Do you like dividends? I bet you will love these 3 actions

For dividend investors, the payment of a business depends on its ability to continue to send checks. It takes a long-term view. While some traders look for the stocks that have risen the most this week, investing in dividends requires the patience of owning stocks and getting paid quarter after quarter and year after year.

Investors in Amgen (NASDAQ: AMGN), Hershey (NYSE: HSY), and Garmin (NASDAQ: GRMN) have learned that slow and steady can win the race. With attractive yields, a positive outlook, and plenty of leeway to keep increasing payouts, it’s hard not to like these dividend payers. Let’s take a look at how each gives investors the assurance that stocks and dividends are likely to continue to rise in the years to come.

Image source: Getty Images.

1. Amgen

Amgen has grown into one of the world’s leading biotech companies, with seven drugs generating more than $ 1 billion in annual sales. Its arthritis drug, Enbrel, has fought off several patent threats and could become the best-selling drug of all time by 2024, when it is estimated to reach $ 140 billion in total sales.

Like many Amgen drugs, the threat to Enbrel comes from biosimilars. These drugs, unlike traditional chemical compounds, are proteins created from living organisms. While generics copy a formula, biosimilars go through the same step-by-step process as the drugs they aim to copy, starting with the same amino acids.

Despite the threat, the company has in fact become a leader in the space. Its biosimilars portfolio reported $ 1.7 billion in sales last year. The transition to these biologics is necessary as four of its blockbuster drugs saw sales decline in 2020. Overall, revenues increased 9% to $ 25.4 billion. Along with its strong position in biosimilars, the company is also expanding internationally. Its rest of the world segment recorded 10% more sales in 2020 than in 2019, slightly outperforming the US performance. Asia-Pacific sales topped $ 1 billion for the first time.

The success allowed Amgen to increase the dividend by 10% to $ 1.76 per quarter. This makes the forward yield of 2.8%. With a payout ratio of 52% – the percentage of profits paid out as dividends – shareholders can anticipate similar increases in the future.

AMGN Dividend Yield Chart

AMGN dividend yield given by YCharts

2. Hershey

The name Hershey is synonymous with chocolate. The maker of KitKat bars and Reese’s Peanut Butter Cups is owned by a charitable trust that has invested its 81% voting power over the years to maintain the independence of the company. Since 2002, the trust has rejected potential deals with Wrigley Jr., Cadbury, Kraft and the Kraft spinoff company Mondelez.

Over the past decade, the company has experienced modest revenue growth of 4% and earnings per share growth of nearly 11%. This is enough to be a constant dividend payer. In 2020, sales grew only 2% to $ 8.15 billion, while profits rose 12%. Management expects this year to normalize, reverting to its long-term forecast of 2-4% sales growth and 6-8% profit growth.

The current 2% return represents approximately 50% of the profits distributed to shareholders. In a world where the 10-year US Treasury is 1.66%, a reliable 2% from the Pennsylvania-based chocolatier is alluring.

The best thing about Hershey is the stable demand. Americans consume about half of the world’s supply of chocolate each year, about 11 pounds per person. This sweet tooth shows no signs of sagging. In June, U.S. consumers were consuming 6.3% more chocolate during the pandemic than during the period a year earlier. Investors more concerned with business predictability and dividends than growth might want to view Hershey as a treat for their portfolios.

HSY Dividend Yield Chart

HSY dividend yield given by YCharts

3. Garmin

After stocks fell nearly 90% from 2007 to 2009, many investors may have ditched Garmin. The company was best known for its dashboard-mounted GPS devices, which were to become obsolete thanks to Applethen is the new iPhone. However, the company has seen a rebound by focusing on fitness equipment, marine and air navigation, and outdoor recreation.

The result has been dedicated customers willing to pay a premium for the company’s gadgets, leading to earnings per share that have nearly doubled over the past decade, pushing the stock over 600% higher in the process. It also gives management the ability to pay a healthy dividend and keep increasing it every year.

The current 1.9% return is less than half of what the company earned last year. That dividend has climbed 18% over the past five years and is expected to rise 10% this year to $ 2.68 per share.

And Wall Street clung to the success story; The stock is now at an all time high after sales rose 23% to $ 1.35 billion in 2020. Impressively, earnings per share jumped 34%. With this kind of performance, it’s no surprise to find the current price-to-earnings ratio around 20% higher than before the pandemic. However, with so many people embracing the outdoors, Garmin could still grow of this new higher base in the future.

While stocks appear to be well valued, yield-seeking investors may want to buy if a pullback occurs. Boat sales hit a 13-year high last year, while hiking has jumped up to 90% in some popular spots. These trends mean strong sales of GPS devices ahead, as well as earnings and dividends for shareholders.

GRMN Dividend Yield Chart

GRMN dividend yield given by YCharts

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Roberto Frank

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