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.
If investors are buying Nintendo just because of Pokemon GO, it’s purely speculation and not investing, unless they believe in the future of Nintendo as a company.
Besides, it’s not like Nintendo owns the Pokemon game. Check out Quora for the relationship between Nintendo, Niantic, and the Pokemon company and find out who benefits from the game.
In fact, I was surprised by the answer that Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG)(NASDAQ:GOOGL) get a share of the pie. I think both of these tech giants are better investments than Nintendo, especially Apple, which trades at about 12.9 times earnings and yields 2.1% at about US$108 per share.
Gotta catch ‘em all?
In the Pokemon world, one of Ash’s goal was to catch all the pokemon. Not for investing, though. You better not try to catch ‘em all. Read More
Year-to-date, the Utilities ETF (NYSEARCA:XLU) has appreciated 21% and the big two telecoms, AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), have also appreciated more than 20%. Those are amazing returns especially including the above-average dividend yields utilities and telecoms typically offer.
However, with the bid up prices, it has become riskier to invest new money in utilities and telecoms.
The top five utilities in the XLU are all overvalued, including NextEra Energy Inc (NYSE:NEE), Duke Energy Corp (NYSE:DUK), Southern Co (NYSE:SO), Dominion Resources, Inc. (NYSE:D), and American Electric Power Company Inc (NYSE:AEP).
Reversion to the mean can happen for any of these utilities that are overvalued, and it could mean negative returns in the short term. Read More