In this era of 1% CDs, finding stable stocks with good dividends is a great way to boost your income generation.
AbbVie is a strong biopharmaceutical stock. It offers a quarterly dividend of 57 cents a share, and the current yield is 3.9%.
Although sales of its biggest drug, Humira, narrowly missed estimates in the fourth quarter, they were still at a record high. This company generates more than $20 billion in annual revenue and had $7 billion in free cash flow last year. Abbvie also expects its growth to continue. Adjusted earnings per share for 2015 were $4.29, up 29% from 2014. The company predicts more double-digit growth this year, with guidance for adjusted EPS of $4.90 to $5.10. Abbvie also expects revenue to hit about $37 billion in 2020 even as its operating margin improves to more than 50%.
Analysts at Market Realist say the company's research & development pipeline could deliver $30 billion in revenues by 2024. That means this profit-generator is set for great days ahead.
All of this is solid protection for the dividend. Note that the annual dividend payout has climbed to $2.02 in 2015 from $1.60 in 2013.
What's more, this stock has a price-to-earnings ratio of less than 10, based on forward earnings estimates. That makes it undervalued. Look up its five-year expected price/earnings-to-growth ratio of 0.68 and compare it with Pfizer's 2.39 and Merck's 3.02, and you know this is a stock that belongs in your retirement portfolio.
2. Cal-Maine Foods
Egg producer Cal-Maine Foods offers a nice quarterly dividend of 44 cents a share for an annual yield of 5.5%. The company has had healthy demand for its specialty eggs (a category that includes nutritionally enhanced, cage free, organic and brown eggs), and those sales increased to account for 31% of total revenue in the company's third fiscal quarter. The average egg price increased 4.3% year over year.
Cal-Maine says it will pursue opportunistic acquisitions to boost growth. Big customers such as Walmart and McDonald's keep it vital and strong.
Under an unusual dividend policy, Cal-Maine pays a variable dividend equal to one-third of its net income in each quarter. We expect this company to continue delivering a solid dividend, and the 25.2% payout ratio is comfortable. Cal-Maine should be an integral part of your growth-and-income strategy for 2016 and beyond.
3. Royal Bank of Canada
Royal Bank of Canada offers a generous yield of 4.1%. This bank has a reassuring four-year dividend growth track record and currently pays a 59-cent quarterly divdiend. The bank grew its annual dividend to $3.08 in 2015 from $2.08 in 2011, an increase of 48%.
We suggest you don't pay a lot of attention to the fact that it's been dragged into the Panama Papers controversy. These headlines will prove ephemeral for Royal Bank of Canada.
Royal Bank of Canada is and will continue to be a great dividend creator.
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