Three Excellent Dividend Stocks
Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Companies that pay out a healthy dividend are handy when you want to supplement your income. The additional revenue provided by the dividend from stock investment is a good way to provide a steady flow of secondary income. It is also useful for retired people who want a steady stream of income. So let’s take a look at three companies that have been providing investors with a regular stream of income and have been doing so consistently in the past.
ConocoPhillips (NYSE: COP) is a major global oil and gas company. The company isn’t quite as big a household name such as BP or ExxonMobil, but it is still fairly big with a market capitalization of $70 billion. In the third quarter of 2012, ConocoPhillips posted a 21% rise in income from continued operations when compared to the same quarter in the previous year. APAC/Middle east and International (which accounts for Africa and Russia) took over from Alaskan operations as the strongest geographical performers, even though the Alaskan operations still remained strong. Warren Buffett’s Berkshire Hathaway owns nearly 29 million shares in the company.
The company’s trailing P/E isn’t a very useful number to look at because it contains earnings from some parts of the company that are now part of its spin off – Phillips 66. However, analysts are expecting $5.80 in earnings per share for the year 2013, which implies a forward P/E multiple of 10. The company has a generous 4.6% dividend yield at current levels and has consistently paid a 66 cent per share dividend since February 2011.
As everyone knows, Microsoft (NASDAQ: MSFT) develops the Windows Operating System. At one point, Microsoft was synonymous with personal computing. Not anymore though, with Apple coming in and stealing a large chunk of the personal computing market. Microsoft still owns the Office suite, which is a key product for the company. Everyone from large corporations to the pensioner with a laptop runs at least one of the applications in the Office family. Excel is a common tool used at most workstations across the world. The company also has enterprise server products such as Windows server and SQL server.
Over 60% of the company’s revenue comes from the Windows PC and Office franchises. 25% of the company’s revenue comes from the server and tools business. The company’s gaming division which currently sells the Xbox 360 also shows good potential, especially with the Xbox 720 soon to release. The company has also recently made forays into the mobile and tablet sector which is an important step forward for the company for a variety of reasons.
PC sales have been dwindling as seen by the poor numbers reported by hardware makers such as HP, Dell and even Intel. Consumer taste seems to have switched to mobile, so it is in the interest of Microsoft to keep up. Faced with the option of either evolving or stagnating, Microsoft has picked evolving after stagnating for a long period of time. Microsoft’s future bets seem to be in line, but the question you’ll need to ask is are they going to match the quality of competitors’ (namely Apple) devices. Despite all this, Microsoft has a dividend yield of 3.19%, and has also been increasing the amount of dividends paid out to investors year-on-year since 2005.
Another company that I’ve previously recommended is McDonald’s (NYSE: MCD). McDonald’s franchises and operates restaurants globally. Its restaurants offer a variety of options such as burgers, soft drinks, coffee and other food items, such as desserts. The company has an excellent track record and has been paying out dividends every year without fail since 1971. The company also managed to do fairly well in the late 2000s recession, proving that food is something that is rarely affected by adverse economic conditions, so long as pricing is in line. The only thing that is a negative against the company is the high P/E ratio.
So there you have it - three companies that will give you a decent source of secondary income. These companies represent different sectors and each of them is a blue chip stock. Trading in blue chips may not be a great idea for someone who is looking to make quick bucks, but long term investors should take note of these companies.
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ceciljohn2002 has no positions in the stocks mentioned above. The Motley Fool owns shares of McDonald's and Microsoft. Motley Fool newsletter services recommend McDonald's and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.