The stock featured in today’s special report is among an elite group of high-quality companies known for paying their shareholders increasing amounts of income through both good times and bad.
They’re called dividend growth stocks… and for many of the analysts we follow, they’re the consensus “investment of choice” for anyone looking to secure a lifetime of steadily-rising income no matter what’s going on in the economy.
Put simply, it’s a company with a proven track record of paying and raising its dividend year-after-year.
These companies typically dominate their industry, realize steady and growing profits, and generate significant amounts of free cash flow.
And perhaps best of all, they pay their shareholders a generous amount of that cash in the form of a dividend that increases each and every year (often rising faster than the rate of inflation).
The beauty of owning a stock like this is that no matter what happens to its share price, as long as the company’s dividend is safe (meaning it has the ability to continue paying it), then we — as shareholders — stand to collect larger and larger payouts each year.
With this in mind, we’ve sifted through the analysis of a handful of our favorite investment analysts and singled out what we consider to be the best dividend growth stock on the market.
For this report, we’ve teamed up with one of our favorite analysts in this space, Brian Bollinger — a Certified Public Account (CPA) and the founder of Simply Safe Dividends.
Brian is a straight shooter who provides analysis that’s 1) rooted in the facts and 2) offers a balanced look at the pros and cons of a particular investment opportunity.
As you’ll discover, you won’t find gimmicky analysis, sensational headlines or careless recommendations. Everything he does is done with integrity.
For this report, we’ve asked Brian to analyze our #1 stock on the merits of its:
- Dividend safety
- Dividend growth potential, and
- Key risks
Brian’s analysis takes into account more than a dozen fundamental factors that influence a company’s ability to continue paying dividends, such as:
- Earnings and free cash flow payout ratios
- Debt levels and coverage ratios
- Recession performance
- Dividend longevity
- Industry cyclicality
- Free cash flow generation
- Business volatility
- Near-term sales and earnings growth
- Return on invested capital
As you’re about to see, the following stock appears to be among the safest dividend-payers AND growers on the planet.
It could be a core holding in a solid dividend-generating portfolio that produces safe, growing income for years to come.
Here at Daily Trade Alert, it’s our firm belief you will do well if you:
- Buy this stock at a reasonable price (fair value or better)…
- Hold it for the long-haul (to allow for the power of compounding, and…
- Reinvest its dividends along the way (either selectively or automatically)
Without further adieu, we’re pleased to introduce you to the April 2018 edition of our special report.
The #1 Stock to Own Right Now: Apple (AAPL)
Dividend Yield: 1.5% Forward P/E Ratio: 12.2 (4/2/18)
Sector: Technology Industry: Computer Hardware
Dividend Growth Streak: 6 Years
Apple needs no introduction.
The stock has already minted many millionaires over the years, and here at Daily Trade Alert, we think it will continue to make money for long-term shareholders going forward… courtesy of its fast-growing dividend.
The company is about as high quality as it gets: It’s “AA+”-rated from S&P, it has spectacular profitability, a massive cash pile (more than the U.S. Treasury!) and an incredible balance sheet.
Thanks to its premium brand, Apple has unmatched pricing power that regularly delivers gross margins in excess of 35% (unheard of in its two main markets, PCs and smartphones).
As you’re about to see, not only does Apple offer one of the safest dividends in the world, but its dividend growth potential going forward is nothing short of outstanding — making it an ideal core holding for long-term income investors.
Perhaps this is why legendary investor Warren Buffett is betting tens of billions of dollars on Apple…
Buffett Bought Over 31 Million Shares of Apple
According to the latest SEC filings, investing legend Warren Buffett recently bought an additional 31.2 million shares of Apple during the fourth quarter of 2017.
And those shares will almost immediately pay off: Berkshire Hathaway stands to collect more than $100 million in Apple dividends within the next three months alone.
With this in mind, we’ve asked Brian Bollinger of Simply Safe Dividends to analyze the safety and growth potential of Apple’s dividend, as well as any key risks investors should be aware of…
Dividend Safety Analysis
Simply Safe Dividends rates a company’s dividend safety by reviewing its key financial metrics. Dividend Safety Scores range from 0 to 100, and conservative dividend investors should stick with firms that score at least 60. You can review how scores are calculated, see their real-time track record, and learn how to use them for your portfolio here.
Apple’s Dividend Safety Score is 97, which indicates that the dividend is not only much safer than the average dividend-paying stock in the market, but actually one of the safest overall.
Apple’s excellent Dividend Safety Score is driven by the company’s relatively low payout ratios, healthy balance sheet, strong business economics, and low industry cyclicality.
Apple’s payout ratio over the last year is about 25%, which gives the company a large cushion to continue paying dividends.
Apple’s balance sheet provides even more assurance with $285 billion in cash and marketable securities compared to total book debt of about $122 billion. Apple can cover its current annual dividend payments for more than a decade with just its net cash and securities on hand!
The new U.S. tax law also lowered the repatriation rate on foreign held cash, so Apple announced it will repatriate $245 billion over the next few years. After the $38 billion repatriation tax the company will pay, Apple’s domestic cash position (which funds buybacks, dividends, and capital expenditures in the U.S.) will exceed $200 billion.
As long as Apple maintains its excellent iPhone margins and protects its brand, the company’s dividend should be very safe for many years to come.
Dividend Growth Analysis
Apple initiated a quarterly dividend of 38 cents per share in 2012 and has since increased its dividend by 66%, raising it to 63 cents today. The last increase was an 11% boost last year.
Within reason, Apple could probably grow its dividend as fast as it wants to. The combination of a relatively low payout ratio, an extraordinarily strong balance sheet, and end markets that should continue to grow can fuel dividend growth for many years to come.
In reality, Apple is likely to keep up the roughly 10% per year dividend growth rate for some time. The company still views itself as a growth company and is willing to invest billions of dollars into high risk, but high reward business ventures in huge addressable markets (self-driving cars, payments, etc).
The iPhone drives over 60% of Apple’s overall revenue and has fueled the company’s high growth over the past decade. Apple’s strong brand, superior user experience, and bargaining power with suppliers have allowed it to capture high margins on its phones.
However, with the smartphone market becoming increasingly saturated and phone differentiation harder to come by, Apple could struggle to find its next major growth driver.
There is also a chance that iPhone margins come under pressure as consumer preferences and buying habits evolve. Many conservative dividend investors choose to avoid the technology sector because of its fast pace of change.
Here at Daily Trade Alert, we’ve put a lot of effort into educating our readers on the wonderful world of dividend growth investing… and it’s our hope that you’ll benefit from today’s special report.
A very special thanks goes to Brian Bollinger of Simply Safe Dividends for analyzing the dividend safety, dividend growth potential and potential risks of the stock featured in today’s report. (By the way, if you’re curious why we have so much confidence in Brian’s dividend scoring system, simply look at his real-time track record.)
The reason we put this report together is because we truly believe that the best way to generate wealth in the stock market over the long-haul is to buy a select group of high-quality dividend growth stocks while they’re trading at reasonable prices… hold them for the long-term… and reinvest their dividends along the way.
We think any long-term investor will do well with that strategy.
That said, thanks to the market’s multi-year bull run, it’s getting harder and harder to find high-quality dividend growth stocks trading at reasonable prices right now.
With this in mind, each and every Sunday — as a part of your free subscription to Daily Trade Alert — you’ll receive the name, ticker and full analysis of what we call our Undervalued Dividend Growth Stock of the Week.
As its name implies, the featured company will likely offer sound fundamentals, a reasonable level of debt, a strong balance sheet, a rock-solid history of increasing its dividend, and of course, an attractive share price.
Don’t miss this Sunday’s issue. To help make sure you receive it, be sure to add DTA@DailyTradeAlert.com to your address book or contact list today.
As always, if you ever have any questions or suggestions, please feel free to send us a note at the email address above.
Greg Patrick, Co-Founder