Dividend Yield: 3.9%
Garmin (GRMN) is technically considered a consumer discretionary stock, according to the S&P 500 … but it makes consumer discretionary technology, and thus makes this list.
If you think the GPS-maker is doomed thanks to the rise of smartphones, think again. Garmin might not be the same hot name it was years ago, with sales still below 2009 levels, but GRMN still has deals with major automotive manufacturers in its back pocket, and also makes positioning products targeted at outdoorsmen.
On top of that, Garmin has been paying dividends for a decade, and GRMN was one of the top 10 S&P 500 stocks for compound annual dividend growth as of the end of Q2, for both a three-year and five-year time horizon.
GRMN currently pays out 45 cents per share each quarter — good for a yield of nearly 3.9%. And while the current annualized payout is around 75% of expected earnings for this fiscal year and next, free cash flow paints a much better picture. In 2012, for example, the company’s total dividends represented just less than half Garmin’s earnings and 40% of free cash flow.
Garmin did warn of a “particularly challenging” third quarter, though — numbers that will be reported Oct. 30. If things are indeed ugly and GRMN goes on discount, it could be a potential buy on the dips.