Best Dividend Stocks To Buy Now
Tara Clarke: Many investors believe the best dividend stocks to buy are simply those that provide steady income – the price per share moves slowly over time, not offering much in the way of capital gains.
And the current near-zero interest rate environment has proven a big enough boon to make income-only investments more than worthwhile.
But that’s about to change…
It’s time to consider dividend stocks that deliver more than just income, as the U.S. Federal Reserve announced in July it will likely raise rates sooner than expected.
That’s why we’ve compiled a list of four dividend stocks that do just that. These income payers are making brilliant moves right now to set up big share-price gains in 2015.
Four of the Best Dividend Stocks to Buy Now
- Siemens AG (OTCMKTS ADR: SIEGY)
Siemens is a German giant with a 150-year-plus pedigree. German Chancellor Angela Merkel has called it “a flagship of the German economy.” With operations all over the world, the engineering company has business in energy, healthcare, and infrastructure.
For instance, in the first half of 2014, SIEGY was responsible for 81% of the global offshore wind turbine market. It has more than 1,000 traffic control centers globally – more than any other company. And through innovative medical imaging machines, hearings aids, and more, Siemens’ healthcare business has become its most profitable division.
The company brought in a whopping $6.1 billion in net profits on revenue of $104.5 billion in 2013. Trading at roughly $125 a share, SIEGY has a market cap of more than $111 billion and strong financials.
“It has a 7% operating margin, and a 17% return on equity,” Money Morning Defense & Tech Specialist Michael A. Robinson said in August. “In its most recent quarter, it grew earnings per share by 111% and last year generated some $5.1 billion in free cash flow. And it pays a roughly 3.2% dividend.”
But what makes Robinson call this a top dividend stock to own in 2015 is what Siemens is doing to deliver on share price.
First, it appointed new Chief Executive Officer Joe Kaeser in July 2013, and what he’s doing now will grow Siemens’ business even more – and improve profits.
“Joe Kaeser has worked to instill an ownership culture, urging personnel to ‘always act as if [Siemens] were your own company,’” Robinson said. “Kaeser recently unveiled his broad vision for Siemens in a program he calls Vision 2020. He wants to get deeper into such tech fields as Big Data, factory automation, cloud computing, and information technology services.”
Second, SIEGY is rumored to have plans to spin-off its healthcare operations, possibly as a publicly traded company.
And that could be a huge boon for the share price.
“We’ve talked about spin-offs in the past and how they can hand tech investors windfall profits,” Robinson said. “Indeed, research consistently shows that spin-offs can beat the overall market by as much as 30%. Thus Siemens is a rare breed in the overall tech sector. It’s set to become a growth firm once again.”
- General Electric Co. (NYSE: GE)
Siemens isn’t the only classic dividend stock that’s undergoing a profit-unlocking spin-off.
On March 13, General Electric announced that it filed an initial public offering (IPO) of its North American retail financing unit. Spin-off Synchrony Financial (NYSE: SYF) supplies retail credit cards and reportedly makes credit card loans to more than 55 million American consumers.
Since Synchrony began trading publicly on Aug. 1, GE stock has added 3.7%.
What’s more, GE’s $17 billion June deal to scoop up the power and electrical-grid businesses of France’s Alstom SA (OTCMKTS ADR: ALSMY) “is another reason to buy GE,” according toMoney Morning Executive Editor William Patalon.
During its fiscal 2013 financial year, Alstom’s power and grid businesses generated $20.2 billion in sales and $1.7 billion in operating income. In the near term, GE said the buyout will add as much as $0.10 a share in 2016. In the long run, GE said the new assets will create more than $1.2 billion in “cost synergies.”
“The Alstom deal adds another bullish catalyst: The new assets will add immediately to earnings,” Patalon said in July. “[GE] just has a lot going for it right now. It’s slimming down.”
Meanwhile, GE has traditionally been one of the best dividend stocks to own – it’s paid out roughly $18.2 billion to investors via share buybacks and dividends in its history. It’s currently good for a hefty 3.37% yield.
“All in all, this is a major global industrial/technology company that’s poised for a strong rebound – meaning you’re getting a shot at the stock at just the right time,” Patalon said. “That makes it a great ‘safety play’ if the current record run in U.S. stocks were to sputter – or even stall.”