Analysts recommend these dividend-paying growth stocks.
Most high-growth stocks reinvest every last dime in expanding their businesses. However, one of the first things companies do when their growth finally starts to level off is begin returning excess cash to shareholders via dividends. Fortunately, there are a handful of companies that generate impressive growth numbers and also pay a dividend. Many of these dividend-paying growth stocks are expanding via acquisitions, but some are still growing organically. Here are nine stocks Morningstar analysts recommend that have generated at least 10% average annual revenue growth over the past three years and pay at least 1% dividend yields.
Anthem (ticker: ANTM)
Anthem is a U.S. managed care organization that holds the extremely valuable distinction of being the exclusive licensee of the Blue Cross Blue Shield brand in 14 different states. Analyst Julie Utterback says Blue Cross is the most recognizable and trusted franchise in the entire U.S. health insurance industry. In the past three years, Anthem has averaged more than 10% revenue growth, and Anthem management is targeting between 10% and 12% annual revenue growth in the years ahead. The stock also pays a 1.3% dividend. Morningstar has a “buy” rating and a $370 fair value estimate for ANTM stock.
Becton, Dickinson (BDX)
Becton, Dickinson is a medical device and diagnostics provider. Analyst Alex Morozov says its Veritor handheld analyzer, which can rapidly test for COVID-19, has been the company’s primary growth driver in recent quarters. Morozov says there are now more than 70,000 Veritor systems in operation, and utilization for flu testing and/or COVID-19 testing will remain elevated through at least 2022. In the past three years, Becton, Dickinson has grown revenue at a 13% average annual pace, and the stock also pays a 1.4% dividend. Morningstar has a “buy” rating and a $296 fair value estimate for BDX stock.
Cigna is one of the largest American managed care organizations and pharmacy benefit managers. The company provides health care services through programs funded largely by U.S. employers and government agencies. Utterback says Cigna is currently developing several growth initiatives, including its Accredo specialty pharmacy and its eviCore medical benefit management solutions. Cigna is also expanding its medical insurance and PBM offerings, Utterback says. In the past three years, Cigna has averaged 79% revenue growth, and the stock pays a 1.6% dividend. Morningstar has a “buy” rating and a $274 fair value estimate for CI stock.
Equitrans Midstream (ETRN)
Equitrans Midstream is a natural gas gathering, storage and transmission company in the Appalachian Basin. Analyst Stephen Ellis says the company faces several near-term headwinds. Equitrans’ largest customer, EQT (EQT), has been performing poorly and the cost of the Mountain Valley Pipeline has ballooned due to scheduling, permitting and regulatory issues. Still, a huge growth year in 2018 boosted the company’s average three-year revenue growth to 23%, and it has the highest dividend yield of any stock on this list at 7.4%. Morningstar has a “buy” rating and a $15 fair value estimate for ETRN stock.
CVS Health (CVS)
Since its blockbuster acquisition of health insurance giant Aetna in 2018, pharmacy retailer CVS Health has struggled to overhaul its business model and return to earnings growth. Utterback says the company’s vision of becoming “the most customer-centric health company in the United States” has not yet come to fruition. The stock has performed horrendously in recent years, but CVS has averaged 14% revenue growth over the past three years, thanks to its Aetna buyout. The stock also pays a 2% dividend. Morningstar has a “buy” rating and a $92 fair value estimate for CVS stock.
Domino’s Pizza (DPZ)
When the health crisis crushed much of the restaurant industry in 2020, Domino’s Pizza made the most out of a difficult situation. Analyst Erin Lash says the company’s heavy investments in online and mobile ordering and delivery and drive-thru pickup services paid off in a big way in 2020, allowing Domino’s to snatch up market share from competitors who weren’t as quick to adapt. Domino’s has grown its revenue by 14% annually over the past three years, and the stock pays a 1% dividend. Morningstar has a “buy” rating and a $386 fair value estimate for DPZ stock.
Invitation Homes (INVH)
Invitation Homes is one of the largest owners and operators of single-family rental properties in the U.S. The company focuses on the lower-end housing market, and analyst Kevin Brown says a wave of millennials starting families in the next decade may have difficulty affording down payments for a house, fueling at least several more years of rental growth for Invitation Homes. In the past three years, INVH has averaged 23% annual revenue growth, and the stock pays a 2.2% dividend. Morningstar has a “buy” rating and a $33 fair value estimate for INVH stock.
Northrop Grumman (NOC)
Northrop Grumman is an aerospace and defense company that produces advanced military and information technology. Analyst Burkett Huey says space systems and aeronautics systems drove the company’s impressive 17% revenue growth in the fourth quarter. Huey says Northrop will likely not continue to generate outsize growth in the long term, but it should have plenty of cash flow to return to shareholders. In the past three years, Northrop Grumman has grown revenue at a 12.3% annual pace, and the stock pays a 1.9% dividend. Morningstar has a “buy” rating and a $331 fair value estimate for NOC stock.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry stock. Analyst Phelix Lee says demand growth from artificial intelligence, the Internet of Things and high-performance computing applications could last for decades. In 2020, Taiwan Semi reported 25% revenue growth and 50% net income growth. It could soon have a major new customer in Intel (INTC), which has struggled with internal manufacturing issues. Over the past three years, Taiwan Semiconductor has averaged 11.5% revenue growth, and the stock pays a 1.8% dividend. Morningstar has a “buy” rating and a $136 fair value estimate for TSM stock.
Nine growth stocks that also pay dividends:
— Anthem (ANTM)
— Becton, Dickinson (BDX)
— Cigna (CI)
— Equitrans Midstream (ETRN)
— CVS Health (CVS)
— Domino’s Pizza (DPZ)
— Invitation Homes (INVH)
— Northrop Grumman (NOC)
— Taiwan Semiconductor Manufacturing (TSM)
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