Holiday Stocks for Giving 2018
CAIM has always advocated the gift that keeps on giving, namely stocks in high quality companies that consistently pay and increase their dividends. It's a gift that will be treasured for many years. Buying these stocks is also a practical way to introduce younger generations to sound investment principles, while simultaneously laying the foundation for their financial independence.
When making company selections CAIM looks for both financial stability, and the ability to generate a strong cash flow. We also take a long-term view of 3 to 5 years, instead of just focusing on performance for the next year. This is because we want companies that possess the backbone to withstand the ups and downs of the economic cycle.
Here are CAIM's suggestions for Holiday Giving in 2018 (prices as of 11/16/18):
Air Products (APD, $164.59, 2.7% dividend yield)
APD offers more dependable growth than most industrial and chemical companies, with increases in both their earnings and dividends averaging more than 10%. A current yield of 2.7% offers a solid above market payout, and is certainly at the high end for a growth company. A new management team has also gone through a multi-year restructuring, which improved margins and growth to the highest in its' industry.
Air Products is the US leader in industrial gas products, with a product mix of nitrogen, oxygen, argon, hydrogen, helium, and a number of specialty gases. Key markets include industrial, manufacturing, chemicals, metals, energy, electronics and medical applications, offering a diversity of stable and growth markets. Industrial gases have grown at 1.5-2 x GDP growth over the business cycle, and APD is among the leading 'growth cyclical' stocks. It also boasts an ESG score of 70, well above that of its' peers.
NextEra Energy (NEE, $181.12, 3.1% dividend yield)
NextEra is another example of a market leader that offers a play on both economic growth and technology leadership, a theme that underlies many of our investments. NEE's roots are as a subsidiary of Florida Power & Light utility, the dominant electric utility in Florida, which has seen power consumption and population growth well above the national average. The power company offers close to 50 GW of generating capacity to more than 10 MM customers, and differentiates itself from other utilities with a large portfolio of renewable energy assets, including wind and solar installations growing at strong double digit rates.
NextEra's earnings and dividend growth rate has exceeded that of the average utility, and the stock currently offers a healthy 3.1% dividend yield.