Let’s face it – we all love to get paid.
And if you think about it, dividend payments are essentially investors’ versions of paydays within the stock market.
As we’re all aware, many target dividend-paying stocks, but why?
Dividends provide a passive income stream, limit the impact of drawdowns in other positions, provide more than one way to profit from an investment, and provide the ability to reap maximum returns through dividend reinvestment.
In addition, many companies that pay dividends are well-established, as they generally are no longer experiencing supercharged growth and opt to share profits with shareholders.
Three companies – Visa V, ASML Holding ASML, and Novo Nordisk NVO – have all grown their dividend payouts nicely over the years. For those interested in an income stream, let’s take a closer look at each.
Visa
Visa is a global payments technology company providing transaction processing services (primarily authorization, clearing, and settlement) to financial institutions and merchant clients. Analysts have raised earnings expectations, helping land Visa into a Zacks Rank #2 (Buy).
Visa shares currently yield a modest 0.8% annually, a few ticks above its Zacks – Financial Transaction Services industry average. Impressively, the company’s payout has grown by more than 15% just over the last five years.
The company posted a double beat in its latest release, extending a long history of delivering better-than-expected results.
ASML Holding
ASML Holding has seen positive earnings estimate revisions across its current fiscal year and next following a recent guidance upgrade, pushing the stock into a Zacks Rank #2 (Buy). The company boasts a big growth profile, with earnings forecasted to soar 45% in its current year on 32% higher revenues.
ASML shares currently yield 0.9% paired with a sustainable payout ratio sitting at 32% of earnings. The company has committed to increasingly rewarding its shareholders, boasting a sizable 36% five-year annualized dividend growth rate.
In addition, shares aren’t stretched regarding valuation on a relative basis, with the current 33.5X forward earnings multiple below the 35.6X five-year median and highs of 50.3X in 2022. Still, it’s worth noting that the value is undoubtedly on the higher end of the spectrum.
Novo Nordisk
Novo Nordisk, a current Zacks Rank #2 (Buy), is a global healthcare company and a leader in the worldwide diabetes market. Analysts have taken their earnings estimates higher across nearly all timeframes over the last several months.
NVO shares currently yield 1.1%, below its Zacks – Large Cap Pharmaceuticals average by a fair margin. Still, the company’s 13% five-year annualized dividend growth rate helps pick up the slack, with the company’s 45% payout ratio also sitting at a sustainable level.
Keep an eye out for the company’s upcoming release expected on August 2nd; the Zacks Consensus EPS Estimate of $1.34 suggests a 60% improvement in earnings from the year-ago quarter. Our consensus revenue estimate stands at $8.5 billion, 42% higher year-over-year.
As we can see below, the company has recently enjoyed rapid revenue growth.
Bottom Line
Dividends are a massive boost to any portfolio, helping to offset the losses in other positions. In addition, they provide a passive income stream, something any investor would enjoy.
And for those seeking companies consistently growing their payouts, all three above – Visa V, ASML Holding ASML, and Novo Nordisk NVO – precisely fit the criteria.
Visa Inc. (V): Free Stock Analysis Report
Novo Nordisk A/S (NVO): Free Stock Analysis Report
ASML Holding N.V. (ASML): Free Stock Analysis Report
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