Given continued market uncertainty on the back of rising bond yields and a tech sell-off, many investors are now looking to defend their portfolios. As a result, the appeal of high-yield dividend stocks with strong track records is growing. This is evidenced by iShares Select Dividend ETF’s (DVY) 37% returns over the past six months.
The Federal Reserve’s near-zero interest rate policy has also made dividend stocks attractive to investors. In particular, stocks that offer a steady stream of income through dividends at rates higher than fixed-income securities have attracted the most attention from relatively risk-averse investors.
Against this backdrop, we think it wise to bet on companies that have been generating substantial cash flows and increasingly rewarding shareholders.
Applied Materials, Inc. (AMAT) and Williams-Sonoma, Inc. (WSM) have not only consistently paid dividends by managing the pandemic-induced uncertainties but have historically increased their dividend payouts.
Applied Materials, Inc. (AMAT)
Based in California, AMAT provides manufacturing equipment, services and software to the global semiconductor, display and related industries. It operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. The company has expertise in modifying materials at atomic at an industrial scale. AMAT pays $0.96 in dividends annually, yielding 0.84% on its current stock price. It has a payout ratio of 15.97%. The company’s dividend payments have grown at a CAGR of 17.1% over the past five years.
AMAT saw an acceleration in demand in its semiconductor business as major industry trends fueled increasing consumption of silicon across a wide range of markets and applications. The company’s net sales have increased 24% year-over-year to $5.16 billion in the first quarter, ended January 31, 2021. Its income from operations has risen 23.1% from its year-ago value to $1.28 billion, while its EPS has improved 26.8% to $1.23 over the same period.
Analysts expect AMAT’s revenues to grow 36.6% year-over-year to $5.40 billion in the current quarter (ending April 30, 2021). A consensus EPS estimate of $1.51 for the second quarter represents a 69.7% improvement from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 107.8% over the past six months.
AMAT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
AMAT has a B grade for Quality, Momentum and Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #19 of 99 stocks.
In total, we rate AMAT on eight different levels. Beyond what we’ve stated above, we have also given AMAT grades for Value, Growth and Stability. Get all AMAT’s ratings here.
Williams-Sonoma, Inc. (WSM)
Based in California, WSM is an omni-channel specialty retailer of various home products. The company markets its products through e-commerce websites, direct-mail catalogs, and retail stores.
Earlier this month, WSM was included in the 2021 Bloomberg Gender-Equality Index (GEI). This demonstrates WSM’s continued effort in creating a diverse and inclusive workplace that reflects the communities it serves. The inclusion reflects a high level of disclosure and performance across various gender equality pillars.
In February, WSM launched a new collection of entertaining and tabletop items exclusively at Williams Sonoma and Pottery Barn in partnership with actress, author, and activist Marlo Thomas. The Marlo Thomas Collection at WSM is expected to attract a large volume of potential customers.
WSM pays $2.12 in dividends annually, yielding 1.57% on its current price. It has a payout ratio of 25.35%. The company’s dividend payments have grown at a CAGR of 7.6% over the past five years.
WSM’s net revenues have increased 22.4% year-over-year to $1.77 billion in the fiscal third quarter, ended November 1, 2020, driven by accelerated sales activity across all brands. Its non-GAAP net operating income has increased 151.9% from its year ago value to $276.82 million, while its non-GAAP EPS has improved 151% to $2.56 over the same period.
Analysts expect WSM’s revenues to grow 18.1% year-over-year to $2.18 billion in the about-to-be reported quarter (ended January 31, 2021). A consensus EPS estimate of $3.38 for the fourth quarter represents a 58.7% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 47.8% over the past six months.
WSM has an overall B rating, which translates to a Buy in our POWR Ratings system. WSM has an A grade for Quality and Momentum, and a B for Growth and Value. Of the 63 stocks in the A-rated Home Improvement & Goods industry, it is ranked #10.
Click here to see the additional POWR Ratings for WSM (Stability and Sentiment).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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AMAT shares were trading at $114.23 per share on Monday afternoon, down $0.06 (-0.05%). Year-to-date, AMAT has gained 32.62%, versus a 5.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands.
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