The Robinhood app is one of the most appealing platforms for millennials and more-aggressive investors. While the Robinhood crowd is often tagged as undisciplined investors because of their speculative bets, the Robinhood 100 List serves as a popularity measure to many pro investors. That’s because the list typically contains stocks that are creating a buzz.
The volatility in the stock markets, declining bond yields, and the second wave of coronavirus around the corner are some of the reasons why dividend income investing is more appropriate now. However, one should ensure the future growth potential in addition to the sustainability of its dividend payments before betting on it. And picking such a stock from the Robinhood List ensures that it’s popular.
Microsoft Corporation (MSFT), Johnson & Johnson (JNJ), and Walmart, Inc. (WMT) are three stocks on the Robinhood 100 list that have resilient business models and impressive dividend-paying history.
Microsoft Corporation (MSFT)
The pandemic has been a blessing in disguise for MSFT. Its Intelligent Cloud business and Teams have been in high demand amid the remote working scenario. Its cloud platform, Azure delivered 47% growth in the fourth quarter. MSFT’s suite of cloud-based products is strategically positioned to gain from the ongoing cloud boom. Its unwavering focus on its cloud services paves way for steadiness in returning capital to shareholders through dividends. In fact, over the past 6 years, MSFT has returned more capital to shareholders through its dividend issuances than 98.4% of other dividend-paying US stocks in the StockNews.com universe.
MSFT is also a cash-rich company because of its Office 365 subscription business. The company’s operating cash flow at the end of the fourth quarter of fiscal 2020 increased by 16.3%. Meanwhile, its free cash flow stood at $45.2 million, up 18.2% year-over-year. This depicts that MSFT is in a comfortable position to sustain its dividend payments. Currently, MSFT generated more cash over the 12 months than 98% of US dividend stocks in the StockNews.com universe.
Analysts estimate MSFT’s revenue for the first quarter of fiscal 2021 to climb 8.1% to $35.7 billion. The consensus EPS estimate of $1.54 for the quarter indicates an 11.6% increase year-over-year. On a year-to-date basis, MSFT gained 36.2% to close yesterday’s session at $214.9.
MSFT has been consistently paying quarterly dividends since 2003. On September 15, the company declared a dividend of $0.56, which is a 9.8% increase. This cumulated to an annual dividend of $2.04 and yields 0.95%. The company’s 3-year and 5-year divided CAGRs stand at 8.74% and 10.45%, respectively. MSFT has been growing its dividend payout consistently. Though the current yield is on the conservative side, its stable dividend growth signifies that there is ample prospect for income growth. Its dividend payout ratio at 35% indicates sustainability, which is a critical trait for consistent income.
How does MSFT stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #19 out of 96 stocks in the Software – Application industry.
Johnson & Johnson (JNJ)
JNJ is synonymous with baby care products, however, it has a strong presence in the pharmaceutical as well as the segments of the medical device. Hence, it has a diversified business which is ideal for your portfolio in volatile times. Its business model also makes it a perfect pick for investors seeking stable dividend income. Over the past 6 years, JNJ has returned more capital to shareholders through its dividend issuances than 98% of other dividend-paying US stocks in the StockNews.com universe.
Even amid the pandemic, JNJ has successfully raised its dividends. The company has hiked its dividend five times in the past five years. Notably, JNJ has shown a significant recovery in its operations and rebounded from the COVID-19 induced sluggishness in the third quarter. Its EPS for the third quarter doubled year-over-year to $1.33. JNJ’s revenue for the quarter edged 1.7% higher to $21 billion. Revenue for its consumer products segment recovered while the same for the medical devices segment slipped 3.6%. However, its pharmaceutical segment stood resilient, thanks to the strong momentum of its blockbuster drugs, Stelara, Zytiga, Imbruvica, and Darzalex. Recently. JNJ also secured approval for its vaccine for Ebola in Europe.
The consensus estimate for its fourth-quarter revenue is $21.6 billion, indicating a 4.3% increase year-over-year. Meanwhile, EPS for the quarter is expected to slip 2.1% to $1.84. Over the past year, JNJ gained 12.3% to close yesterday’s session at $145.08.
JNJ has been steadily paying dividends since 1987. Yesterday, the company declared a dividend of $1.01 per share for the fourth quarter of 2020, unchanged from the prior quarterly dividend amount. This results in an annual dividend of $4.04 and a yield of 2.81%. The company’s 3-year and 5-year divided CAGRs stand at 5.98% and 6.32%, respectively.
JNJ’s POWR Ratings reflect its promising outlook. It has an overall rating of “Strong Buy” with an “A” in Trade Grade, Peer Grade, Buy & Hold Grade, and a “B” in Industry Rank. Among the 240 stocks in the Medical – Pharmaceuticals industry, it’s ranked #10.
Walmart, Inc. (WMT)
WMT, the operator of discount stores for over six decades, is the world’s largest retailer in terms of revenue. WMT is one of the most dependable stocks for income investors. The company has been consistently increasing its dividend since 1974. Whether it was the era of stagflation or the Great Recession since 2008, WMT has been resilient as a dividend stock. Even amid the current phase of pandemic, when most of the companies are suspending or lowering their dividends, WMT has hiked its dividend by a penny in April. Over the past six years, WMT has issued more dividends than 97.6% of other dividend-issuing US stocks in the StockNews.com universe.
For the second quarter ended June 2020, the retail giant’s total revenue increased 5.6% year-over-year to $137.7 billion. Strong demand for general merchandise and food products led its US comp sales to jump 9.3% during the quarter. WMT’s adjusted operating income increased by 18.6% to $6.6 billion. The company’s operating cash flow at the end of June quarter was $19 billion. For the quarter ended July, WMT had a free cash flow of $15.4 billion, which implies it has enough room to sustain its dividend payments. Currently, WMT generated more cash over the 12 months than 97.3% of US dividend stocks in the stockNews.com universe.
The company has been consistently paying dividends for the past 47 years and raised it for 25 consecutive years. On February 18, the company announced an annual dividend of $2.16 per share, a 2% increase from last year’s amount. The current dividend yields 1.50%.
On a year-to-date basis, the stock climbed 21.5% to close the trading session at $143.80. This retail company has done exceptionally well during the pandemic as more people were looking to save money on daily essentials. WMT always believes in keeping the cost low and passing on the benefits to customers.
It’s no surprise that WMT is rated “Strong Buy” in our POWR Ratings system, with an “A” for Trade Grade, Peer Grade, Buy & Hold Grade, and Industry Rank. Among the 18 stocks in the Grocery/Big Box Retailers industry, it’s ranked #5.
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MSFT shares were trading at $215.29 per share on Friday afternoon, up $0.40 (+0.19%). Year-to-date, MSFT has gained 37.61%, versus a 8.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More…
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