3 Can't-Miss Growth Stocks Yielding Great Dividends
Jul 10th 2012 10:15PM
Updated Jul 10th 2012 10:20PM
For all the rewards and pitfalls of stock ownership, investors purchase shares of companies for one main reason: to make money. There's no sweeter feeling than reaping the rewards of a smart buy in realizing solid, sustained growth -- and earning great dividends at the same time doesn't hurt, either. Let's take a look at three companies promising to pump up your portfolio and reward you with handsome income at the same time.
Smoke 'em if you got 'em
International tobacco colossus Phillip Morris International (NYS: PM) warrants a long look. Sporting a 3.5% dividend yield, it provides great income to shareholders while keeping a payout ratio of only 59%, considerably lower than the industry standard of 71%. That it boosted its quarterly dividend by 20% during the year while maintaining that payout number speaks of the company's commitment to playing smart with shareholder income.
Along with industry-beating net margins of 28% and consistent year-over-year income growth (rising from $6.3 billion to $8.6 billion over a two-year period), Phillip Morris has the financial freedom to pursue serious growth strategies. Its international focus allows it growth opportunities and freedom from restrictive legislation that hurts industry contemporaries, such as former parent company Altria (NYS: MO) .
Whereas Altria faces an uncertain legal future in an ongoing struggle among all domestic tobacco companies, Phillip Morris' overseas business allows it to enter developing and less regulated markets without as much exposure to restrictive legislation. Altria's dividend provides a higher yield at 4.7%, but its extreme payout ratio of 96% and limitations in a saturated American market prevent it from capitalizing on the same opportunities Phillip Morris International welcomes.
Dividends are great; beer is good
In a related market of consumers' guilty pleasures, brewing company Molson Coors (NYS: TAP) provides another stock yielding a solid dividend with good growth prospects to boot. Currently dishing out an industry-leading dividend of 3.1%, the company controls recognizable beer brands such as Coors Light and Keystone to leverage a 40% market share in Canada and a 30% share in the United States.
Molson Coors boasts a five-year dividend growth rate of 15.4%, smashing the industry average of 3.8%. Its dividend payout ratio of only 35% -- a good, low number for such a great dividend -- and net margins of 19% that beat the industry by 200 basis points allow it financial room for growth against the competition.
The company also faces a unique opportunity with the recent moves of competitor Anheuser-Busch InBev (NYS: BUD) , which the U.S. Department of Justice may force to discharge its brands of Natural Light, Michelob, and Busch after acquiring Grupo Modelo. If it chose to snap up these offerings, Coors could secure brands that make up 10% of the domestic market. That's not chump change for a company jockeying for position in a competitive market.
Against industry competitors like the aforementioned debt-laden Anheuser-Busch (sporting long-term debt of more than $36 billion in its most recent yearly report) and Boston Beer, a solid growth stock that provides no dividends at all, Coors looks like a long-term riser and income deliverer.
Snacking on growth ... and dividends
Filling out the portfolio picks, food producer General Mills (NYS: GIS) provides shareholders with a 3.4% dividend. The company enjoys a sustainable brand advantage, trotting out such names as Cheerios and Wheaties in the cereal department and household staples in Bisquick, Green Giant, and Pillsbury.
Although investors could fear increasing frugality from consumers in a weak market, it's hard to argue with General Mills' financials and a five-year dividend growth rate of 11.51% at a payout ratio of only 52%. The company still boasts healthy, if not world-beating, net margins of 9.4% and a return on assets of 8.37%. The company's size and recognizability promise steady ground for investors even through the long-term bumps and dips in the market.
Why settle for less?
There's no reason to settle for either high growth or large dividend payouts when you're choosing great companies to invest in. Phillip Morris International, Molson Coors, and General Mills all provide the income investor peace of mind while showing great upside to the growth-oriented stock picker. In purchasing shares of any of these companies, the smart investor can truly get the best of both worlds.
These three portfolio stars aren't the only great companies with both upside and standout dividends. To see more picks to supercharge your portfolio for the long haul, take a look at The Motley Fool's free report, "The 3 Dow Stocks Dividend Investors Need." Securing financial freedom protects you from the economy's ups and downs; get your free guide.
At the time this article was published Fool contributor Dan Carroll holds no positions in the stocks mentioned in this article. Motley Fool newsletter services have recommended buying shares of Molson Coors. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
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