This article was published in the November issue of Money magazine.
You may be tempted to declare the great run in dividend-paying stocks over. Investors, after all, are already shifting focus away from stodgy, high-yielding defensive stocks such as utilities and embracing risk again -- as often happens when bull markets age.
Yet "the dividend story still has legs," says Stephen Auth, chief investment officer at Federated Investors. Contrary to popular belief, plenty of stocks deliver steady income and double-digit earnings growth -- and they also happen to trade at attractive prices. The trick now, says Rick Platte, co-manager of the Ave Maria Rising Dividend Fund, is "to put more emphasis on growth."
A good place to start is with technology companies, which only recently began paying dividends but have quickly become the biggest contributors to S&P 500 payouts. A top tech pick in Platte's fund is Intel (INTC), the dominant maker of semiconductors for PCs. Intel yields nearly twice what the S&P 500 does. While there are concerns that Intel's growth is slowing along with PC sales, those worries are overblown. Analysts expect Intel's profits to rise 12% annually for the next five years, in part because of fast growth in the mobile market, which increasingly relies on Intel's servers and chips.
Another of Platte's tech holdings is Microchip Technology (MCHP), which makes memory chips and other processors used in autos and basic home appliances. Not quite cutting edge, but it allows the firm's profits to grow about 10% a year. That, in turn, lets Microchip, which yields 3.5%, keep increasing payouts. It has boosted them 38 times since 2003.
You'd be wise to look abroad for income opportunities, since U.S. stocks have rallied so much this year, says Russ Koesterich, BlackRock's chief investment strategist. He recommends focusing on Europe and Japan.
I ran a screen to find foreign firms that yield more than a 10-year Treasury and offer growth at a fair price. Among the stocks that popped up: the Japanese camera and photocopier maker Canon (CAJ), which yields 4.1%. The company's profits are expected to climb 12% annually, thanks in part to recent strength in its office-equipment unit. Lately this story has been overshadowed by fears over weak digital camera sales. But Morningstar analyst Carr Lanphier says "the recent pullback in share price could be an attractive opportunity for investors."
Britain's HSBC (HBC) also passed this screen. The bank derives more than half its revenues from Asia and Latin America, with less than a third coming from Europe. Now that the continent is out of recession, though, HSBC should enjoy another shot of growth. Indeed, profits are forecast to rise nearly 13% a year.
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The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
This column is not about what the Federal Reserve is going to do next or the future of Fed chair Ben Bernanke. Capisce?
Investors have blinders (not referring to former Fed vice chair Alan) on right MOREPaul R. La Monica - Jun 18, 2013 1:01 PM ET
Dinosaurs are extinct. But dinosaur tech stocks? They're thriving lately.
Microsoft (MSFT) was up 2% Wednesday and shares passed $30 for the first time since October. That move comes after a nearly 4% rise on Tuesday. Intel (INTC), the chip yin to Microsoft's operating system yang in the Wintel PC market, rose 3% Wednesday. It was up 3% Tuesday too. And Cisco Systems (CSCO) followed up a 2% pop on Tuesday MOREPaul R. La Monica - Apr 10, 2013 12:23 PM ET
Warren Buffett is getting back to basics. Berkshire Hathaway's three new third quarter investments are in companies that create the building blocks for manufacturing and agriculture.
Warren Buffett's Berkshire Hathaway (BRKA) (BRKB) purchased new stakes in Deere & Company (DE), Precision Castparts (PCP), and Wabco (WBC), according to SEC filings released Wednesday afternoon. Deere is the well-known maker of tractors and other farm equipment. Precision Castparts makes the nuts and MOREMaureen Farrell - Nov 14, 2012 5:46 PM ET
Amazon.com is in advanced negotiations to buy the mobile chip business of Texas Instruments, according to Israeli newspaper Calcalist, which would put the online retail giant on the path to becoming a manufacturer of smartphone and tablet processors.
Shares of Dallas-based TI (TXN) rose nearly 3% following the report, while shares of Amazon (AMZN) declined slightly.
Amazon's Kindle Fire tablet is currently powered by a TI processing chip, and the company has MOREHibah Yousuf - Oct 15, 2012 12:44 PM ET
In a world fraught with uncertainty and volatility, the executive team at Caterpillar (CAT) can evidently see the future -- three years into the future. The equipment maker slashed its revenue and profit forecasts for 2015. It cited the likelihood of "modest" economic growth at an industry conference this week.
Should growth fall farther than the company's modest predictions, Caterpillar's CEO Douglas Oberhelman promised that investors would still find reasons MOREMaureen Farrell - Sep 25, 2012 4:42 PM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
Who needs to own a boring U.S. Treasury bond when you can buy an exciting tech stock and get a similar -- or in many cases, higher -- yield in the process?
Cisco Systems (CSCO) announced Wednesday MOREPaul R. La Monica - Aug 16, 2012 1:14 PM ET
Warren Buffett might not like technology that much after all.
The legendary investor exited his entire position in Intel (INTC) during the second quarter. His firm, Berkshire Hathaway (BRKA) (BRKB), bought into the computer chip making firm just three quarters ago. Such a rapid exit is rare for Buffett, who is known for his buy-and-hold value stocks ethos.
Berkshire Hathaway's only addition to his fund's portfolio in the second quarter was the MOREMaureen Farrell - Aug 14, 2012 4:58 PM ET
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