Income investors love dividend stocks, and growth investors love, well, growth stocks, but the two don’t have to be mutually exclusive. There are some stocks that can give shareholders the best of both worlds.
Here’s a closer look at five such “double threat” names investors may want to consider. A couple of them are modestly predictable, but some of them may be surprising to find as dividend plays as well as growth opportunities.
5 Double Threat Dividend Stocks: Becton, Dickinson and Co. (NYSE:BDX)
Syringes, petri dishes and catheters may not be sexy, but selling more of them for a nice profit is sexy. And that’s exactly what Becton, Dickinson and Co. (NYSE:BDX) does.
OK, sales growth may not be red-hot for Becton, Dickinson, and with a dividend yield of 1.7%, it’s not like BDX is being hailed as one of the market’s top dividend stocks. But, the dividend payout growth rate means this name deserves a closer look.
Since 2005, the quarterly dividend payout for BDX stock has grown from 15 cents to 60 cents, and the company has never failed to up its payout during that time. The best part of all? The company only pays out about a fourth of its profits as dividends.
There’s plenty of room to sustain both the yield and its growth.
5 Double Threat Dividend Stocks: Gap Inc (NYSE:GPS)
Calling a spade a spade, Gap Inc (NYSE:GPS) began to struggle in the early 2000s and lost traction all the way through 2010. A funny thing happened on the road to irrelevancy though … Gap started to grow again. Slowly, almost imperceptibly.
But the retailer has managed to crank up the top line from $14.2 billion in 2010 to $16.1 billion last year. Better still, margins are starting to consistently widen again.
The current yield of 2.2% is fair enough, but the current quarterly payout of 22 cents is considerably stronger than the 9 cents owners of GPS stock were pocketing every quarter back in 2009.
Odds are we’ll see more payout growth in the foreseeable future, making Gap one of the better hybrids of dividend stocks and growth stocks out there.
5 Double Threat Dividend Stocks: Microsoft Corporation (NASDAQ:MSFT)
No, this isn’t a misprint — Microsoft Corporation (NASDAQ:MSFT) belongs on a list of potential dividend stocks to buy that also offer strong growth potential.
Despite drawing more than its fair share of criticism and concerns, numbers don’t lie. In nine of the past 10 years, Microsoft has grown its top line. The average annual revenue growth rate is nearly 12%. Earnings per share of MSFT stock have grown at an average annual pace of 10.3%. The company barely even felt a headwind during the recession.
Not bad for a company that’s allegedly been whiffing for a while.
In the meantime, MSFT stock boasts a dividend yield of 2.9%, and the payout has been consistently rising for a decade.
5 Double Threat Dividend Stocks: Cal-Maine Foods Inc (NASDAQ:CALM)
It’s not exactly surprising to see packaged foods company Cal-Maine Foods Inc. (NASDAQ:CALM) on a list of dividend stocks to consider. After all, everyone has to eat, and the dividend yield of 2.8% is decent.
Is there any actual growth on the horizon for CALM stock, though? As it turns out, there’s more than one might first guess.
Last fiscal year, the top line for Cal-Maine Foods grew an impressive 17% — and it wasn’t an unusual year. Earnings grew by 109%, which was an unusual year due to unusual expenses that were booked. But, earnings per share of CALM stock have grown an average of 7.7% per year over the past five years. Not bad for a mere food company.
The only potential downside with CALM stock is that the dividend is erratic and hasn’t measurably grown since the company began paying one in 2008. With a payout ratio of only 36% of its net income though, the market may start clamoring for even bigger dividends.
5 Double Threat Dividend Stocks: Genuine Parts Company (NYSE:GPC)
It’s a bit of a convoluted premise, though one that’s proving accurate all the same — cheaper gasoline prices means consumers are driving more, and those extra miles on their cars means more wear and tear. In turn, that means more repairs and replacement parts for those vehicles.
Enter Genuine Parts Company (NYSE:GPC), which is a distributor of those repair and replacement parts. And if the expectations of prolonged low oil prices are anywhere close to being on target, Genuine Parts Company is just at the beginning of a very healthy period.
And bear in mind this ramp up is materializing at a time when the company was already doing pretty well. Earnings per share of GPC stock have grown nearly 9% for the past 12 months, and that annualized growth rate is expected to increase to nearly 13% in the foreseeable future.
In any case, with a current yield of 2.4%, a payout ratio of roughly 50% of income, a long history of persistent dividend increases (and never failing to pay one for at least the past 30 years), and revenue growth of nearly 11% over the past 12 months, GPC stock is a worthy addition to any list of dividend stocks an investor might also want to own for growth reasons.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.