Automatic Data Processing Could Be an Excellent Long-Term Buy

 

The company's most recent quarter was negatively impacted by Covid-19, but the stock offers a solid, safe yield

  

Automatic Data Processing Inc. (NASDAQ:ADP), the largest provider of business outsourcing solutions in the U.S., held up well during its most recent quarter. Given the number of jobs that have been lost over the last quarter to the Covid-19 pandemic, this is a surprising result. At the same time, Automatic Data Processing offers a yield higher than its historical average that is well protected by free cash flow.

 

Let's look closer at Automatic Data Processing to see why long-term investors should consider buying shares of the company now.

 

Company background, quarterly highlights and analysis

 

Automatic Data Processing is composed of two segments: Employer Services, which provides payroll and tax services, and Professional Employer Organization Services, which supplies all-inclusive human resources services to smaller companies. Employer Services account for 70% of revenues, while the PEO services contributed the rest. Automatic Data Processing works with more than 700,000 corporate customers around the country. The company is valued at just under $60 billion as of Tuesday's close.

 

Automatic Data Processing reported earnings results for the fourth-quarter and full fiscal year 2020 on July 29 (the company's fiscal year ends June 30).

 

Revenues were down 3% to $3.4 billion, though this was $55 million ahead of what Wall Street analysts had expected. Adjusted earnings per share of $1.14 were flat from the prior year, but 18 cents better than consensus estimates.

 

 

 

 

For fiscal 2020, revenue improved 3% to $14.6 billion. Organic growth was 4% when adjusted for currency exchange rates. Adjusted earnings per share grew 47 cents, or 8.6%, to $5.92.

 

Continue reading …

 

5 Stable Dividend Stocks to Buy as Fixed Income Vanishes

 

Bond yields are at all-time lows, but these dividend stocks are stable alternatives

 

Income in the bond market is rapidly disappearing, and that’s a weird concept to try and wrap your head around.

 

For decades — centuries, even — investors around the world have bought fixed-income instruments for relatively risk-free income. The concept is simple. You give money to a government or corporate entity who turns around and pays you interest for lending that money to compensate for risk and time.

 

But this simple concept has been flipped on its head recently. Specifically, the “interest” part of the above fixed-income equation has gone out the window. Consider the following:

 

-The 10-year Treasury yield is around 0.6%.

-The 30-year Treasury yield has plunged to all-time lows around 1.3%.

 

In other words, across the world, the income part of the fixed-income equation is rapidly disappearing. Weird, right?

 

Despite this, U.S. equities are still giving investors income. That is, the S&P 500‘s dividend yield presently hovers just below 2% — significantly above all-time low levels (roughly 1% in 2000) and also on the upper end of where the S&P 500 dividend yield has hovered over the past 20 years.

 

Big picture, then, while the fixed income market is suffering from disappearing income, some stocks are still paying good income.

 

 

 

 

The implication? Buy stable dividend stocks that pay more than any other relatively risk-free bond in the world will. As investors grow tired of not even beating inflation by buying a 10-year Treasury note, they will inevitably pile into stocks which: 1) have much higher yields, and 2) have a history of steady and consistent dividend hikes.

 

Without further ado, let’s take a look at five dividend stocks that fit this description.

 

Continue reading …

 

8 Dividend Aristocrat Stocks to Buy Now

 

Here are the best dividend stocks to buy in a risky environment

 

 

After the big shock in March, many investors are still looking for defensive stocks to buy now. Of course, in the most extreme example, you can elect to go all into cash. However, history has proven that to be the worst thing to do. Instead, this is a good time to consider dividend aristocrats.

 

First, market uncertainty incentivizes stable dividend stocks to buy now. How so? Passive-income generating companies typically perform better than high-flying growth names during bearish phases.

 

For one thing, investors can still collect their payouts even if their portfolio isn’t doing too well. Moreover, organizations that have a history of consistent payouts tend to be levered toward secular or otherwise steady industries.

 

And there’s no better paragon of stability than dividend aristocrats. For those who are unfamiliar with the term, dividend aristocrats have three main requirements: they must be equities traded in the S&P 500, have 25 years-plus of dividend increases and meet size/liquidity benchmarks.

 

However, a word of caution. Just because you put dividend aristocrats in your list of stocks to buy now doesn’t guarantee a smooth ride. If the markets turn volatile, you can expect virtually all names to incur red ink.

 

 

 

 

But the major selling point is magnitude. With dividend aristocrats, you’re limiting your potential losses due to the robustness of the target company. Better yet, the volatility provides a rare discount for these stalwarts of industry.

 

So with that in mind, here are eight stocks to buy now with a long track record of payouts:

 

Continue reading …

 

Is 3M a Bargain or a Value Trap?

 

A venerable company's share price is down, driving up the dividend and perhaps creating an opportunity

 

For more than a year and a half, the share price of the 3M Company (NYSE:MMM) has trended downward.

 

Most recently, it was part of the spring market meltdown, from which it rebounded to some extent. As Chairman and CEO Mike Roman noted in the second-quarter earnings release on July 28th, "our results were significantly impacted by the global economic slowdown."

 

3M also has been wrestling with liabilities from the past, primarily around PFAS, or perfluoroalkyl and polyfluoroalkyl substances. Thus, it reported significant legal liabilities, including more than $600 million paid out in the first half of 2020. In its 10-K for 2019, the company recorded a pre-tax charge of $897 million related to PFAS liabilities.

 

The demand for masks and other personal protective equipment has been a bright note fpr the company, but second-quarter results were mixed. Sales and earnings per share were down from the same period last year, but operating cash flow and adjusted free cash flow were both up. More important, perhaps, was the news that monthly sales numbers were improving, albeit slowly. 3M continues to withhold guidance for the full year.

 

 

 

 

With the share price relatively low, is 3M a stock that deserves investor attention, or is it a value trap? In this article, we will attempt to assess this by studying 3M's fundamentals, dividends, buybacks and guru investors.

 

Continue reading …

 

 

2 Safe Dividend Stocks for a Risky Market

 

Today, I have two safe dividend stocks to recommend to you for a possible market pullback now that it’s climbed all the way back to all-time highs. Because in the short term at least, it’s crucial to have some safety in your portfolio…

 

We don’t know what is going to happen. This year is a perfect example of that fact. Who knew that the year 2020 would thrust the country and the world into the throes of a pandemic that would force us into our bunkers and crash the economy? Didn’t see that coming?

 

And the market just loves it. Sure, there was a violent selloff in the early days. But stocks have come all the way back. In fact, the S&P 500 just made a new all-time high. The index is reflecting a market that seems to think things are better now than before the pandemic ever happened.

 

How can that be?

The market isn’t stupid. And it usually gets things right. The market is forward looking. It looks six to nine months into the future. In that span, it sees a rapidly recovering economy drowning in Fed stimulus and record-low interest rates, with money having no place else to go but stocks to fetch a decent return.

 

The market is looking past the virus to a very positive environment for stocks. While the economy will not be back to pre-pandemic shape for a much longer time, things will be going in the right direction. Besides, we got the long overdue bear market and recession over with and now the Fed is friendly.

 

I hope that turns out to be right. And I believe in the U.S. economy. It almost always proves stronger and more resilient than the negative media reflects. It is also true that the market indexes have been driven higher by the amazing performance of technology stocks, as business has largely been even better for the sector during the pandemic. But many stocks and sectors are still beaten down and are more reflective of the current realities on the ground.

 

I also believe that we are in a longer-term secular bull market. In the grand scheme of things, this pandemic will fade and stocks will continue to perform strongly. But the near term is looking awfully dicey. There’s an awful lot of risk out there for a market at all-time highs.

 

 

 

 

Who knows what the virus will do? There could be a second wave that is worse than the first. The market seems confident that a vaccine will be coming in the quarters ahead. But that could prove to be wishful thinking. Then there’s the presidential election. Elections always inject unwanted uncertainty into the equation, but this time it’s worse. There is a risk of an uncertain or contested outcome in November that could wreak havoc on the markets.

 

I’m by no means a gloom-and-doomer. I just think that under the current circumstance it is prudent to eye some relatively safe dividend stocks with businesses that will continue to thrive regardless of the course of this virus or who’s elected President. Here are two to consider.

 

Continue reading …

10 Safe Dividend Stocks You Can Rely On

 

2020 has hammered home the importance of investing in safe dividend stocks, such as these 10 picks with conservative payout management.

 

 

When investors evaluate dividend stocks, they'll typically look at the yield first, then maybe delve into how much it's growing. Far less exciting is how safe the dividend is – but if 2020 isn't a lesson in why it's important to invest in safe dividend stocks, nothing is.

 

Hundreds of companies have reduced or suspended their dividends this year, including dozens of big-name firms such as Boeing (BA), Ford (F) and Disney (DIS). For younger investors, that's less money you can put back to work and compound over time. For investors who rely on dividends in retirement, that's literally an income reduction that can negatively impact your quality of life.

 

So, how do you identify safe dividend stocks? One of the easiest places to start is with the dividend payout ratio, which measures the percentage of profits that are paid out as distributions. It's an easy calculation: Simply divide dividends per share by earnings per share. The higher the percentage, the more net profits go toward sustaining the dividend – and the more risk that a sudden reduction in profits would lead to a negative dividend action.

 

 

 

 

The average S&P 500 payout ratio in 2019 was 42%. That's a fine benchmark, but in the spirit of finding truly safe dividend stocks, we're going to explore a group of companies with a payout ratio of 25% or less. We're also going to look for stocks that have a history of relatively recent dividend growth, even if that growth has temporarily stalled as a result of COVID-related financial hurdles.

 

Here are 10 safe dividend stocks that have plenty of breathing room. Some have slumped in 2020, while others have bucked the trend and shot meaningfully higher. But in all cases, conservative dividend management is serving them (and investors) well.

 

Continue reading …

 

Cisco share – price plunge! A buy with a 3.3% dividend?

 

The Cisco share (CSCO) has after disappointing quarterly results lost 11 percent in one fell swoop. Sales fell by 9 percent compared to the previous year and, according to management’s forecast, should fall by a further 10 percent in the current quarter. It seems as if Cisco, despite the high demand for conference software such as WebEx, is more of a victim of the Corona crisis, instead of benefiting from the acceleration of digitization triggered by the virus.

 

On the other hand, the drop in the share price has driven the dividend yield to an attractive 3.3 percent, close to an all-time high. How to explain the weak numbers and whether the Cisco share is a bargain, you will find out in this share analysis. In addition, Cisco is one of the 20 stocks that we save each month in the starter depot. If our judgment is negative, the share is up for grabs.

 

The business model: This is how Cisco makes money

 

Cisco is one of the dinosaurs of the Internet. Its routers and switches have been ensuring that the flow of data from A to B works for decades. Internet hardware is accordingly one of Cisco’s core business. At the latest with the strategy of “intent-based networking” introduced in 2017“However, things started to change. Intent-based networking tries to master the increasing complexity of the configuration of the network landscape. To meet this challenge, Cisco simplifies the configuration with software. Instead of configuring the network landscape directly, very technically and specifically, the software is told in a much more general and at the same time simpler way what the network should look like. The software then takes care of the actual configuration. “Intent-based networking” also makes good business sense for Cisco. Compared to hardware, software scales better, achieves higher margins and can more easily ensure predictable sales through subscription models.

 

 

 

 

Continue reading …

 

CVS Health Corp: A Dividend Growth Stock in Disguise

 

Why CVS Stock Deserves Special Attention

 

 

At first glance, CVS Health Corp (NYSE:CVS) doesn’t seem that appealing to dividend growth investors. With an annual yield of 3.1%, it’s not exactly a high-yield stock. And because the company has been paying the same quarterly dividend since 2017, there hasn’t been much payout growth lately, either.

 

However, if you decide to ignore CVS Health stock right now, you could miss out on a serious dividend growth opportunity.

 

Let me explain.

 

To most consumers, CVS is known for its pharmacy chain business. The company has more than 9,900 retail locations in 49 states, D.C., and Puerto Rico. Around 70% of the U.S. population lives within three miles of a CVS pharmacy. Every day, the company’s stores serve 4.5 million customers. (Source: “CVS Health at a Glance,” CVS Health Corp, last accessed August 21, 2020.)

 

At the same time, CVS Health Corp has about 1,100 walk-in clinics and the company is one of the largest pharmacy benefits managers in the United States.

 

 

 

 

Now, healthcare is known as a recession-proof industry, which means healthcare stocks could come in handy this time around.

 

Continue reading …

 

$10 Billion Reasons to Start Buying Intel Stock Now

 

INTC stock gets no respect and therein lies an opportunity

 

 

I am not usually a fan of buyback programs, especially not as a reason to chase a stock. Intel (NASDAQ:INTC) announced this week that it intends to buy back $10 billion worth of its own stock. This may be a reason to start buying into INTC stock for of two reasons. First, it’s cheap and recovering so investors would not be chasing it. And second, I think the intent of the buyback from management is to project confidence in the company’s future. You don’t buy an asset unless you believe it will be improving, so they may have good plans forward.

 

Usually there is a stigma that comes with buybacks because it could suggest that its managers have no better ideas than this. Case in point, you never see Amazon (NASDAQ:AMZN) doing this because it invests every penny into future businesses.

 

 

 

 

Intel here is trying to align the Wall Street risk profile for the company with the reality of its position among investors. Simply put, there is no respect for this formidable company especially if you compare it to Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA).

 

I can’t fault the critics for not liking it because management has been very disappointing for a long while.

 

Continue reading …

 

Should You Buy Target (TGT) Stock?

 

In 2017, Target (ticker: TGT) announced it would invest $7 billion over three years to "adapt to rapidly evolving guest preferences."

 

Target positioned this investment to improve customer shopping. We're in 2020 now, three years later, and "the investment has been proven to create an incredible upside," says Scott San Emeterio, CEO of BallStreet Trading in New York City.

 

The retail giant's 2017 initiative was essentially a euphemism for investing in its e-commerce operations to combat Amazon.com (AMZN) in the digital retail sales and delivery space.

 

Target's digital offerings during the global health crisis puts it on par with Walmart (WMT) and Amazon, San Emeterio says, and the company has the numbers to show for it.

 

Target released its second-quarter results in August and reported overall sales growth of 24.3%, compared with last year.

 

"(It's) the strongest the company has ever reported," according to the company's earnings report, with digital sales increasing by nearly 200%.

 

That said, the Minneapolis-based big-box retailer still faces an extremely tough, slug-it-out operating environment, competing directly against the likes of Macy's (M), Kohl's (KSS), Walmart and Best Buy (BBY), as well as digital sales giant Amazon. While its recent earnings report illustrated just how well Target's investments in e-commerce are faring, the company is still feeling the effects of the global pandemic on its bottom line.

 

 

 

 

How have Target's efforts panned out, and where is the company headed from here? What can investors expect from retail's sleeping giant? Let's take a look:

 

Continue reading …

 

8 Dividend Stocks That Look Too Generous

 

These high-yield dividend stocks could be in trouble thanks to the coronavirus

 

 

With interest rates near zero, many investors are turning to dividend stocks for income. And for some investors, the higher the yield, the better.

 

But it’s important to remember that in the equity market, just as in the bond market, higher yield usually means higher risk. The biggest risk is a dividend cut, which usually provides the proverbial double whammy.

 

After all, not only does the payout get reduced, but capital usually is lost as well. Investors in widely held names like General Electric (NYSE:GE) and Anheuser-Busch InBev (NYSE:BUD), to name just two, have learned that lesson in recent years.

 

It’s not just a reduced dividend that can cause problems. Cash returned to shareholders can’t be used to invest behind the business or pay down debt. For some firms, then, a focus on growing or even maintaining a dividend can have a deleterious impact on growth.

 

 

 

 

The broad point is that an investor shouldn’t be choosing a stock for its dividend alone. Nor should they see the payout as “free money.” Dividend stocks have their use, but a high dividend on its own doesn’t make a bull case. In fact, for some firms, the dividend can create risks of its own, as is the case for these eight dividend stocks:

 

Continue reading …

 

3 High-Dividend Stocks For Your Retirement Portfolio

 

It's finally here.

 

Retirement has arrived, and it's time to look forward to traveling, spending time with the grandkids, and all the things you have been dreaming of doing.

 

You have worked, scrimped, saved, and invested for a long time to get to this day.

 

Now you need to set your portfolio up to provide a steady, consistent stream of income.

 

In years past, you might have been talking to your banker about certificates of deposit or visiting with a local broker to discuss tax-free bonds, but in today's zero interest rate world, that's no longer an option.

 

You need income to fund your dreams, and your best option is the stock market. Fortunately, high-yield dividend stocks are out there, even in this pandemic-ravaged economy.

 

The strategy here is to find high dividend-paying stocks in companies you can depend on to make the payments regularly and increase that payment over time. You do not want to lose so much as a minute's sleep worrying about having income coming into your account, which is exactly why you don't want to buy just any old stock with a high yield.

 

 

 

 

And I'm going to show you exactly how to find these reliable dividends.

 

Let's look at a few of the best retirement dividend stocks.

 

Continue reading …

 

3 Surging Tech Stocks to Buy Now for Both Growth and Dividends

 

Stocks surged Wednesday, after slipping to start the week, with the tech-heavy Nasdaq up above 11,000 once again. The mid-week gains were once again driven by the tech titans, including Apple AAPL, Amazon AMZN, and Microsoft MSFT.

 

Tesla TSLA also soared after it announced a 5-for-1 stock split to help make its shares more attractive to a wider range of investors—Apple announced a split at the end of July. Advanced Micro Devices AMD, Nvidia NVDA, and other recent tech standouts jumped as well.

 

The positivity marks the extension of the technology sector’s massive run off the market’s March bottom, as the tech space proves increasingly resilient to the coronavirus economic downturn. Wall Street has also been pleased with the better-than-expected second quarter earnings results, along with the improving third quarter outlook.

 

In recent weeks, there have been more calls about a transition out of tech into undervalued cyclicals, such as travel and leisure, financials, and energy. The move into some of those areas could pay off for investors and it’s a bet on the continued reopening of the economy, as people, businesses, and Wall Street learn to live with the coronavirus.

 

There are some legitimate valuation concerns on the tech front. But with the don’t fight the Fed mantra etched into the market, cyclicals could start to climb without causing a major tech pullback.

 

 

 

 

Yet now might be time to be a bit more selective when it comes to buying tech stocks. So today we look at three tech stocks that pay a dividend and are poised to grow during the pandemic and beyond…

 

Continue reading …