Home Stock list 3 dividend-paying stocks that had a record year and are just getting started

3 dividend-paying stocks that had a record year and are just getting started

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It should come as no surprise that with markets trading near all-time highs, there are well-known large-cap companies also listed at or near record highs. But investors need to realize that it doesn’t have to be just high-profile, record-breaking growth names.

One can build wealth with a base of slow and steady growth which also provides income in the form of dividends. Three of these stocks are the manufacturer of drinks and snacks PepsiCo (NASDAQ: PEP), home improvement retailer Home deposit (NYSE: HD), and a leading company in steel and steel products Nucor (NYSE: NUE). These stocks have hit all-time highs this year because the underlying companies are making record profits. With solid plans to build on this momentum, investors who include them in their portfolios should expect more to come.

Image source: Getty Images.

Develop a strong brand

Many people invest in the consumer staples sector for ballast and portfolio income. PepsiCo delivers in both areas. After increasing its dividend 5% above 2020 levels, this year marks the company’s 49th consecutive year with an increase in payout. Next year, PepsiCo will likely join the elite Dividend Kings roster. It makes sense for the stock to be included in the income-generating portion of a portfolio with stocks earning 2.7% at recent prices.

But the market hasn’t pushed Pepsi stocks to new heights because of its dividend strategy. Navigating the impacts of the pandemic was a mixed bag for PepsiCo. While door-to-door sales were strong, event suspensions in venues ranging from cinemas to sports arenas took their toll on this side of the business. Overall, however, PepsiCo increased its sales by almost 5% for the full year of 2020.

And growth has accelerated as the pandemic subsides and economies reopen. In its third quarter 2021 period ended September 4, 2021, sales grew a further 13.2% compared to the prior year period. The good results have prompted the company to raise its guidance for the year 2021 in terms of revenue and earnings per share. One of the places PepsiCo expects its growth to come from is to expand the reach of one of its most popular brands.

The company relies on Mountain Dew with two different partnerships. PepsiCo revisits the taste of Mountain Dew with the launch of the citrus drink Mtn Dew Thrashed Apple which will be available at Kroger‘s family of groceries. And this summer, the company announced that it would collaborate with the craft brewer Boston beer to produce the Hard Mtn Dew alcoholic beverage. Investors who are happy to earn income from Pepsi shares will most likely also continue to benefit from the growth portion of the company whose shares are trading at record highs.

Ahead of the online sales trend

Like PepsiCo, Home Depot has adopted a capital allocation model of paying increasing dividends to shareholders. In fact, over the past 10 years, Home Depot has increased these payments much faster than PepsiCo.

HD Dividend Paid Chart (TTM)

HD Data Dividends Paid (TTM) by YCharts

And Home Depot also repays capital to shareholders through share buybacks. Along with a 10% dividend increase, the home improvement retailer announced on May 20, 2021 a new $ 20 billion share buyback authorization program to replace its existing program.

Much like PepsiCo, the management of Home Depot kept their foot on the gas to develop the underlying business. Two major initiatives were its $ 11 billion investment in One Home Depot which the company announced in late 2017. This strategy to grow the company’s e-commerce business was perfectly timed to maximize customer needs during the pandemic. And the company has also refocused on its professional contractor base with the $ 8 billion acquisition of HD Supply late last year.

The growth movements have already borne fruit. With the help of favorable winds related to the pandemic, Home Depot’s sales for fiscal 2020, ending January 31, 2021, were up 20% from fiscal 2019. This sales strength continued through the year. during fiscal year 2021 with net sales up nearly 19% for the six-month period ended August 1. 1, 2021. These results took stocks to all-time highs, and if the company continues to perform at that level, it should continue to help stocks reach new highs.

Nucor galvanizing line treatment console with computers and line facing the operator.

Image source: Nucor.

Take a green gray industry

The steel industry has always been cyclical and there is no reason to believe that will change. But current circumstances have placed major steelmakers in a unique position that looks likely to shift the new cycle to much higher highs and lows. One thing industry leader Nucor has done to help smooth cycles for investors is pay a regular dividend. If Nucor increases its annual payout in December as planned, it will match PepsiCo for its 49th straight year of dividend increases and join the Dividend Kings roster next year with an additional raise.

And increasing those payments shouldn’t be a problem for Nucor. After soaring steel prices and booming customer demand across most industries, Nucor broke its previous record for annual profits in the first six months of 2021. And the company says it will reach a new quarterly profit record with the third quarter. results that it will announce on October 21, 2021.

But the company is not sitting on its laurels. Nucor’s management has shown more clearly that what was considered a chimney industry has made great strides in producing cleaner steel. And it took the next step by offering the industry’s first net zero carbon steel product.

Using previously announced power purchase agreements that use renewable wind and solar power capacity, Nucor said General Motors will soon be its first customer for its offer of green products called Econiq. The steelmaker will also buy carbon offsets “to cancel all remaining emissions from scopes 1 and 2”.

The industry-leading product offering is far from the only place where Nucor expects future growth. He also uses his generous cash flow to invest in order to continue growing the business. In addition to several previous investment projects totaling more than $ 3 billion, the company this year acquired an insulating metal panel business for $ 1 billion in cash; announced a new state-of-the-art steel mill project that will focus on value-added products; and “will have a significantly smaller carbon footprint than its nearby competitors,” according to the company.

Investors can enjoy a stable and growing dividend from Nucor as the company implements new investments over the next few years. While industry and inventory will likely remain cyclical, these trades should shift Nucor’s cycle to new levels.

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 heterogeneous! Questioning 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.


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