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Tags: dividend stocks | starbucks | stryker | broadcom

Bob Ciura: 3 Dividend Stocks for Long-Term Growth

Bob Ciura: 3 Dividend Stocks for Long-Term Growth

Bob Ciura By Friday, 21 July 2023 11:30 AM EDT Current | Bio | Archive

Investors looking for long-term income have many possible choices. Investors that are close to retirement, or already retired, are likely to choose dividend stocks with high yields of 5% or more. But for those that have a longer time horizon, there’s another way to go about it that can generate higher income over time.

Dividend growth stocks could produce higher levels of income in the long-term, as well as stronger capital gains as well. This strategy is particularly appealing for younger investors in particular, as they have more time to unleash the power of compounding.

Starbucks Corporation (SBUX)

Starbucks has more than 36,000 stores worldwide. About half of the stores are in the U.S., and nearly 20% of the stores are in China. The company operates under the namesake Starbucks brand but also holds the Teavana, Evolution Fresh, and Ethos Water brands in its portfolio. The company generated $32 billion in annual revenue in fiscal 2022.

In early May, Starbucks reported (5/2/23) financial results for the second quarter of fiscal year 2023. The company enjoyed accelerated business momentum and grew its comparable store sales 11% thanks to 12% growth in the U.S. and 7% growth in international markets.

Adjusted earnings-per-share grew 25% for the quarter. The company expects at least 15% adjusted EPS growth for the full year.

Starbucks has increased its dividend for 12 consecutive years. The stock is currently offering a dividend yield of 2.0%. Thanks to its healthy payout ratio of 62%, its solid balance sheet and its promising growth prospects, the company is likely to keep raising its dividend for many more years.

Stryker Corporation (SYK)

Stryker is a healthcare giant with a dividend increase streak of nearly three decades. The company has also proven to be exemplary for dividend growth, due to its high rate of earnings growth. In the past 10 years the company grew adjusted EPS by 15% per year. We expect Stryker to grow earnings at 12% annually for the foreseeable future as well, meaning shareholders should see a long runway for further dividend increases ahead.

Stryker is a global leader in the medical device sector. The company’s product lines include surgical equipment, neurovascular products and orthopedic implants. For the 2023 first quarter, revenue grew 11.8% to $4.8 billion, which beat estimates by $240 million. Adjusted earnings-per-share of $2.14, which compared favorably to $1.97 in the prior year and was $0.13 more than expected. Organic revenue was 13.6% for the quarter, driven by 12.9% volume growth and a 0.7% tailwind from higher realized prices.

For the quarter, MedSurg and Neurotechnology had organic growth of 12.4% while Orthopaedics and Spine grew 15.2%. Results for both businesses were driven by double-digit growth in volume. Prices were up 1.9% for MedSurg and Neurotechnology and down slightly for Orthopaedics and Spine. Stryker provided updated guidance for 2023 as well.

The company now expects organic revenue growth of 8% to 9% for the year, up from 7% to 8.5% previously. Adjusted earnings-per-share are forecasted to be in a range of $10.05 to $10.25 for 2023, up from $9.85 to $10.15 previously. This would represent growth of 8.7% at the midpoint.

As the leader in the medical device sector, Stryker’s products are in demand around the world. For example, the company continues to see growth in its Mako robot installations, as well as a higher number of procedures performed.

Broadcom (AVGO)

Broadcom is a tech stock that designs, develops, and sells semiconductors under the following business units: Wired infrastructure, wireless communication, enterprise storage and industrial. Its offerings include data center chips, factory automation, energy systems and power generation, broadband access, and home connectivity. Broadcom is a fabless semiconductor company, which means that the products it designs are manufactured by other companies/foundries.

In the most recent quarter, the company generated revenues of $8.7 billion during the quarter, which represents an increase of 8% compared to the prior year’s quarter. The solid revenue growth performance was possible thanks to beating estimates in the semiconductor solutions unit, while its Infrastructure software business generated solid growth as well. Broadcom reported earnings-per-share of $10.32 for the second quarter, which was ahead of the analyst consensus estimate.

Broadcom’s dividend payout ratio has risen considerably over the last couple of years, due to the large dividend increases that Broadcom has offered to its owners. Between 2010 and 2021, Broadcom increased its dividend by an incredible factor of more than 100. Broadcom’s dividend still looks relatively safe, however, as it is well-covered by both profits as well as by the cash flows that the company generates.

The stock has a dividend payout ratio expected to be just 44% for 2023, which leaves plenty of room for future dividend increases. Shares currently yield 2%.

Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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Investors looking for long-term income have many possible choices. Investors that are close to retirement, or already retired, are likely to choose dividend stocks with high yields of 5% or more.
dividend stocks, starbucks, stryker, broadcom
Friday, 21 July 2023 11:30 AM
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