When it comes to locating the best of the best stocks to own, I like to see more than one positive metric. In fact, I like to look for what I call “triple-threat” stocks. These include companies that recently have reported strong earnings, and that also have made the move to increase shareholder wealth by upping their dividend.
Of course, the first two metrics are great, but if investors haven’t also responded positively by buying the stock and sending its price share higher, then the solid earnings and dividend hikes are basically for naught. The way I see it, it doesn’t matter if the earnings and dividend are there — if the stock price is languishing, the stock isn’t capturing enough investor interest. “Expensive” stocks often are expensive for a reason: They’re worth it.
With these metrics in mind, I took a look at the bluest of blue-chip companies — those in the elite S&P 100 club. A quick screen of the index revealed that more than a third of the S&P 100 companies have increased their dividend payouts so far in 2012. But the ones that stand out are my top five triple threat blue-chip stocks so far in 2012:
In April, drugmaker Abbott Labs (NYSE:ABT) reported better-than-expected quarterly sales and earnings that were largely due to strong demand for its Humira arthritis drug. The company earned $1.24 billion, or 78 cents per share, in the first quarter, up from $864 million, or 55 cents per share, the prior year. Excluding special items, Abbott earned $1.03 per share, which beat Wall Street estimates for $1. A couple months earlier, Abbott upped the dosage on its dividend by 6.25% to 51 cents per share. Investors have rewarded Abbott’s solid performance by bidding the stock up about 10% year-to-date.
Abbott is one of the best drugmakers out there, with a host of moneymaking products out now, and many more in the pipeline — which should ensure big numbers for many quarters to come.
In early May, insurance giant Allstate (NYSE:ALL) reported a first-quarter profit that surged 46%, thanks in part to higher average homeowner premiums, as well as the acquisition of online auto insurance retailer Esurance. First-quarter net income rose to $766 million, or $1.53 per share, from $524 million, or 98 cents per share, a year ago. The company said operating income, which excludes gains on investments and other items, was $1.42 per share — well ahead of operating income estimates of $1.12 per share. In February, Allstate increased its dividend 4.8% to 22 cents per share. And since the year began, investors have been pouring into ALL, pushing the share price up 24% YTD.
As the biggest publicly traded U.S. home and auto insurer, Allstate is able to offer best-in-class pricing power to clients. This will be the primary driver of earnings going forward for the carrier, and as we’ve already seen, the company has proven to be an earnings powerhouse.
Beverage giant Coca-Cola Co. (NYSE:KO) popped the top on its quarterly dividend in February, increasing its payout 8.5% to 51 cents per share. That announcement was followed by a strong earnings beat in April that saw Coca-Cola earning $2.05 billion, or 89 cents a share, in the quarter ended March 31. That easily topped last year’s stellar 82 cents a share. Revenue grew an impressive 6% to $11.14 billion, compared with $10.5 billion in the first quarter last year. Investors also have enjoyed drinking KO shares this year, as the stock is up about 9% year-to-date.
The Coca-Cola brand is world-renowned, and it’s only going to get bigger and bigger in emerging markets such as China in the months and years to come. Global demographics alone make this stock one to drink up for the future.
In mid-February, cable TV behemoth Comcast (NASDAQ:CMCSA) boosted its dividend signal by a whopping 44%. That move definitely pleased shareholders, and in May, the company showed why it felt confident increase its dividend so much, as Comcast reported a 30% increase in first-quarter earnings thanks in part to strong Super Bowl advertising. The company reported net income of $1.224 billion, or 45 cents per share, for the January-March period. That metric easily bested the $943 million, or 34 cents per share, a year ago. Wall Street was only expecting earnings of 42 cents per share. As for the share price appreciation, this is where CMSCA really shines. The stock is up 22% this year.
The company’s deal to acquire a majority stake in NBC Universal added nicely to its bottom line in the most recent quarter, and now accounts for about a third of Comcast’s revenue. That division grew 18% from the prior year, and the resurgence of the NBC broadcast network, which grew 37% last year, is a big part of that growth.
In March, digital communications giant Qualcomm (NASDAQ:QCOM) raised its quarterly dividend 16% to 25 cents per share. The company also announced a $4 billion share buyback program. In April, the maker of chips used in cellphones and other wireless devices posted fiscal second-quarter earnings of $1.01 per share, up from 86 cents a share the prior year. Revenue dialed in at $4.94 billion, a 28% increase from $3.87 billion a year ago. Wall Street was expecting the company to report earnings of just 96 cents a share on $4.84 billion in revenue. Although Qualcomm said it expects slightly reduced earnings in fiscal Q3, investors still are embracing the stock. QCOM shares are up 12% year-to-date.
Interestingly, the lower outlook for the coming quarter and the rest of 2012 is primarily because of a manufacturing shortage of the company’s 28-nanometer chipset. The chipset is inbuilt in MSM 8960 Snapdragon processor, which is widely used in several high-end smartphones. I suspect this shortage will be a temporary phenomenon, and one that Qualcomm will rectify no later than fiscal Q1 2013 — and that means the profit floodgates will be open once again.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.