Category Archives: Investing

Strong Dividend Stocks in the Retail Space Exists?!

If you’ve been following Sears Holdings Corp. (NASDAQ:SHLD) and Macy’s Inc.’s (NYSE:M), it may be difficult to believe that strong companies in the retail space still exist.

Sears had been posting losses since 2012. And Macy’s fundamentals have been deteriorating since 2015; its long-term growth is estimated to be about 2% per year, which would be hardly keeping pace with inflation. One should, of course, avoid investing in these types of retailers.

However, it’s not all bad in the retail space. Here are a few quality stocks whose fundamentals have remained strong as they face the challenges in the industry.

shopping mall

Simon Property Offers a ~4.4% Yield

Simon Property Group Inc. (NYSE:SPG) is a global leader, which owns premier shopping, dining, entertainment and mixed-use destinations with properties across North America, Europe, and Asia.

In the second quarter, Simon Property slightly increased its guidance for the year (due to the elimination of some debt), and now estimates to generate $11.14 to $11.22 funds from operations per share, which would represent a growth of ~7% compared to 2016.

As well, management also increased its quarterly dividend to $1.80 per share, which represents a boost of nearly 9.1% from a year ago. Simon Property has hiked its dividend payout every year since 2011.

At ~$164.50 per share, Simon Property is reasonably priced at a multiple of ~15 (and some say even undervalued because the quality shares have historically commanded a premium multiple of ~18). Here the best three places to look for safe dividend income.

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Are the Auto-Parts Retailer Stocks Attractive?

car repair

The Auto-Parts retailer stocks have fallen off the cliff. The shares of Advance Auto Parts, Inc. (NYSE:AAP), O’Reilly Automotive Inc. (NASDAQ:ORLY), and AutoZone, Inc. (NYSE:AZO) have all declined about 38% in the last 12 months.

Either the industry is attractive or they’re experiencing some trouble. O’Reilly and AutoZone have maintained operating margins of above 19%, while Advance Auto’s has slipped 7.3% as it digests its last acquisition.

AutoZone takes the lead with annual revenue of nearly $10.78 billion. Advance Auto takes the second place with annual revenue of almost $9.48 billion. Lastly, O’Reilly has annual revenue of $8.65 billion.

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3 Top Dividend Growth Stocks For Now

Are you looking for stable growing income? If so, you should have these stocks on your radar. They offer sustainable yields of 4.5-5.6% with dividend growth potential of at least 5% per year.

High-growth utility with a 4.5% yield

Algonquin Power & Utilities Corp (TSX:AQN)(NYSE:AQN) has returned about 24.6% on the TSX in the last 12 months. The utility offers a U.S. dollar-denominated dividend which benefits Canadian investors no matter if they opt to receive its dividend in the Canadian or U.S. currency. For U.S. investors, Algonquin offers above-average growth in the relatively stable utility space.

Algonquin continues to execute. In Q1, its adjusted earnings per share increased 19% and its assets grew 94% compared to Q1 2016.

These are thanks partly to its acquisition of Empire, which added 218,000 new water, gas, and electric utility customers to its portfolio, as well as 1,400 MW of regulated electrical power generation.

wind-power facility

Photo: warrenski. License: CC SA 2.0 Source: flickr

Algonquin also put in service 210MW of net power generation capacity, of which 160MW has 20 years of power purchase agreements, which implies stable cash flow generation from those facilities.

The utility offers an above-average yield with an above-average growth rate. Due partly to the strength of the U.S. dollar, Algonquin yields 4.5% and aims to grow its dividend by 10% a year.

Thomson Reuters analysts have a mean 12-month price target of C$14.20 on the stock. So, it’s fairly valued. Investors looking for stable, growing income can consider the shares today. However, weakness in the U.S. dollar will bring the yield down for Canadian investors. Investors looking for a margin of safety  should wait until a pullback to at least the low C$13 level.

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