Dividends or Growth: What Is in Your Portfolio?
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Every company is in a different stage. Some will not grow a whole lot more, and others are just getting started. Everyone's investment objective is different, but between growth and dividends, most people can find a happy median. There are a couple companies that I expect to grow tremendously for years to come, and one that should become a haven for dividend investors.
What if I told you three months ago that you could double your money by investing in one company for just one quarter? Most people would have thought penny stocks, or some extremely risky investment strategy. Some people might have even thought "Ponzy scheme!"
The truth of the matter is, Tesla Motors (NASDAQ: TSLA) has done just that. Its stock has doubled in just three months. While its not a ponzy scheme, it seems positioned to continue growth over the next several years.
Tesla isn't alone. Although Amazon (NASDAQ: AMZN) may not have doubled in the past three months, it is just entering a new $850 billion market in the U.S. AmazonFresh is the company's produce segment that is being unraveled in parts of Los Angeles and the San Francisco Bay area.
Tesla and Amazon won't be issuing dividends anytime soon, but there is one company that will be seriously boosting their payouts to shareholders. Apple (NASDAQ: AAPL) may not be the first company investors think of when they think dividends, but that may be changing. The good news for investors? Between these three companies, most of your needs should be met.
Durable competitive advantage
All three companies have one. Warren Buffet would never invest in a company without a durable competitive advantage, but he would be proud of these three companies. Tesla is revolutionizing the way people think about cars. It seems that Tesla is years ahead of any competitors, and is finally selling a significant number of cars. Amazon has completely (and continues to) changed the way people view retail. You don't even have to go to the store to buy groceries anymore thanks to them. Apple has a name that no one can miss, enough cash to buy most anything it wants, and a following of customers unlike any other company in the world.
So, why do I pick these companies and expect them to do what I say? Simple. The ground work is there.
It was announced on Tuesday that Tesla would take Oracle's place on the Nasdaq 100 Stock Index, but that is minimal in comparison to its upside. The company is expecting gross margins of 25% by the second half of the fiscal year, which would be higher than that of BMW. It also expects to bring a $30,000 vehicle to the market by the end of 2016. The company is on track to sell 20,000 vehicles this year, but if they can meet this goal of a cheaper vehicle, some expect the company to sell upwards of 200,000 vehicles per year. By the end of the year, Tesla expects to have charging stations nation-wide, and also cut charging times in half.
Amazon is not cheap, but has enough potential moving forward that it might not be too expensive to scare away growth investors. The two biggest growth factors for Amazon right now are Amazon Prime and AmazonFresh.
Amazon Prime members spend twice the amount of non-members, and it collects the membership fees of $79/year. 92% of Prime members plan to renew their membership. Morningstar analyst R.J Hottovey expects a 250% increase in Prime members by 2017.
AmazonFresh is the same idea as Prime, except with groceries. Free same day delivery will be made for orders of more than $35, and the company looks to capture as much of the $850 billion market that they can.
Simply put, Apple has cash - and lots of it. Morningstar expects the smartphone market to double between 2011 and 2014. The point is, if Apple simply keeps up with the smartphone market, they will have even more cash than they do now. With more than half of their revenues coming from iPhones, this can only be good for the tech giant.
The company already has a dividend yield of 2.7%, and will be releasing an additional $100 billion to shareholders by 2015. There are a lot of shareholders, but $100 billion is a lot of money. Amazingly, they could release all this money today and still have approximately $50 billion left. This could be the dividend stock of the future.
The bottom line
Amazon and Tesla have huge potential for growth in upcoming years. These companies may not be the cheapest companies around, but with the growth they are experiencing, and the potential for much more, it may be worth the money. Apple has a mountain of cash that will be released to shareholders in the next year and a half. There are no signs that Apple will mysteriously stop making money, and that is promising for investors.
Tyler Wofford has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Tesla Motors . The Motley Fool owns shares of Amazon.com, Apple, and Tesla Motors . 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!