’ll find motorcycle giant Harley Davidson listed under HOG.
12. FUN is for Cedar Fair, which owns amusement parks and has one of the highest dividend yields on the list at 5.2%.
The large selection of dividend stocks available means there’s truly a dividend-paying stock for everyone: there are even small caps that pay dividends! In my premium advisory, Cabot Dividend Investor, I recommend dividend-paying stocks for investors with a wide variety of goals, as long as income is one of them. Our portfolio is divided into High Yield, Dividend Growth and Safe Income tiers to help subscribers find the investments that best fit their personal goals.
Not every investment is right for every subscriber, but every subscriber can find investments that are right for them.
For investments I’m considering for the Safe Income tier, relatively low volatility is important. To assess volatility, I look at stock charts, consider the stock’s beta (<1 means less volatile than the benchmark, >1 means more volatile) and research industry factors.
Established businesses in growing or stable industries are much less volatile than smaller companies and those in more cyclical industries. Longevity is also a concern-the company and its industry must both be viable long term, and stocks in faddish industries, like 3D printing or social media, are simply inappropriate.
In the Dividend Growth tier, I require a company to demonstrate above-average earnings growth, and I also like to see company-specific or industry-wide catalysts for more growth in both price and the dividend.
And in the High Yield tier, of course, the investment’s current yield must be significantly above average.
For investors whose tastes lean more toward growth investing, the Dividend Growth tier of our portfolio is a great place to find stocks that deliver both capital appreciation and income.
To find stocks that consistently increase their dividends year after year, you have to look for companies that consistently earn more every year, which is also a hallmark of great growth stocks. Sometimes the capital returns in this tier wind up dwarfing the dividend yield from these stocks, but we always appreciate the dividends for their consistency-and tax advantages.
The top-performing holding in the Dividend Growth tier today is one of those cases.
With a 42% price return since it was added to our portfolio in February 2014, Novo Nordisk’s (NVO) capital appreciation has quite dwarfed its annual yield on cost of 1.4%. But that’s to be expected from a company with as many great catalysts for growth on the horizon as Novo Nordisk. Here’s what I wrote about Novo’s current projects my latest Cabot Dividend Investor update, published last week:
“Novo Nordisk powered ahead this month on positive drug news. Last Wednesday, the company launched Saxenda, an anti-obesity drug, in the U.S., and said it would launch in other markets by the end of the year. In addition, the company has resubmitted Tresiba, a long-acting insulin, for approval in the U.S. after it was rejected in 2013. Novo Nordisk is partway through the new cardiovascular safety study the FDA requested at that timex2028and says it now has enough interim data to resubmit the drug. Though there’s no guarantee things will go better this time, Novo’s decision to resubmit the drug after sharing interim results with regulators suggests the company has a good degree of confidence. Resubmissions are usually approved or rejected within a month. NVO is a Buy for annual income, dividend growth and capital appreciation.”
If you’ve always thought dividend stocks were boring or just for “widows and orphans,” today’s huge universe of dividend-paying companies should be enough to make you think again.
In Cabot Dividend Investor, I recommend everything from double-digit yielding MLPs to fast-growing small caps, so if adding some income to your usual investing style appeals to you, consider trying it out today. Just click here to learn more about what you get with your trial subscription.
Your guide to a secure retirement,
Chloe Lutts Jensen
Chief Analyst, Cabot Dividend Investor
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More