Generally, dividend-growth stocks are a conservative way to invest in the stock market. Typically, they’re mature companies that generate sufficient earnings or cash flows to pay a generous dividend and maintain and grow the business.
This Telecom offers a growing dividend
It’s been a long time since TELUS (TSX:T)(NYSE:TU), the third-largest Canadian telecom has hit my minimum yield target of 4.7%.
The dividend is safe, and the stock is reasonably valued — not a bargain and not excessively expensive. At ~CAD$46 per share, TELUS trades at a P/E of ~16, while it’s estimated to increase its earnings per share (“EPS”) by 6.5-7.1% per year over the next 3-5 years.
At current levels, TELUS can deliver 8-11% per year on average over 3-5 years.
Johnson & Johnson (NYSE:JNJ) recently reported its Q4 and full year results. In 2018, it increased sales by 6.7% to $81.6 billion. Excluding divestitures/acquisitions, sales would have increased by 5.5%
A Business Overview
J&J is a globally diversified healthcare company that operates in three segments:
Consumer, which includes popular brands such as Tylenol, Motrin, Neutrogena, and Aveeno;
Pharmaceutical with Zitiga, Stelara, Tremfya, etc. that were key contributors to growth; and
The Pharmaceutical segment is the largest and experienced the highest sales growth of 12.4% (compared to 1.8% for Consumer and 1.5% for Medical Devices). The segment experienced market outperformance driven by double-digit growth in 10 key products.
In 2018, about 51% of its sales were in the U.S. and 49% were international (23% in Europe, 18% in Asia-Pacific and Africa, and 7% in the western hemisphere excluding the U.S.).
J&J’s blockbuster portfolio contributed nearly 47% of sales in 2018.
The company doesn’t stop there, though. It continues to grow its portfolio via research and development (“R&D”), acquisitions and licensing, deals and partnerships, etc. In 2018, it spent about $11 billion in R&D, which was about 13% of sales and aligned with the percentage spent in 2017.
The U.S. stock market, using SPDR S&P 500 ETF Trust (NYSE:SPY) as a proxy, has bounced about 8% from a low in December. The ETF has some strong resistance at the US$270 range. It needs to break that range and make a new high to indicate that the correction that started in October won’t continue.
Despite the market rebounding, there are still some good-value quality U.S. dividend growth stocks for long-term investing. Here are two out of seven top U.S. dividend ideas I wrote about here in December. They’re still great buys today.