From Dogecoin to Reddit meme stocks, it might be easy to forget about the real story — an economic recovery is occurring.
One thing is for sure, Dividend Titans, an elite group of S&P 500 stocks that have increased their dividends for 25 consecutive years or more, can give you a safer alternative for your money during a recovery more so than other assets.
Some of our favorites among these stocks include Stanley Black & Decker (NYSE:SWK) and A. O. Smith (NYSE:AOS). Here’s why.
Stanley Black & Decker
This company has given a dividend for the past 144 years and increased it for 50 years in a row, Stanley Black & Decker is a top loved stock by dividend investors. Their history is proof of the company’s strength, and the best news is it is only getting stronger.
The company is reaping the rewards from the surge of household projects created by the lockdowns during the pandemic. The boom in power tools was at the perfect time. It helped them build sales of brands bought in past years, including Irwin, Craftsman, and Lenox electrical and plumbing tools.
Stanley is also expanding sales into lawn products in a major way. The company already has a 20% stake in lawnmower maker MTD, and executives want to take that up with an option to buy the other 80% this year.
All of this adds up to an amazing growth opportunity, and even if Stanley’s dividend yield is just 1.3% currently, it is a safe bet that the firm will raise it every year.
A. O. Smith
A. O. Smith is a leading global maker of water boilers and heaters. The company has raised its dividend for 27 consecutive years. Of course, the 1.5% forward dividend yield might not have every investor going nuts, but their dedication to giving shareholders their portion of profits means we need to recognize the company. And what’s more, the stock and dividend has given investors a market-beating return over the past ten years.
The company leaders have a conservative strategy to their dividend, suggesting that investors should not fear that they will get burned by an overambitious dividend approach. Over the last 10 years, A. O. Smith’s ratio has averaged around 30%. Investors can be assured that the company has a good financial foundation, which means they are well positioned to keep their dividend policy.
Ending Q1 of this year, the company reported a net cash position of $559 million. While water heater sales declined in 2021 for this country, management predicts growth in foreign markets like China and India. So the company is predicting revenue growth of around 14% in 2021. But this is not the only number that is anticipated to rise. A. O. Smith also predicts EPS going up around 23% year over year to about $2.60 this year.
If you are looking to add some dividend income to your portfolio with A. O. Smith, now is a good opportunity. The company is selling at 28.7 times earnings, which might appear pricey given its five-year average P/E ratio of 26.1. But going deeper you will see that is not as expensive as it looks. The stock is selling at 18.3 times cash flow, a discount from the five-year average multiple of 21.2.
Author: Blake Ambrose