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DIVIDEND CHAMPS 2020
The Corona virus is a challenge to the survival of companies large and small. Many are simply hunkering down and preserving cash, which in a lot of cases means suspending stock buybacks and cutting dividends.
This is NOT the case, however, with the companies we own in the CAIM portfolios. In fact our
portfolio ended the 1st quarter 2020 with a dividend growth of 12% versus 6% for the SP 500.
Even in April, when the worst of the virus news came out, we saw many of our stocks continuing that trend of dividend increases.
The reason for these companies' strong foundations is threefold:
- They exercise strong corporate governance
- Have low levels of debt
- Have the ability to generate excess cash flow
The dividend is the centerpiece of our investment philosophy at CAIM and a key component of providing investors the ability to build wealth in both up and down markets.
In this newsletter we highlight three of our companies exhibiting exceptional dividend growth:
AbbVie Pharmaceuticals (ABBV
, 5.08% yield) - In today's uncertain and unknown health environment we want more health care exposure. But this investment also fits in with our thematic investments in companies that are merging. The benefits of the upcoming Allergan merger should more than offset the effects of Humira generic pressure. And the pipeline has gotten much better as well. The current yield is rather high at 5.08% for a pharma name, well covered by a high 10% free cash yield, with a P/E well below its historical level. This year's dividend increase was 11%.
Home Depot (HD
, 2.45% yield) - For this best-in-class high yielding consumer name, we could see both a short-term recovery and a longer-term favorable demographic story; especially with millennials now starting to buy homes and with interest rates remaining lower for longer. There was a real acceleration going on before the hit, with higher permits and ticket sizes and lower commodity costs. HD offers an AA ESG rating as well. Management increased dividend by 25%.
NextEra Energy (NEE
, 2.38% yield) - This company offers best-in-class growth in its' industry as a leading renewable energy portfolio. Management recently increased dividend by 12% and is striving for 15% growth going forward. NEE offers a rare AAA ESG rating, making it an ideal long-term hold for our strategy.
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