2 Dividend Stocks to Buy That Are Better Than Apple, Inc
I've been a fan of Apple's (NASDAQ: AAPL) dividend for some time now. And I still am. But no matter how enticing the stock may seem today, there are some stocks that have the tech giant beat when it comes to dividend payouts. Here are two: Intel (NASDAQ: INTC) and Wells Fargo (NYSE: WFC).
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Intel
|
Metric Name |
Metric for Intel |
|---|---|
|
Dividend yield |
2.9% |
|
5-year average dividend growth rate |
3.1% |
|
Payout ratio |
35.2% |
|
5-year average EPS growth rate |
3% |
|
Price-to-earnings ratio |
17.1 |
Data for table retrieved from Reuters.
Boasting a strong dividend yield, room for further increases, and a long history of dividend payments, Intel is a great dividend stock.
Importantly, Intel's dividend yield is more enticing than Apple's. For some dividend investors, Apple's 2.1% dividend yield, which is about equal to the average dividend yield for all stocks in the S&P 500, may simply be too small. Some dividend investors are looking for immediate, strong cash flow from their dividend stocks. Intel's 2.9% dividend yield, therefore, is probably more attractive for investors looking for income.
Further, as a qualified cash cow for over two decades, Intel has paid a dividend since 1992, giving it a consistent track record with dividends Apple lacks. Comparatively, Apple paid a dividend between 1987 and 1995 and didn't reinitiate its dividend until 2012.
Finally, Intel's payout ratio is conservative for a stock with such a meaningful dividend yield. Intel's payout ratio, which is equal to its annual dividend payments as a percentage of earnings, is 35.2%.
Wells Fargo
|
Metric Name |
Metric for Wells Fargo |
|---|---|
|
Dividend yield |
3.1% |
|
5-year average dividend growth rate |
49.1% |
|
Payout ratio |
37.1 |
|
5-year average EPS growth rate |
13.3% |
|
Price-to-earnings ratio |
12.0 |
Data for table retrieved from Reuters.
Wells Fargo, in particular, offers excellent prospects for investors looking for income -- arguably better than both Apple and Intel.
Sure, Wells Fargo does jump out among these three stocks as the dividend investment with the highest dividend yield -- at 3.1%. But that isn't the only reason Wells Fargo is such a good dividend investment. Wells Fargo looks even better when its yield is considered in light of the stock's compelling valuation. With a price-to-earnings ratio of just 12 and a price-to-book ratio of just 1.4, investors who buy today get both a low-risk business and prospects for meaningful appreciation; as one of the most efficient and scaled banks in the world, Wells Fargo possesses staying power its current valuation simply isn't fully appreciating.
In addition to its compelling dividend yield and valuation, Wells Fargo also boasts a conservative payout ratio -- especially considering investors buying today get a meaningful 3.1% dividend yield.
Notably, investors should bear in mind that Wells Fargo's 5-year average dividend growth rate isn't indicative of what growth could look like in the future. However, investors should still appreciate this recent growth, as it signifies the bank's impressive recovery since the recession; Wells Fargo cut its dividend from $0.34 per share in 2008 to $0.05 in 2009, and it has since rebounded to $0.38 -- above its pre-recession dividend. In other words, even the recession that sent major banks into bankruptcy couldn't stop Wells Fargo from getting its dividend payouts back to where they were just five years after dividend growth was resumed in 2011.
Altogether, Wells Fargo offers investors a safe investment, upside potential for the stock price, and a meaningful dividend yield.
Apple, of course, has its own strengths. Namely, the tech giant boasts a payout ratio of just 25% -- well below both Intel's and Wells Fargo's -- and its dividend could potentially grow faster than these two companies' dividends over the long haul. But for investors looking for a higher yield today and a longer track record of dividend payments, Wells Fargo is the surer way to fatter cash flows over the next five years.
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Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Wells Fargo. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.