I am an advocate of investing in companies with a long-term proven ability to regularly increase their annual dividend.
I regularly browse through a current list of components within the dividend achiever index (companies with 10 or more years of consecutive dividend increases) for new investment ideas to consider. That being said, do I neglect to consider adding companies to my watch list that have not achieved the dividend achiever status, or that have never paid a dividend at all? Absolutely not!
In fact, some of my favorite dividend paying companies are not in the dividend achievers index and have only recently begun a dividend payment program. In addition, some of the best dividend paying companies of the future may be companies that have not begun paying a dividend yet. I believe that investors should first look for solid businesses with long term potential before even considering whether or not the company pays a dividend, but you can get the best of both worlds with the following three companies:
Dividend Achievers of the Future
Amgen, Inc. (NASDAQ:AMGN) is the top dog of biotech companies with annual revenues of $17.3 Billion. Amgen, Inc. (NASDAQ:AMGN) has proven its ability to develop successful, life-changing biotechnology products. Its blockbuster products include Enbrel (treats inflammation), Neulasta/Neupogen (treats infection), Epogen (treats low red cell count), Aranesp (treats anemia), and Xgeve/Prolia (treats bone metastasis).
Amgen, Inc. (NASDAQ:AMGN) currently has six potential new products in phase 3 trials and five in phase 2 trials, including AMG 145 for the treatment of low-density lipoprotein (LDL) cholesterol, and Trebananib for the treatment of ovarian cancer. In addition, Amgen is working towards entering the Biosimilars market and has plans to introduce 6 Biosimilars products beginning in 2017. Biosimilars are lower-cost versions of successful biotechnology products that have lost their patent protection. Amgen, Inc. (NASDAQ:AMGN) will also benefit from additional profits in Enbrel beginning in 2014 due to a significant reduction in royalties that are currently paid to Pfizer.
Amgen, Inc. (NASDAQ:AMGN) initialized its dividend program in 2011 and has increased its dividend in 2012 and 2013 by an average of 29.5% per year, resulting in a 1.9% dividend yield. With a payout ratio of only 26%, I believe that Amgen’s impressive dividend growth will continue well into the future. In addition, Amgen’s 2013 1st quarter was excellent, with Earnings Per Share (EPS) increasing to $1.91/share from the 2012 1st quarter EPS of $1.50.
I believe that Amgen, Inc. (NASDAQ:AMGN)’s success in developing blockbuster drugs will continue and that at a Price./Earnings (P/E) multiple of 16.8 and its stock well off its all time high of $115, now is a good time to open or add to a position.
Apple Inc. (NASDAQ:AAPL) is currently trading at $436/share, which is 38% below its all-time high of $705, with a P/E of only 10.3%. This low share price is a result of Apple Inc. (NASDAQ:AAPL)’s enormous growth cooling off, competitive threats, and a lack of new product launches.
However, Apple Inc. (NASDAQ:AAPL) has proven that it has the ability to develop innovative products. In fact, CEO Tim Cook has recently indicated that there are some upcoming, new product releases that will be very significant. However, the market is still in a wait and see mode with Apple, resulting in an opportunity to buy a great company at an unbelievable price.
The fact that Apple Inc. (NASDAQ:AAPL) now pays a dividend makes this opportunity even better. Apple Inc. (NASDAQ:AAPL) initiated its dividend in 2012 and recently increased it by 15%, resulting in a 2.8% dividend yield. With a payout ratio of only 19%, I believe that Apple will continue its dividend increases well into the future.