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Investors who need income from their portfolios often turn to dividend stocks. Particularly now, low interest rates on other types of income-producing investments have driven more investors toward the stock market in search of more income, and it's important to be careful about which dividend stocks to buy.
Below, you'll find five solid dividend stock ideas for your consideration.
Steve Symington: Despite Gentex Corporation's (GNTX) propensity for taking market share and consistently turning in excellent quarterly results, shares of the auto-dimming mirror specialist have still fallen more than 10% over the past year as of this writing.
Most recently in its fourth-quarter report just over a month ago, Gentex revealed had climbed 16% year over year to $405.6 million, while net income rose an even more impressive 25% to $88.4 million.
Keeping in mind light-vehicle production is expected to increase just 2% year over year in 2016, Gentex also anticipates its own 2016 revenue will increase in the range of 6.2% to 11.4% over 2015, demonstrating the effectiveness of its focus on R&D and innovation in helping the company further penetrate its core automotive market segment.
Gentex's primary electrochromic mirror technology was launched in 63 new vehicles last year, up from 43 in 2014 and 37 in 2013. But Gentex also announced last quarter that three OEMs will debut its full display mirror in new vehicle models over the next year and half -- and that's in addition to three models from GM so far. All told, advanced features like these and frameless mirrors, electronic content display, and compass displays accounted for around half of Gentex's growth last year.
Finally, in addition to Gentex's dividend yielding a healthy 2.1% with a reasonable payout ratio of 31%, Gentex supplements its capital returns efforts through share repurchases; the company repurchased and retired 6.7 million shares of common stock in 2015, leaving around 4.7 million shares remaining under its current authorization. In the end, though Gentex's share price seems to be stuck in neutral, I think the pause offers long-term investors the perfect opportunity to open or add to a position in this solid company.
In mid-2014, the Chinese government started implementing a series of restrictions and regulations to fight corruption and illegal money laundering via casinos in Macau. This had major negative implications for all casino operators in this market, and gaming revenues in Macau collapsed by 34.3% during the full-year 2015.
However, data for February is showing a considerable improvement, Macau gaming revenue declined by a marginal 0.1% versus the same month last year, and this was considerably better than the decline of between 2% and 10% forecasted by analysts. One month does not make a trend, but different data points indicate that maybe the worst is over for Macau casinos.
Investors are reacting with optimism to encouraging data from Macau, and Las Vegas Sands stock is up by more than 45% for its lows of the last year. However, the stock is still paying a big dividend yield of 5.6% at current prices, so it's not too late to make a smart bet on this dividend-paying casino stock.
Selena Maranjian: CSX Corporation (CSX) is worth considering for purchase in March -- not because it's likely to double in short order but because it's being offered at an appealing price these days. Its recent and forward-looking P/E ratios are around 12, well below its five-year average of 15. Railroads in general are in a bit of a slump in part due to a drop in demand for the coal they often transport, and CSX Corporation has retreated by more than 25% over the past year. (Over the past 30 years, though, it has averaged annual gains of 10%, handily outperforming the overall market.)
Railroads are in a cyclical business, which keeps away investors who fear volatility. But if you can stomach some ups and downs, CSX -- one of Fortune magazine's "Most Admired Companies" for six years in a row -- is an attractive business. Revenue has been lumpy in recent years, but profit margins have generally been rising, along with earnings and dividends, reflecting a business getting more efficient. CSX's share count has been falling, too, boosting the value of remaining shares. The railroad has been investing in updating its fleet, which should enhance efficiency and safety, and it has diversified its business, significantly reducing its reliance on coal for revenue.
Even superinvestor Warren Buffett is bullish on train transport, having bought the entire BNSF railroad. In his latest letter to shareholders he offered a key factor making the industry's prospects attractive: "BNSF, like other Class I railroads, uses only a single gallon of diesel fuel to move a ton of freight almost 500 miles. That makes the railroads four times as fuel-efficient as trucks!" You may have to wait a while for CSX's stock to surge, but patient investors can enjoy a growing dividend that recently yielded a solid 3%.
Dan Caplinger: Sometimes, the best dividend stocks are ones that don't yet have high yields but are moving in that direction. That's the case for home-improvement retailer Home Depot (HD), which has tapped into the new bull market in housing in a major way since the end of the financial crisis. By working to cultivate relationships with professional contractors as well as do-it-yourself customers, Home Depot has seen its growth outpace that of key rivals, and shareholders have benefited from that growth.
From a dividend perspective, Home Depot's yield of 2.2% isn't particularly remarkable. However, the retailer has built up a history of regular dividend increases, and it added to its streak in late February with a 17% boost to its quarterly payout. Moreover, Home Depot's strong fundamentals suggest that future dividend hikes should continue. In its most recent quarter, the home-improvement specialist saw comparable-store sales in its U.S. stores jump almost 9%, closing its fiscal year on a high note and with considerable momentum. Home Depot's history includes demonstrated success even when conditions in the housing industry weren't as favorable as they are now, and so dividend investors should take a close look at Home Depot to add to long-term holdings.
Jason Hall: I'm going back to the (natural gas) well, and offering up ONEOK (OKE) as a solid long-term dividend stock to buy now. Yes, shares are up almost 35% since mid-February, but the natural gas and natural gas liquids midstream player remains a fairly valued stock, and still trades well below its all-time highs reached in 2014.
Don't get me wrong -- I'm not one to anchor on a previous stock price, but I am keenly aware of this important point: Since 2014, the year energy prices peaked and then began the precipitous decline, ONEOK has actually increased its dividend by 50%. Furthermore, management recently reiterated that the dividend is secure, and pointed out that the company is on track to generate several hundred million dollars in excess cash flows this year above and beyond its capital and dividend obligations, and has also already established financing that will fund its capital expansion plans "well into" 2017.
Lastly, ONEOK operates in some of the fastest-growing natural gas plays in the U.S., and has also established a strong base of fee-based long-term gathering, processing and transportation contracts with multiple producers in those plays. Put it all together, and the company is probably lower risk today than it was at $100 oil and $4 natural gas.
Add it all up, and the 9% dividend yield may make ONEOK feel like a risky dividend stock, but it's more secure than it seems. It also points to pretty nice upside for the stock price in the years ahead, too.
Dan Caplinger, Selena Maranjian, Jason Hall, Andrés Cardenal, and Steve Symington
