As the sun sinks on another summer and Labor Day taunts with the pitiful proposition of just 24 hours less work, it stands to reason that some investors will adopt a glum state of mind faster than you can say “this beach is closed.”
But if you count the beachfront opportunity of September investments, there’s no such thing as off season — especially if you’re looking at a steady company on the cusp of a back-to-school comeback.
And so, here are five dividend winners poised to make autumn profits automatic:
— American Financial Group (ticker: AFG)
— FS KKR Capital Corp. (FSK)
— Apple (AAPL)
— Western Digital (WDC)
— CVS Health Corp. (CVS)
American Financial Group (AFG)
American Financial Group, an insurance industry holding company, may be off 10% year over year but it’s enjoyed a post-Christmas rush of close to 20%.
“It peaked in early 2018 and we think that the company’s ability to increase earnings and its dividend in an ultra-low interest-rate environment will get the stock to start increasing again in the next few months,” says Norman Levine, managing director and portfolio manager for Portfolio Management Corp., based in Toronto.
This Cincinnati-based holding company counts Great American Insurance as its largest firm. It engages in specialty property-casualty operations and sells various types of annuities.
“It tends to operate in areas where there’s limited competition as opposed to the broad property-casualty areas,” including agriculture and commercial vehicles, Levine says.
That annual dividend of $3.10 with its 3.1% yield shows promise, too.
“AFG has a history of increasing earnings and dividends,” Levine says. “It has paid annual special dividends in the past six years and in the past two years has actually paid two special dividends in addition to its quarterly disbursements.”
The small market cap of $8.9 billion makes AFG easy to miss but as Levine puts it, “We are long-term investors and have owned AFG for more than 16 years. … The yield on the stock we bought 16 years ago is currently 22% based on the total 2018 dividend payments of $4.45 per share. And as we are only eight months through 2019 we do not know the total payment for the year.”
FS KKR Capital Corp. (FSK)
Based in Philadelphia, FS KKR is a business development company resulting from the December merger of FS Investments and KKR Credit Advisors. That deal made the new entity the second largest publicly-traded company in its sector.
“It’s a compelling opportunity,” says Benjamin Halliburton, chief investment officer at Tradition Asset Management in Summit, New Jersey.
“At $5.78, FSK is currently trading at a significant discount to net asset value of $7.88 per share, while maintaining a very attractive 13% dividend yield on a 76-cent dividend,” Halliburton says. “With an estimated earnings per share of around 76 cents for 2020 it’s covering the dividend, which we think will have modest 1-3% growth over time.”
Two Wall Street analysts call FS KKR a “buy” and one a “hold,” with a consensus price target of $7.50 per share.
It’s a curiosity how consumer tech companies such as Apple can keep counting on inroads to already saturated mobile markets in India and China. What’s more, the trade war with China can’t be helping matters on the supply end, as Apple CEO Tim Cook had a pretty frank sit down with President Donald Trump recently.
Yet analysts continue to be bullish, bullish, bullish on the House of Jobs, even if its gadgets no longer elicit the same anticipation as the first iPhones. Fourteen analysts rate Apple a “strong buy” and two others a “buy.” Granted, another 13 consider Apple a “hold,” but you won’t find a single seller in the lot.
Meanwhile, AAPL continues to hold its own. Unchanged over the last 12 months, it trades at $212, with a dividend yield of 1.45%. Reinstated in 2012, the quarterly payout has risen consistently since mid-2014; then 47 cents per share, it now stands at 77 cents, an increase of 64%.
And as for the company’s market cap, $960 billion makes Apple a most valuable company.
Western Digital (WDC)
As one of the world’s largest manufactures of hard-disk drives, solid-state drives and other flash NAND components, Western Digital has become highly susceptible to supply/demand dynamics in the consumer electronics sector, says Jeff Bilsky, portfolio manager/senior analyst of the large-cap equity investment team at Chartwell Investment Partners in the Philadelphia area.
“WDC was a big underperformer in 2018 as memory prices fell faster and harder than the market expected,” Bilsky says. Enter the recent Flash Memory Summit in Santa Clara, California — yes, there is such a conference — where WDC predicted a recovery in the second half of the year for the NAND market.
“A recovery in pricing could come quicker than normal in this cycle since the industry used the downturn to reduce supply growth to well below long-term projected demand growth,” Bilsky says. “Historically, memory-sensitive companies like WDC have been big outperformers versus the market during periods of price increases.”
Trading at $57, the stock is flat year over year with a dividend yield of 3.51% and a quarterly payout of 50 cents per share, unchanged since 2015.
CVS Health Corp. (CVS)
In the pitched battle for American pharmacy supremacy, CVS has been often regarded as second fiddle to Walgreens, part of the Walgreens Boots Alliance ( WBA). Yet a recent merger with Aetna has given CVS a solid boost, says Ivan Feinseth, research director and chief investment officer at Tigress Financial Partners.
“CVS is seeing early benefits from its acquisition of Aetna as they continue to build the modern version of health care insurance and service delivery,” Feinseth says.
By contrast, Walgreens just announced it would close more than 200 stores.
Coming off a strong second quarter, “CVS raised forward guidance for the second quarter in a row driven by increased revenue and income from its pharmacy benefits management unit, retail pharmacy sales, and health insurance.”
The stock trades at $62, with a dividend yield of 3.22% and a quarterly payout of 50 cents per share.
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5 of the Best Dividend Stocks to Buy for September originally appeared on usnews.com