Why Is Qualcomm, Inc. An Attractive Buy?

Qualcomm, Inc. (NASDAQ:QCOM) shares pulled back about 15% in three months to about $55.50 per share. Thanks to the lower share price due to negative press (i.e. Apple Inc. (NASDAQ:AAPL) suing Qualcomm), Qualcomm now offers an attractive yield of 3.8%. That’s 90% higher than the market’s 2% yield.

Dividend growth and share buybacks

Qualcomm has increased its dividend for 14 consecutive years. It compounded its dividend at an annual rate of 16.5% over the last 10 years. The company last hiked its dividend by 10.4% in Q2 2016.

Over time Qualcomm has been morphing into a more mature dividend company. Up to fiscal 2014, its average annual dividend yield was 2.1% or smaller and its payout ratio was 30% or lower. Its annual payout of $2.12 per share is supported by a payout ratio of about 48%.

Since the end of fiscal 2014, Qualcomm has reduced its share count by almost 13%. It wasn’t a bad use of capital as shares were either fairly valued or undervalued during most of that period.

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Is High-Quality VF Corp. a Great Bargain?

VF Corp. (NYSE:VFC) may seem to be a bargain as the stock trades at its lowest level since 2013. However, the shares were actually way overvalued between 2014 and 2015, trading as high as at a P/E of 25. The shares have since reverted back to a valuation which is more reasonable.

What’s VF Corp.’s Valuation?

Some analysts believe VF Corp. is a great bargain.

Morningstar rates VF Corp. as a wide-moat company and rates it five stars for being super undervalued. It gives it a fair value estimate of $73, which implies a margin of safety of about 33%.

In Value Line’s January 27, 2017, report, it gave VF Corp. a 2019-2021 price projection of $70-95, which implies a potential annualized return of 10-18%, as VF Corp. traded at about $52 per share at the time with a yield of 3.2%.

At about $49.50 per share, VF Corp. trades at a P/E of about 15.7 while the analyst consensus (across 30 analysts) expects the company to grow its earnings per share (“EPS”) by 8.1-8.9% per year for the next three to five years. Read More

How U.S. Dividends Affect Canadians’ Dividend Income And Its Growth

I’m a Canadian who invests in U.S. dividend stocks. So, I thought it’d be useful to explore how U.S. dividends affect my income and income growth. Is it worth it to buy and hold U.S. dividend stocks when Canadian eligible dividends are more favourably taxed?

First, I’ll look into the effective dividend yield and effective dividend growth when receiving U.S. dollar-denominated dividends as a Canadian. Then, I’ll discuss how to reduce the income tax on U.S. dividends for Canadians. Lastly, I’ll discuss why it may be worthwhile to hold U.S. stocks even with increased uncertainty due to fluctuating foreign exchange rates.

The effective dividend yield

On the Toronto Stock Exchange, I hold stocks that pay U.S. dollar-denominated dividends. They include Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP), Brookfield Renewable Partners L.P. (TSX:BEP.UN)(NYSE:BEP), Brookfield Property Partners L.P. (TSX:BPY.UN)(NYSE:BPY) and Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN), which yield roughly 4-6%.

This group of stocks has juicy yields partly because the U.S. dollar has been strong against the Canadian dollar.

I also get some nice yields of 4-8% from U.S. companies, such as Pfizer Inc. (NYSE:PFE), and Omega Healthcare Investors, Inc. (NYSE:OHI). However, the effective yield from these U.S. companies will be higher while the U.S. dollar remains strong against the Canadian dollar.

A Strong USD boosts current income

Essentially, a strong U.S. dollar (against the Canadian dollar) boosts my effective income today. However, if the U.S. dollar weakens (against the Canadian dollar), my effective yield from these companies would decline.

For the first group of stocks, depending on your brokerage, you may be able to call in and ask for the dividends to be paid in the U.S. dollar instead of having the brokerage automatically convert it toe Canadian dollars and possibly take a cut while at it. This only works for brokerages that allow holding of cash in U.S. dollars in the trading accounts.

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