I’ve spent most of my career helping investors discover high-quality growth stocks that can deliver market-beating returns, but there is more to the story.
Many investors see this as boring, but I follow dividend stocks closely, too. Why?
There has always been a need for safe income investments, especially in times of market uncertainty. Investors will turn to safer investments, including dividend-paying stocks that should “zig” when the market “zags.” High-yielding dividend stocks can outpace inflation in the long term. Dividends are also less volatile than stock prices and earnings.
Now, a dividend is a distribution from a company’s earnings paid directly to a class of its shareholders. It is up to the company when (or even if) it is paid. The dividends tend to be paid out on a quarterly basis, but some companies will pay a semiannual or annual dividend. Company management will always announce when it will be paid – including your deadline to buy the stock in order to receive this payout – and what the dividend will be per share. The yield varies, depending on the company’s actual dividend and where the stock price is at the time.
In some cases, you may be looking at a double-digit dividend yield. But as attractive as that may sound, I recommend you pump the brakes before investing. Chasing dividend yields alone can be downright dangerous.
Stocks are not like Treasury bonds or a savings account; there’s no guarantee that you will get your money back. There’s also no guarantee that any given company will continue paying a dividend. If you choose poorly, you could lose your capital as the stock price falls. Or, that nice juicy dividend could be slashed.
In most cases, dividend yields are tantalizingly high for a reason (the stocks are cheap and rightly so) – and are simply not supported by the fundamental earnings power of the business.
I don’t want to scare you away from dividends – far from it. I just want you to be aware of the risks. Investing in dividend stocks can be very lucrative. If you get it right, you can make a fortune. The best way to make big returns is by investing in a dividend stock that also boasts superior fundamentals. These stocks pack a one-two punch of share-price appreciation and a steady stream of income… with payouts that can be twice or five times what you get from a Treasury bond or savings account.
When I say superior fundamentals, I mean growing companies that are healthy and thriving. I also want to see strong buying pressure. Think of this as “following the money.” The more money that floods into a stock, the more momentum a stock has to rise. I measure eight key fundamental factors to determine if a company is growing…
- Sales Growth
- Operating Margin Growth
- Earnings Growth
- Earnings Momentum
- Earnings Surprises
- Analyst Earnings Revisions
- Cash Flow
- Return on Equity
I analyze the company’s fundamentals and buying pressure and then provide my analysis in easy-to-interpret A to F letter grades in my Portfolio Grader. I break down my analysis into three grades: My Fundamental Grade (the fundamentals), Quantitative Grade (buying pressure) and Total Grade, which is a combination of the Fundamental Grade and Quantitative Grade. I consider a stock fundamentally superior if it holds an A-rating for its Total Grade and at least a B-rating for its Fundamental Grade.
Now, as I mentioned, I also follow dividend stocks, and I do this with my Dividend Grader. I screen more than 1,000 dividend-paying stocks for four factors…
- Dividend Trend
- Dividend Reliability
- Forward Dividend Growth
- Earnings Yield
Its grading system is similar like Portfolio Grader, expect the Total Grade is based on the aforementioned factors rather than the stock’s fundamentals and buying pressure. A solid dividend stock will hold an A-rating for its Total Grade.
So, what constitutes a fundamentally superior dividend stock? First, it must hold an A-rating for its Total Grade in Dividend Grader. The dividend stock must also hold an A-rating in my Portfolio Grader. In other words, it’s an AA-rated stock. If the dividend stock holds an A-rating for its Quantitative Grade, that’s even better.
These stocks can be tricky to find, so I’m excited to say that I’ve found five AA-rated stocks that offer a solid blend of dividend and growth. Let’s take a look at each now…
Bulletproof Retirement Stock #1: AVGO
Broadcom, Inc. (AVGO) is a leader in technology infrastructure, as practically all internet traffic utilizes a type of Broadcom technology. In fact, the company boasts that more than 99% of internet traffic crosses through its technology. Broadcom’s technology is also vital to smartphones, service providers, data centers, the cloud, broadband connectivity, factory automation and more.
So, what exactly does Broadcom’s technology entail? The company provides storage and systems (adapters, switches, blades, hard disk drives, software, etc.), wireless products (amplifiers, filters and RF components), wired connectivity (ethernet network adapters, ethernet switching software, processors, etc.), optical products (LED displays, fiber optics, encoders, switches, etc.), software (Broadcom, mainframe and enterprise) and cybersecurity.
You may have guessed this already, but Broadcom also has its hand in AI. In fact, earlier this year, the company introduced Jericho3-AI, which will enable the highest-performance fabric for AI networks. The company also provides an environment where its custom AI chips can network and communicate with one another, offering Network Interface Cards (NIC), ethernet switches optimized for AI traffic, silicon photonics modules and ethernet serializers/deserializers.
When it comes to the company’s fundamentals, they don’t disappoint. For 2024, the analyst community is calling for earnings of $45.76 per share on revenue of $50.25 billion. This compares to earnings of $41.94 per share and revenue of $36.26 billion in 2023. That translates to 9.1% year-over-year earnings growth and 38.6% year-over-year revenue growth. Additionally, the company has paid a dividend for 51-straight quarters. It currently holds a 1.9% dividend yield.
Bulletproof Retirement Stock #2: BWMX
This company was the very first Mexican company to be listed on the NASDAQ – and it has strived ever since its listing in 2020 to reward its shareholders.
Betterware de Mexico, S.A.P.I. de C.V. (BWMX) may have been founded in England more than 80 years ago, but today, it is a Mexican-based company focused on home innovation. The company primarily provides home organization and personal care products. These products range from dish and food organizers for the kitchen to shoe racks and closet organization solutions, from shower caddies and towel rails for the bathroom to moldings and shelves.
The company has a vast distribution network, with more than 66,000 distributors that serve more than a million households across Mexico. Betterware’s primary distribution center is located in Jalisco, Mexico.
Looking ahead to full-year 2024, the analyst community is calling for earnings of $1.64 per share, which is 24.2% higher than earnings of $1.32 per share in full-year 2023. Likewise, revenue is expected to come in at $777.6 million, up from revenue of $729.05 million in the prior year. Betterware has also paid a dividend for 14-consecutive quarters and currently boasts a 4.8% dividend yield.
Bulletproof Retirement Stock #3: FDX
On its first day of operations back in 1973, FedEx Corporation (FDX) delivered 186 packages. Today, the company delivers millions of packages every day to locations – residences and businesses – around the world. In fact, the company has 13 major hub locations that connect more than 220 countries and territories – and it operates 710 aircraft and more than 215 vehicles to ensure that its more than 15 million shipments are delivered every business day.
FedEx Corporation has a vast portfolio of services, including…
- FedEx Express: Delivers more than 5.5 million packages on average daily, making it the world’s largest express transportation company and cargo airline.
- FedEx Ground: Provides delivery services to the U.S. and Canada, delivering nine million packages on average each day.
- FedEx Freight: Serves the U.S., as well as Canada, Mexico, Puerto Rico and the U.S. Virgin Islands, through its more than 400 service centers. More than 100,000 shipments are made daily.
- FedEx Logistics: Provides logistics solutions to connect supply chains around the world, with 34 countries and territories served.
FedEx also offers more than 50,000 retail locations in the U.S., where it provides package drop-off and pickup, as well as pack and ship services, printing and hold services.
Now, turning to FedEx’s financials, the shipping company is looking at a strong 2024. Analysts expect earnings of $18.23 per share on revenue of $89.38 billion. This compares to earnings of $14.96 per share and revenue of $90.16 billion in 2023. Additionally, the company has paid a dividend for 80-straight quarters. It currently holds a 1.9% dividend yield.
Bulletproof Retirement Stock #4: PCAR
PACCAR, Inc. (PCAR) primarily develops light-, medium- and heavy-duty trucks under three main brands: DAF, Kenworth and Peterbilt. The company’s products are sold in more than 100 countries, and it continues to expand its dealer network throughout the world.
Interestingly, though, PACCAR wasn’t first founded as a commercial truck manufacturer. Back in 1905, the company was originally founded as Seattle Manufacturing Company, and it produced railway and logging equipment. PACCAR didn’t actually enter the heavy-duty truck market until it acquired Kenworth Motor Truck Company of Seattle in 1945 and Peterbilt Motors Company in 1958.
I should also add that the company’s structural steel business is known for fabricating the steel for the Seattle Space Needle, and it also played a role in the construction of the Grand Coulee Dam’s third powerhouse and the New York City World Trade Center.
Since then, PACCAR acquired DAF Trucks N.V. in 1996 and Leyland Trucks in 1998. With these two acquisitions and the company’s history in heavy-duty trucks, PACCAR earned the title of one of the biggest truck manufacturers in the world.
Today, PACCAR offers commercial vehicles through its Kenworth Truck Company, Peterbilt Motors and DAF Trucks businesses. It also has a vast dealer network, with 2,200 locations around the world. In 2022, the company delivered 186,000 trucks. The company’s PACCAR Parts division also provides parts distribution centers with aftermarket support for its dealers and customers. And its PACCAR Financial Services business offers finance, lease and insurance services in 24 countries.
What really has me excited about PACCAR is its track record of growth: the company has achieved a profit for 84-straight years!
And on the note of profiting, the company also has a long history of giving profits back to its shareholders: It’s paid a dividend for 170-striaght quarters. And it currently boasts a XX% dividend yield.
Now, the financials for 2024 a bit lackluster. The analyst community is calling for full-year 2024 earnings of $7.47, down 16.2% from earnings of $8.91 per share in 2023. Likewise, revenue is estimated to fall 7.5% to $30.91 billion. .
However, PACCAR has rewarded its shareholders handsomely over the years; it’s paid a dividend for 170-straight quarters. It currently offers a 1.1% dividend yield.
Bulletproof Retirement Stock #5: SPOK
Back in 2014, USA Mobility and Amcom Software merged to create a leading healthcare wireless communications company: Spok Holdings, Inc. (SPOK). The company focuses primarily on resolving communication challenges in hospitals and other healthcare facilities, as communication breakdowns in these settings can result in life-or-death situations.
The company’s primary offering, Spok Care Connect, is a platform that encourages team collaboration, secure messaging and closed looped communication. In fact, the platform provides a web directory, secure texting, encrypted paging, facility alarms, test results, clinical alerts, order routing and more.
More than 2,200 hospitals rely on Spok Holdings’ solutions, with more than 100 million messages sent each month through the platform. The company also boasts the biggest pager system in the U.S., which doesn’t rely on Wi-Fi or wireless networks, ensuring that an outage doesn’t hinder communications in critical situations.
In regard to Spok’s fundamentals in 2024, the analyst community is calling for earnings of $1.02 per share and revenue of $139.76 million. This represents a 9.7% jump in earnings and 1.5% increase in sales from full-year 2023. Spok has also paid a dividend for 63-consecutive quarters and currently boasts an 8.2% dividend yield.
Putting It All Together
And there you have it! Five AA-rated bulletproof retirement stocks.
As you now know, these companies offer the perfect blend of income and growth. So, if you’re looking to add more dividend-paying stocks to help smooth out your portfolio and better protect you in the current economic climate and wild market gyrations, these are five good stocks to start with.
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[Editor’s Note: The Portfolio Grader and Dividend Grader data is of 12/07/2023. The grades can fluctuate week-to-week, so please make sure to visit Dividend Grader here and Portfolio Grader here for the latest grades. The dividend yields are also subject to change.]
Regards,
Louis Navellier
