Financial markets have delivered a strong performance in the first half of 2013.
The impressive returns YTD have caught everyone by surprise, including the major investment firms on Wall Street which are now hastily raising their full-year targets on the S&P 500. Analysts at Goldman Sachs raised their S&P targets through 2015; the index is now expected to reach 1,750 by year-end 2013. This is significantly higher than the original target of 1575 which we surpassed in April.
In addition to its revised forecast, Goldman Sachs remains bullish on high-quality dividend paying stocks. A healthy debate is ongoing if dividend stocks will continue to perform as U.S. cyclicals gain momentum, causing a shift in money flows from one market segment to the other.
In consideration of both sides of the debate, I’ve identified three companies that meet Goldman Sachs’ criteria for dividend growth that should also participate in the economic recovery. Here are my best ideas for the remainder of 2013 that offer earnings growth and a solid dividend.
Shares of Ford Motor Company (NYSE:F) have outpaced the broader market with impressive gains so far this year. Here’s four reasons why the stock still has ample fuel in the tank:
Sales at U.S. auto manufacturers should rise as consumers replace a record age vehicle fleet. The timing is right for new auto sales, with attractive inventory, increased consumer credit, stable gas prices, and a confirmed housing recovery.
Pickup truck business is booming. The major American brands such as Ford Motor Company (NYSE:F), GMC, and Chevrolet have lifelong loyalty from buyers with minimal competition from overseas. Ford Motor Company (NYSE:F) makes up to 4 times the profit from a pick-up vs. a small / mid-size car. Autodata reported sales of pickups are up 20% so far this year.
China sales rose a massive 45% in May, lead by strong SUV sales of the Ford Explorer and locally-produced Kuga and EcoSport models. The Chinese consumer also prefers Ford over Toyota, a trend that is likely to persist for the long-term.
Beginning in 2013, Ford Motor Company (NYSE:F) doubled its quarterly dividend from $0.05 to a current $0.10 based on improved profitability and operating cash flow. The company plans to grow its dividend further to a level that is sustainable through all business cycles.
American conglomerate General Electric Company (NYSE:GE) emerged from the 2008-09 recession as a more focused, solidified company that aims to be a leader in every market. Here are four reasons the diversified industrial is a good play for the long-term:
The company’s industrial businesses, including everything from aircraft engines to power generation, are likely to rebound further in the second half of 2013. Demand is being seen in the U.S. and emerging markets, across all business lines.
Investors are likely to receive the $6.5 billion payout from General Electric Company (NYSE:GE) Capital to parent company GE. General Electric Company (NYSE:GE) is exiting higher-risk businesses within its finance division and making smart purchase decisions, such as the recent acquisition of oil services firm Lufkin Industries.
As of the world’s largest companies and a consistent American innovator, General Electric Company (NYSE:GE) offers investors the potential for upside surprise. CEO Jeff Immelt recently stated his company is creating an “Industrial Internet” in China, the world’s fastest growing economy. The venture is expected to create $3 trillion in business opportunities by 2030.