Equity income investing has gained enormous traction amid the pandemic as the average investor is trying to secure a steady income with interest rates being very low. However, the relentless pandemic induced recession has caught up with companies that typically pay dividends, many of which slashed or discontinued payouts altogether. Dividend payments…
fell by $42.5 billion in the second quarter, compared to the year-ago quarter.
A dividend is essentially a way for companies to return capital to shareholders. Companies typically pay dividends from free cash flow that their businesses generate. While the pandemic has affected the dividend paying ability of many companies, strong fundamentals along with a pandemic-ready business model and robust financials have helped some companies increase shareholder returns.
UnitedHealth Group Incorporated (UNH), American Tower Corporation (AMT), Toronto Dominion Bank (TD), and Dick’s Sporting Goods Inc (DKS) are four stocks that have not only raised their dividend payments amid the crisis, but have been returning more and more capital to their shareholders through dividends.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified health care company in the United States. It operates through four segments – UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx. It has recently collaborated with Morehouse School of Medicine to help expand Covid-19 research and health equity for individuals with Sickle Cell.
UNH has been uniformly paying dividends every quarter for the past decade. Over the past ten years, the average dividends per share growth rate for UNH was 63.7% per year. The company increased its payout during the second quarter by 15.7% to $1.25. The most recent dividend declared by the company is for its third quarter ending September 2020. The annual dividend cumulates to $5, which translates into a dividend yield of 1.66%.
UNH generated free cash flow of $9.6 billion in its last reported quarter, registering a 75% growth from its comparable quarter last year. The company also generated $10 billion in cash flow from operating activities during the quarter, accounting for a 70% rise year-over-year. The company posted a top-line of $62.1 billion, an increase of 2.5% from the year-ago quarter, primarily due to growth at Optum and the UnitedHealthcare public-sector and senior businesses. EPS for the quarter came in $7.12, beating the consensus and company’s own estimates.
UNH has recently expanded its shared portfolio with Canopy Health, an accountable care network, for delivering a new low-cost health care plan for consumers in Northern California. Moreover, UNH is planning to enter the Memphis health insurance marketplace in the succeeding year. The market expects EPS to grow 23.5% per year over the next five years and hence, the dividend payout is expected to rise further.
How does UNH stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
A for Overall POWR Rating.
It is also ranked #1 out of 9 stocks in the Medical – Health Insurance industry.
American Tower Corporation (AMT)
AMT is a real estate investment trust (REIT) which invests in the real estate markets across the globe. It is an independent owner, operator, and developer of multi-tenant communications real estate, with a portfolio of approximately 181,000 communications sites, including more than 41,000 properties in the United States and 140,000 properties internationally.
The company has been…
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