3 Stocks with High Dividend GROWTH to Own for 2021

We have heard that “Change is the only constant in life” and it could not be truer in the current market scenario. The world is anticipating a second wave of coronavirus, there is huge uncertainty in the upcoming presidential election, and the talks concerning fiscal stimulus have yet to show a direction. These along with weak economic indicators are keeping the markets extremely volatile. Amid such uncertain times, it’s wise to look for nominal, but steady income.

Considering the near-zero interest rate environment, nothing can be better than dividend yielding stocks for steady income. However, dividend investing requires ensuring sustainability of the distribution based on a company’s ability to generate money.

High dividends do not always signal attractive investment opportunities. One should rather look for companies that have been able to pay regular and consistent dividends. A company’s ability to maintain or increase dividends amid the pandemic definitely signals its fundamental strength.

The Vanguard High Dividend Yield ETF (VYM), which measures the investment return of common stocks of companies characterized by high dividend yields, has gained 14.8% over the last year. That means, investing in high-yield dividend stocks amid the uncertain times can be rewarding for investors.

Home Depot, Inc. (HD), Comcast Corporation (CMCSA), and Oracle Corporation (ORCL) have consistently paid quarterly dividends over decades, have increased dividend payments significantly over time, and currently offer attractive yields.

Home Depot, Inc. (HD)

Founded in 1978, HD went on to become the world’s largest home improvement retailer. Although it is primarily a brick-and-mortar based company, it has been expanding into the e-commerce segment. Operating in more than 2,200 stores across the United States, Canada, and Mexico, the company offers more than one million products for the DIY customer, and professional contractors.

HD has been consistently paying quarterly dividends since 1987. Recently, the company declared a quarterly dividend of $1.50, payable on September 17th, which cumulates to an annual dividend of $6.00 and yields 2.11%. The four-year average dividend yield for HD is 2.2% and the company’s 3-year dividend CAGR stands at 25.4%.

HD’s sales increased 23.4% year-over-year to $38.1 billion for the second quarter that ended July 2020 and net earnings increased 22.9% year-over-year to $4.3 billion, owing to the company’s fast response to changing market dynamics. Analysts expect HD’s revenue to increase 14.4% for the quarter ending October 2020. Its EPS is expected to increase 17% for the quarter, 5.1% next year, and at a rate of 6% per annum in the next five years.

The company has benefitted from the stay-at-home trend and the stock gained 83.8% since hitting its 52-week low in mid-March. HD’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters. Moreover, HD has been enhancing its e-commerce experience with focus on Artificial Intelligence (AI).

How does HD stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

A for Industry Rank

A for Overall POWR Rating

The stock is also ranked #1 out of 69 stocks in the Home Improvement & Goods industry.

Comcast Corporation (CMCSA)

CMCSA has come a long way since Ralph Roberts purchased American Cable Systems, a small subscriber cable system in Tupelo, Mississippi in 1963. The company went public in 1972 and now owns AT&T broadband, NBC Universal, Sky, DreamWorks Animation, and XUMO. As one of the largest cable providers in the United States, the company provides a full range of advanced broadband services, including internet access, data networking, business telephone, video, and music entertainment services.

CMCSA has been paying quarterly dividends over the past three decades. For the third quarter, the company declared a cash dividend of $0.23 per share payable on October 28th. This cumulates to an annual dividend of $0.92 and yields 2.08%. The company’s 5-year dividend CAGR and four-year average dividend yield stand at 13.3% and 1.88%, respectively.

While CMCSA was adversely affected by the Covid-19 induced pandemic, its customer relationships increased 4.1% year-over-year to 32.1 million customers in the second quarter that ended June 2020, recording the best second quarter on record. Cable Communications adjusted EBITDA increased 5.5% year-over-year, primarily driven by strength in high-speed internet. Moreover, NBCUniversal re-opened Universal Orlando Resort and Universal Studios Japan after temporary closures, and Sky successfully retained 99% of total customers since the crisis began. Analysts expect CMCSA’s revenue to increase 8.2% next year. Its EPS is expected to increase 21.4% next year, and at a rate of 5.2% per annum over the next five years. CMCSA has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The stock gained 49.4% since hitting its 52-week low in March.

Universal Beijing Resort, a unit of Comcast NBCUniversal unveiled a theme park with popular attractions on October 20th. Earlier this month, CMCSA achieved a 10G technical milestone in a trial delivering symmetrical 1.25 gigabit-per-second upload and download speeds over a live production network. In fact, a couple of days back, CMCSA announced that it is joining forces with Aruba, a Hewlett Packard Enterprise (HPE) company, for the launch of Comcast Business Teleworker VPN.

CMCSA’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. Among the 14 stocks in the Entertainment - TV & Internet Providers industry, it’s ranked #1.

Oracle Corporation (ORCL)

Based in Redwood City, California, ORCL’s mission is to help people see data in new ways, discover insights, and unlock endless possibilities. Expanding its cloud applications, the company also develops, manufactures, markets, sells, hosts, and supports database and middleware software, application software, cloud infrastructure, hardware systems, and related services worldwide. In 2013, the company’s database plugged into the cloud and since then has been helping deliver a secure and consolidated database cloud.

For the fiscal 2021 first quarter that ended in August 2020, ORCL’s cloud services and license support revenues increased 2% year-over-year to $6.9 billion. The company’s total quarterly revenues also increased 2% year-over-year to $9.4 billion. Analysts expect ORCL’s revenue to increase 1.9% for the second quarter ending November 2020 and 2.1% in 2021. The company’s EPS is expected to increase 9.6% this year, 8.1% next year, and at a rate of 7.7% per annum over the next five years.

ORCL has an annual dividend yield of 1.61%. The company has been consistently paying quarterly dividends since 2009 and the most recent dividend of $0.24 is payable tomorrow, October 22. The latest dividend amount cumulates to an annual dividend of $0.96 and yields 1.61%. Over the last three years, ORCL’s dividend grew at a CAGR of 14.9% and its four-year average dividend yield stands at 1.59%.

The stock gained more than 50% since hitting its 52-week low of $39.71 in mid-March. ORCL has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. Going forward, ORCL’s cloud computing system, Oracle Fusion Cloud Applications, which is the world’s most complete cloud applications suite, should generate significant revenues.

It’s no surprise that ORCL is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. In the 96-stock Software - Application industry, it is ranked #1.

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HD shares were trading at $284.56 per share on Wednesday afternoon, down $1.48 (-0.52%). Year-to-date, HD has gained 32.66%, versus a 8.11% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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