February 2017 edition
The stock featured in today’s special report is one of the newest additions to an elite group of companies with remarkable histories of paying shareholders through both good times and bad.
These special stocks are 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 dividend payments.
Put simply, a dividend growth stock is a company with a proven track record of raising its dividend year after year.
These companies typically dominate their industry, realize steady profits, and generate massive 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 goes up 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 continues to grow its dividend, we stand to collect larger and larger payouts each year.
With this in mind, we’ve sifted through the recommendations of some of our favorite analysts and singled out our favorite dividend growth stock to own right now.
For this report, we’ve teamed up with Brian Bollinger – a Certified Public Accountant (CPA) and founder of Simply Safe Dividends.
In short, we’ve asked Brian to analyze the stock featured in this report on the merits of its 1) dividend safety 2) dividend growth potential and 3) 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 one of the safest dividend-payers AND growers on the planet.
It could easily be a core holding in a solid dividend-generating portfolio that rewards you for years (if not decades) to come.
Here at Daily Trade Alert, it’s our firm belief you will do well if you:
1) buy this stock at a reasonable price (fair value or better)…
2) hold it for the long-haul (to allow for the power of compounding, and…
3) reinvest its dividends along the way (either selectively or automatically)
With this in mind, we’re pleased to introduce you to the February 2017 edition of what we think is the #1 stock to own right now…
The #1 Stock to Own Right Now: Apple (AAPL)
Apple needs no introduction. You know its name, and it’s very likely you use one of its products each and every day.
Owning its stock has already minted many millionaires over the years, and here at Daily Trade Alert, we find it very likely that it will continue to make money for shareholders going forward.
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).
We’ll get to Brian’s dividend analysis in a moment, but for now, just realize that the combination of a relatively low payout ratio, an extraordinarly strong balance sheet, and end markets that should continue to grow can fuel dividend growth for many years to come.
Perhaps this is why one of the world’s richest and best-informed investors is betting tens of billions of dollars on Apple shares…
Warren Buffett Just Bought Another 42.1 Million Shares of Apple
According to the latest SEC filings, investing legend Warren Buffett recently backed up the truck and bought an additional 42.1 million shares of Apple.
And those shares will almost immediately pay off: by our calculations, Berkshire Hathaway stands to collect at least $32.7 million in dividends within the next three months alone!
For long-term income investors who follow Buffett’s lead into Apple stock, the potential could be enormous…
Apple (AAPL) – Dividend Analysis and Key Risks
Simply Safe Dividends rates a company’s dividend safety and growth potential by reviewing its key financial statements and ratios. Dividend scores range from 0 to 100, with scores below 20 considered weak, 50 considered average, and 80 or higher considered excellent.
Dividend Safety Analysis
Apple’s Dividend Safety Score is 96, 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 27%, which gives the company a large cushion to continue paying dividends. Investors can learn more about how to use payout ratios here.
Apple’s balance sheet provides even more assurance with over $18 billion in cash and more than $200 billion of marketable securities compared to total book debt of about $85 billion. Apple can cover its current annual dividend payments for close to 12 years with just the net cash and marketable securities on hand!
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’s Dividend Growth Score is 90, which indicates excellent future dividend growth potential.
Apple initiated a quarterly dividend of 38 cents per share in 2012 and has since increased its dividend by 50%, raising it to 57 cents in 2016. The last increase was a 10% boost in 2016.
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.
Action to Take: If you’re a long-term income investor looking to cash in on what appears to be one of the safest dividend-payers AND growers on the planet, then consider building a core position in Apple (AAPL) today. Right now could be the perfect time to buy shares.
Greg Patrick, Co-Founder
P.S. Not all of the analysts we follow are in agreement on Apple’s bullish outlook. In fact, one of them thinks most investors are going to get caught by surprise with underwhelming performance. Click here for the details.