If You Like Dividends, You Should Love These 3 Stocks
Buying stocks that deliver reliable earnings growth and pay a regular dividend can be a very rewarding investment strategy. Plus, when things get shaky in the broader market, it's nice to own stocks that pad the cash balance in your brokerage account with consistent dividend payments.
Below, we're looking at three companies -- Texas Instruments (NASDAQ: TXN), Brookfield Property Partners (NASDAQ: BPY), and Intel (NASDAQ: INTC) -- that offer above-average dividend yields and should deliver wealth-building share-price gains over the long term, as well.
A cash-gushing analog chip maker
Texas Instruments is the leading supplier of analog processing chips for a range of applications within the industrial, automotive, and personal electronics markets. TI is also among the leaders in supplying embedded processors for complicated tasks, such as infotainment systems and advanced driver-assistance systems in cars.
The stock has been a wealth-building investment for longtime shareholders, delivering a total return (including dividend reinvestment) of 386% over the last 15 years and 734% for investors who backed up the truck during the market bottom in early 2009.
TI has increased its dividend for 15 years in a row, and management is very focused on maintaining growing free cash flow and dividends over time. Last year, the company paid out $2.555 billion in dividends and repurchased $5.1 billion worth of shares for a total cash return of $7.655 billion. That's more than the $6.1 billion in free cash flow the company generated, but over the last decade, TI's free cash flow has grown 221%.
Even though TI is a leading supplier in the markets it serves, the company only has 18% share of the analog and embedded processor markets. It has a considerable low-cost manufacturing advantage and a wide breadth of products, which has helped it cultivate long-term relationships with major customers. These advantages should help the company continue to take market share from smaller companies over the long term.
Despite the slowdown in the chip industry toward the end of 2018, TI delivered revenue growth of 6%. Because management is confident in the company's future ability to generate free cash flow, TI raised the dividend by 24% in the fourth quarter to bring the full-year payout to $3.08 per share, or 47% of earnings per share. The stock trades for a forward P/E of 18.6 and offers an above-average dividend yield of 2.81%.
A cash-gushing real-estate empire
Brookfield Property Partners is one of the largest operators of real estate in the world. It has an impressive portfolio of properties, including Canary Wharf in London, Brookfield Place in New York, and Fashion Show in Las Vegas. In total, Brookfield Property Partners owns 2,000 assets across 30 countries worldwide.
Brookfield Property is a subsidiary to Brookfield Asset Management, which operates in infrastructure, renewable energy, and private-equity investments. Brookfield utilizes a vast network of contacts around the world to scout out new properties to buy. Management looks to acquire high-quality properties that deliver steady cash flow at prices that will allow for 12% to 15% returns on investment over time.
With about $90 billion in assets under management and total equity of $47 billion, Brookfield Property Partners can pursue opportunities few companies can around the world. For example, in 2018, management acquired General Growth Properties for $15 billion, which brings to Brookfield several prestigious retail properties, such as Grand Canal Shoppes in Las Vegas, Ala Moana Center in Honolulu, and Water Tower Place in Chicago, among others.
Brookfield Property Partners currently offers a mouth-watering yield of 6.55% at the current price of $20.16 per unit. To sweeten the pot, investors can currently buy units at a 30% discount to the company's net asset value of about $29 per unit. Brookfield Property has grown cash distributions at a 6% annual rate over the last five years, and management is targeting distribution increases of 5% to 8% annually over the long term.
A cash-gushing chip supplier for data centers
Historically, Intel has been known as the dominant supplier of central processing units (CPUs) for personal computers, but today, PC-centric revenue makes up only about half of its $71 billion in annual revenue. In 2018, $32.9 billion came from selling chips into data-centric markets, including data centers, Internet of Things, and self-driving cars.
Across all of these markets, management estimates it faces a more than $300 billion addressable market. Data-centric revenue soared 20% last year and promises to revitalize Intel's top-line growth over the next decade as cloud providers continue spending on data centers and Intel's Mobileye unit gains a leadership position as a chip supplier to the multitrillion-dollar transportation sector. Intel is also positioned well to capitalize on the rollout of 5G connection speeds later this year.
These growth opportunities spell a great time to buy shares, particularly for income investors. The company has steadily raised its dividend over the years, except for a temporary halt to dividend increases in 2013 and 2014. However, Intel has paid a dividend every year since 1992. The dividend yield is currently at 2.37%, and Intel only paid out 45% of its free cash flow last year as dividends. That sustainable payout ratio, coupled with bright prospects for future growth in profits, makes for a compelling dividend growth investment.
Plus, Intel stock is quite cheap overall, trading for a forward P/E of 11.8 times this year's consensus earnings estimate.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool owns shares of Texas Instruments. The Motley Fool has a disclosure policy.