One very attractive bonus feature of every earnings season is dividend increases. Inevitably around these times, a clutch of companies elect to lift their payouts.
This earnings season was no different. It featured numerous increases from prominent issuers. Will you get some more coins in your pocket as a shareholder of these companies?
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Don't look now, but the once famously dividend-averse Apple (NASDAQ: AAPL) has now raised its quarterly payout annually for seven years running. The latest is a 5% boost to $0.77 per share, which yields 1.7%.
Apple continues to be a cash-earning machine even as sales of the iPhone, its big cash cow for years, are slumping.
Growth in other segments hasn't fully compensated for this yet, but there have been some impressive numbers regardless. Services, Apple's No. 2 revenue source behind the iPhone, rose by 16% on a year-over-year basis in the company's most recent Q2 to notch a new record high. And the wearables, home, and accessories segment saw 30% growth across the same stretch of time.
In other words, Apple has several dependable levers it can pull to keep the dosh coming in. That's why we can expect more dividend increases in the years to come from the mighty gadget purveyor.
In this increasingly gadget-filled world we live in, someone's got to make the equipment that can fabricate the chips that go into iPhones, Galaxys, and Pixels. The No. 1 someone is Applied Materials (NASDAQ: AMAT), which like Apple declared a 5% increase in its quarterly dividend not long ago.
The aforementioned slump in iPhones isn't only an Apple issue; other manufacturers have been hit by this trend — caused by factors such as smartphone saturation, and the tendency of users to wait longer to upgrade their gadgets.
By extension, Applied Materials has felt the pinch. Its revenue saw a 23% drop in its recently reported Q2, while its net income dived by 39%. For its current quarter at least, Applied Materials is also anticipating more declines.
But the future is bright. Our lives are only going to be filled with more gadgets, be they increasingly connected cars, Internet of Things (IoT) hardware and apps, and artificial-intelligence functionalities. And Applied Materials is going to be a major company making the goods that make the brains behind these technologies.
With the dividend increase, Applied Materials now pays $0.21 per share, which yields 2.1% at the latest closing share price.
Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) is one of the most regal of the Dividend Aristocrats, the small group of S&P 500 stocks that have raised their dividends at least once annually for a minimum of 25 years in a row. The company has more than doubled that requirement, as it declared the 57th consecutive annual raise in its quarterly dividend — a nearly 6% bump to $0.95 per share.
For many years, Johnson & Johnson has been a unique company straddling the consumer-goods and medical industries. Its consumer health division sells basic products such as the ever-popular Band-Aids and Johnson's Baby Oil, while the company is a major player in both the pharmaceutical and medical device segments.
In other words, it's a combination of steady-ish businesses and the often feast-or-famine performance of pharmaceuticals. In the end, this makes the company a constant and consistently good performer, and a reliably effective cash generator. You don't reach 57 years of Dividend Aristocracy without keeping your cash flow well in the black, and managing it well.
Johnson & Johnson's upcoming dividend yields a solid 2.7%.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Applied Materials. The Motley Fool has a disclosure policy.