Each of these 3 are very different companies, but each has one thing in common: a dividend yield that could head higher because of improving financials. Here’s why three Motley Fool contributors believe buying these top dividend stocks in income portfolios makes sense…
The 800-pound gorilla of the high-end luxury market
Leo Sun (LVMH Moet Hennessy-Louis Vuitton SA (NASDAQOTH:LVMUY)): LVMH, the largest luxury company in the world, is an ideal trade-war stock for three reasons:
- It’s based in Europe, which isn’t engaged in a trade war with China.
- High-end luxury products are generally considered recession-proof.
- It’s well diversified across five markets: fashion and leather goods, selective retailing, perfumes and cosmetics, wines and spirits, and watches and jewelry.
LVMH’s portfolio of 70 brands includes Louis Vuitton, Fendi, Christian Dior, Loewe, and Marc Jacobs; jewelry and watch brands like Bvlgari and Tag Heuer; retailers like Sephora and Le Bon Marche; and wine and spirit brands like Hennessy, Dom Perignon, and Moet & Chandon.
LVMH’s organic sales rose 11% last year, as all five of its business segments posted positive sales growth and expanded their operating margins. Its profit from recurring operations rose 21% as its net profit grew 20%. That robust growth boosted its free cash flow 16% to 5.5 billion euros ($6.1 billion) for the full year — and it spent 3 billion euros on dividends and another 800 million euros on buybacks.
LVMH has raised its dividend annually at an average rate of 14% over the past five years. It currently pays a forward dividend yield of 2.3%. The stock isn’t cheap at 27 times earnings, but I’m personally willing to pay that premium for its insulation from the trade war, recession-proof business model, and dependable dividend.
A top wireless dividend
Travis Hoium (Verizon (NYSE:VZ)): The telecommunications business hasn’t gotten a lot of love from investors recently, but that doesn’t mean there aren’t values to be found in the industry. I think wireless behemoth Verizon Communications is well positioned for long-term growth and has a solid dividend of 4.3% for investors to generate cash from.
Verizon’s core business of selling wireless service in the U.S. is a cash machine and makes the entire business run. The downside is that it requires billions in capital expenditures to build wireless networks — but that required scale is a deterrent to competitors who may want to enter the market…
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