We love dividend stocks here (if it’s not already obvious). Companies that regularly give investors a share of their earnings through payouts come from all market sectors. The majority of U.S.-based businesses that offer them typically do so by offering a fixed sum to investors each quarter, and the best of them will gradually raise that sum over time so that investors may create a stream of income akin to an annuity. This also gives investors who don’t necessarily require the income stream some wiggle room to reinvest those dividend payments right back into the stock itself or elsewhere in the market.
Dividend stocks can also help increase the stability of one’s portfolio because the firms they represent often have strong track records. That’s what I’m focusing on with today’s list: companies that are well regarded on Wall Street for offering lucrative dividends and for engaging in smart business practices. For instance, in addition to the income, I’ll emphasize earnings growth because, without it, there wouldn’t be much of a money pool from which the dividends could be withdrawn and distributed to shareholders.
I’ll now break down the key metrics on three income stocks that show strong fundamentals, earnings growth, price-appropriate payouts, and positive analyst sentiment. The experts tell us to buy and hold, by the way. Let’s have a look at these lucrative tickers here:
Tractor Supply Co (TSCO)
Tractor Supply Co. (TSCO) focuses primarily on farm and ranch supplies. TSCO runs retail farm and ranch stores and concentrates on servicing small companies, tradespeople, and recreational farmers and ranchers with lifestyle necessities. Charles Schmidt, Sr. founded TSCO in 1938, headquartered in Brentwood, TN. TSCO, up slightly YTD by 0.57%, has a market cap of $26 billion, an enterprise value of $30.7 billion, and a safe 0.82 beta figure. TSCO shows a P/E ratio of 23.3x, a forward P/E of 21.4x, a P/S ratio of 1.84x, and a 2.35x PEG ratio. With TTM revenue of $14.2 billion at $9.71 per share, TSCO profited $1.1 billion over the same period with a 7.66% net margin. TSCO shows forecasted 5-year EPS growth of 23.3% and 5-year dividend growth of 30.7%. TSCO has a dividend yield of 1.82% and a quarterly payout of $1.03 ($4.12/yr) per share. With an operating free cash flow of $1.32 billion, TSCO has a median price target of $256, with a high of $280 and a low of $224, representing a potential 24% price jump from where it currently sits. TSCO has 23 buy ratings and 11 hold ratings.
Microchip Technology Inc (MCHP)
Microchip Technology Inc. (MCHP) manufactures semiconductor products. MCHP is responsible for developing, producing, and marketing microcontrollers, development tools, and analog and mixed-signal connection products. MCHP was established on February 14th, 1989, and is based in Chandler, AZ. Up by 5.38% YTD, MCHP has a market cap of $40.5 billion, an enterprise value of $47 billion, an 18.7x P/E ratio, a forward P/E of 11.44x, and a PEG ratio of 1.16x. MCHP shows $8.44 billion in TTM revenue at $3.70 per share, profiting $2.24 billion via a 26.52% net margin. MCHP most recently exceeded analysts’ EPS and revenue projections by modest margins of 1.21% and 0.40%, respectively, and shows steady YOY growth in revenue (+21.07%), EPS (+41.56%), net income (+37.93%) and profit margin (+13.94%). MCHP has forecasted 5-year dividend growth of 14.6% and 48.3% 5-year EPS growth. MCHP has a dividend yield of 2.07% and a 38 cents ($1.44/yr) per share quarterly payout. With a 10-day average volume of 5.35 million shares, MCHP has a median price target of $95, with a high of $125 and a low of $76. This represents a potential upside as high as 69%; MCHP gets 17 buy ratings and 8 hold ratings.
Merck & Co Inc (MRK)
Merck & Co., Inc. (MRK) is a pharmaceutical healthcare business that provides health solutions through its line of prescription medications, vaccines, biologic treatments, and consumer care products. MRK also offers health solutions for livestock, pets, and companion/support animals. MRK was formed in 1891 and is based in Kenilworth, NJ. Up YTD by 4.62%, MRK has a market cap of $293 billion, a $310 billion enterprise value, and a very safe 0.36 beta. MRK shows TTM revenue of $57.87 billion at $5.12 per share, from which it profited $13 billion via its 22.52% net margin. With a P/E ratio of 22.5x, a forward P/E of 16.7x, and a PEG of 2.31x, MRK most recently surpassed analysts’ projections on EPS by 4.76%, and revenue by 4.98%. MRK boasts forecasted 5-year EPS growth of 58% and a free cash flow of $9.5 billion. MRK presently has a 2.52% dividend yield, with a quarterly payout of 73 cents ($2.92/yr) per share and a 55.47% payout ratio. With a 10-day average trading volume of 5.82 million shares, MRK has a median price target of $126, with a high of $135 and a low of $102, representing a potential price increase of 16.3% from its current position. Collectively, analysts give MRK 22 buy ratings and seven hold ratings.
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