October marks the start of the last quarter of the year, a critical time for most businesses. And for investors, this is the last time to determine annual stock returns.
Dividends can be a key part of those returns – and this month there are income payments coming from a number of major dividend stocks. I think two of the most attractive dividend payers right now are Lowe’s (NYSE: LOW) and Colgate-Palmolive (NYSE: CL). Let’s see why these dividend giants deserve a spot on your watch list.
Lowe’s stock outperformed the market for most of 2021 thanks to an exceptionally strong sales environment in the home improvement industry. The company revealed in late August that sales had risen 32% in the past two years, as consumers continued to prioritize spending on home upgrades and renovations.
The profitability of the company even approaches that of its competitor Home deposit and is expected to reach 12% of sales this year.
Lowe’s next dividend payment will hit investors’ accounts in early November if they hold the shares by October 20. The payout is $ 0.80 per share, offering an annual return of 1.6% based on the last share price – better than the current return of 1.3% for S&P 500. This is a solid bonus for a company that should benefit from continued expansion of its profit margin over the next few years.
Lowe’s has an attractive growth story that involves catching up with its main rival – and that momentum should generate great returns for shareholders if it goes as management hopes.
The Colgate-Palmolive consumer products powerhouse is one of those rare companies with more than a century of uninterrupted dividend payments behind it. And its next payment – to shareholders of record as of October 21 – will mark the company’s 59th consecutive year of dividend increases. It is very impressive.
And yet, the toothpaste and cleaning giant is well behind the market this year, mainly because investors are looking for more meteoric growth in other sectors. There are also concerns about squeezing margins due to rising costs and increased spending in areas such as advertising.
But Colgate-Palmolive is seeing solid sales gains in 2021 on top of last year’s increase. Organic sales increased 5% in the last quarter and its dominant position in the toothpaste market remained at 39% of global sales. .
Colgate’s dividend yield – at around 2.4% – is roughly equal to Procter & Gambleand one percentage point more than you could get by holding a diversified index fund that tracks the S&P 500. Owning this stock of consumer goods should provide shareholders with a good mix of income and capital appreciation over the next several years – and Colgate is slightly cheaper than its rival today, as measured by the price-to-sales ratio. .
Investors interested in buying Colgate or Lowe’s need not feel rushed to establish their positions before the next dividend payment. But if you are already planning to buy these Dividend Aristocrats, the immediate income should amplify your returns well.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.