Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Dividend Stocks that Offer Both Growth and Big Yields

Companies / Dividends Sep 10, 2012 - 06:26 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleBy Martin Hutchinson writes: I want to let you in on a little secret: You really can enjoy the best of both worlds.

With a little bit of digging, you can uncover companies that not only offer growth but pay good dividends as well.

Now admittedly, there has always been something of a perceived conflict between the two.

The classic theory has been that real growth companies need to retain all of their earnings to have the capital to expand, whereas high-paying dividend stocks are simply "too mature" to be considered good growth opportunities.

But here's the thing. This well-worn theory is wrong on both counts.

In fact, the best companies to put in your nest egg are often what I call "heirloom" investments.

Heirloom investments are companies which have not only maintained their dividends for 30 years or more-- but have increased them every step of the way.

For investors, it's like getting growth and dividends all rolled into one.

Take Emerson Electric Co. (NYSE:EMR) for example.

This heirloom investment has increased its dividend every year since 1957. They haven't been trivial increases, either.
If you look at Emerson's dividend record over the last 20 years, you will find that its quarterly dividend has risen from 8.62 cents in the third quarter of 1992 to 40 cents today.

That's a compounded growth rate of 8.0%, far above the average 2.5% consumer price inflation rate during this same 20-year period.

Granted, it may not sound like much in a single year--but over a 20-year period it's the kind of difference great fortunes are made of.

Add Emerson's annual dividend growth rate of 8.0% to its dividend yield of 3.1% and you get an annual return of 11.1%. Over 20 years, that will turn every $100 invested into $820.83.
That's the difference between a cheese-paring retirement and living your golden years in style.

Dividend Stocks: How to Uncover the Best of Both Worlds
Of course, some sectors are much better than others in giving you both dividends and growth.

The tech sector, for example, is so determined to reward every employee with bountiful grants of stock options that they generally forget to pay dividends altogether.

Indeed, when companies like Microsoft Corp. (Nasdaq: MSFT) and Apple Inc. (NYSE:AAPL) decide to distribute some of their tens of billions of dollars in cash to their unfortunate shareholders, it's generally a sign that they have gone ex-growth and are running out of new ideas.

And yes, I would include Apple's new dividend generosity, taking its yield up to a bountiful 1.6%, in that criticism.
Then there are companies forced to pay out essentially all their earnings in dividends, such as real estate investment trusts (REITs) and master limited partnerships (MLPs).

Generally, these companies are in stable asset-rich businesses, so they can only grow by acquiring new capital, thereby diluting exiting shareholders.

Still, in the case of some REITs like Omega Healthcare Investors (NYSE:OHI) the company's leases have an inflation-protection clause built in, so your nominal yield--in this case 7%-- is better than it looks since the dividends tend to rise with inflation.

As for the financial sector, it used to pay good dividends, but these days they are much harder to come by. The combination of the 2008 financial crisis and the greed of its managers' with stock options has made them both less reliable growth opportunities and less generous dividend payers.

In any case, banks also have the opposite problems compared to the REIT discussed above: their assets are generally denominated in nominal dollars so their earnings can erode if inflation is too high.

For the best combination of growth and dividends, apart from a very few heirloom companies like Emerson Electric, you need to look for companies with a high return on capital and growth in their underlying business.

In this case it's important that the growth involved doesn't chew up too much of their capital.
One example is the oil drilling rig company SeaDrill Ltd. (NYSE:SDRL).

SeaDrill is based in Bermuda, which gives it an enormous earnings advantage. The company pays very little tax, since its headquarters is in a tax haven and most of its assets are located offshore.

Given the world's increasing need for energy, and the attractive economics of offshore drilling, SDRL has enjoyed rapid growth in recent years and looks likely to continue doing so.

With a 15.8% return on equity in its last fiscal year, the company's profitability is high. But it also pays a generous and increasing dividend, with a current yield of 8.2%.

So you see, you really can enjoy the best of both worlds when you combine a solid dividend stream with long-term growth prospects.

You just need to know where to look.

Source :

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules