Amid the current low-interest-rate environment and rising market volatility, investors have been flocking to dividend stocks since the onset of the COVID-19 pandemic. The economic recovery expected with the vaccination drive has also been shifting investors’ focus toward value stocks this year…
A second strain of the virus that has caused a resumption of lockdowns in major European countries, as well as problems associated with the global distribution of vaccinations, continue to buoy the appeal of dividend stocks.
Furthermore, the decline in U.S. job growth in December, as announced by the Bureau of Labor Statistics today, makes the dividend stock case still more favorable.
We think companies such as International Business Machines Corporation (IBM – Get Rating), Enbridge Inc. (ENB – Get Rating) and Prudential Financial, Inc. (PRU – Get Rating), whose dividends are yielding more than 5% at their current prices are attractive investment bets. They are the leaders in their respective sectors and have reliable dividend payout histories. Moreover, each of these companies has increased its dividend payouts consistently over the past five years, reflecting their ability to generate cash flow.
International Business Machines Corporation (IBM – Get Rating)
IBM provides integrated solutions and services worldwide. The company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing.
On December 21, IBM entered an agreement to acquire European cloud management services firm Nordcloud to boost its hybrid cloud consulting capability. This will advance IBM’s cloud migration and transformation capabilities and bolster the growth of its hybrid cloud platform.
IBM collaborated with Avertra, a global integration services and consultancy organization two days ago to help accelerate clients’ digital transformation in the energy and utilities industries. This should help IBM provide a common global infrastructure across all workloads that can run more intelligently and securely.
IBM pays $6.52 in dividends annually, yielding 5.04% at its current price. It has a payout ratio of 77.2%. The company’s dividend payments have grown at a CAGR of 5.4% over the past five years.
IBM has reported a gross profit margin of 49% in the fiscal third quarter ended September 30, 2020, up 160 basis points from the year-ago value. Its EPS has increased 550% year-over-year to $1.43 over the same period. And its pre-tax income from continuing operations has increased 20% year-over-year to $1.83 billion.
Analysts expect IBM’s revenues to increase slightly year-to-year to $74.77 billion in fiscal 2021. The consensus EPS estimate of $11.63 for the ongoing year indicates a 38% improvement year-over-year. IBM has gained 7.6% over the past six months.
How does IBM stack up for the POWR Ratings?
A for Trade Grade
B Buy & Hold Grade
A for Industry Rank
B for Overall POWR Rating.
It is currently ranked #15 of 46 stocks in the Technology – Hardware Industry.
Enbridge Inc. (ENB – Get Rating)
ENB is an energy infrastructure company, operating networks of crude oil, liquids, and natural gas pipelines, regulated natural gas distribution utilities and renewable power generation. The company functions through five segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services.
In November, ENB began construction of its Line 3 Replacement Project in Minnesota after receiving authorization from the Public Utilities Commission. The project is a safety and maintenance focused private investment in Minnesota’s energy infrastructure, which consolidates ENB’s dominance in the region.
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