These 2 high-yield dividend stocks should no longer be overlooked
Dividend stocks have been on investors' radar for some time because of their ability to generate stable and regular income in any market environment, even during high inflation or recession. So today we'll take a look at 2 interesting stocks that have solid track records and fat dividends.
When investing in dividend stocks, investors pay attention to dividend yields because they indicate the amount of income an investor can expect from dividend-paying stocks in terms of their price. Stocks with high dividend yields are often considered risky investments because they signal financial distress or underlying problems within the company. However, the overall financial health and solid balance sheet of the relevant company can mitigate the risks associated with high yields. So yes, not every dividend with a higher yield has to be risky.
Let's take a look together at 2 interesting stock picks that have really solid dividend yields 👇
Enterprise Products Partners L.P. $EPD+1.3%
- Dividend 7.61%
Enterprise Products Partners L.P. is one of North America's largest hydrocarbon product pipeline and storage companies. It operates an extensive network of pipelines, crude oil pipelines, terminals and storage facilities throughout the United States.
Enterprise Products has several competitive advantages:
1. Size and infrastructure - Enterprise has a huge infrastructure including 49,000 miles of pipelines, 260 terminals and underground storage facilities. These vast assets allow it to efficiently transport energy over long distances.
2. Diversification - Enterprise focuses on both gas and oil and its derivatives. This diversification helps the company reduce risk and achieve stable returns regardless of commodity price fluctuations.
3. Long-term contracts - The majority of Enterprise's revenue comes from long-term transportation contracts with reliable partners. These contracts guarantee stable and predictable cash flows into the future.
4. Financial strength - Interestingly, Enterprise has investment grade buy ratings from all three major rating agencies. The company's stable financial position and access to capital allow it to fund growth and expand its infrastructure.
5. Dividend Growth - Enterprise has a record of growing dividends, increasing every year since its IPO in 1998. This history of rising dividend payouts coupled with the stock's relatively low volatility attracts conservative investors.
Total revenues have grown 78% over the past 3 years. This growth is mainly due to acquisitions and the commissioning of new assets. Given the growing demand for energy and the company's plans for further infrastructure expansion, further revenue growth can be expected.
Thegross margin is stable at around 12%, which shows the company's resilience to commodity price fluctuations. Moreover, stable margins generate stable cash flows.
Operating expenses account for only a few percent (around 1-2%) of sales, which is very low. This indicates to us that Enterprise is able to operate its infrastructure efficiently with minimal costs.
Net profit after tax has been growing every year along with sales. The growth in after-tax profit is a positive indicator that the company is effectively converting revenue growth into profit growth. Finally, Enterprise has increased its dividend every year (since its IPO in 1988), demonstrating the company's financial strength and ability to generate stable cash flow.
Camping World Holdings $CWH+4.7%
- Dividend 9.81%
Camping World Holdings is an Illinois-based retail company that primarily sells recreational vehicles. In April, KeyBanc changed its coverage on the stock with an Overweight rating and $25 price target, highlighting the company's earnings potential for 2024 and beyond. However, that target was recently beaten and analysts are still optimistic about the company's future.
Camping World Holdings is the largest retailer of RVing and camping equipment in the US. It operates more than 100 stores across the United States focused on selling RVs, motorhomes, tents and other camping equipment.
Camping World has several competitive advantages:
1. Size and Scale - As the largest retailer in the industry, Camping World has a vast array of products, inventory and financing options for customers. This allows it to achieve significant economies of scale.
2. Customer loyalty - Camping World operates a Good Sam Club for members, which has over 2 million members. Through various benefits and rewards, Camping World maintains a high level of loyalty from these customers.
3. Vertical integration - Camping World owns several brands from caravan and motorhome manufacturers, allowing it to control the entire sales process. This leads to higher margins and better customer service.
4. E-commerce - A large part of Camping World's revenue is generated by internet sales. The company's well-developed e-commerce activities help it reach customers nationwide and strengthen relationships with existing clientele.
Total sales have increased by 42% over the last 3 years. This growth is due to organic growth of existing stores, new store openings and acquisitions. Given the size of the industry and the potential of e-commerce, further revenue growth can be expected, according to many analysts.
Gross margins have been increasing in recent years, which is a positive trend. It was 25% in 2019 and 33% in 2022. Operating expenses are growing slower than sales, which is positively reflected in operating profit growth. This has almost quadrupled since 2019.
CWH does not have a long history of dividend payments, as it is a relatively young company (IPO 2016). But even these few years have been enough to mark CWH as a stable dividend choice.
- What do you think of the company? 🤔
Please note that this is not financial advice. Every investment must go through a thorough analysis.
If I had to choose, I'd take $CWH+4.7% but it still seems like a pretty seasonal business to me.