General Electric Company (NYSE:GE) has raised its dividend 90% since the recession, and should raise it a further 60% over the next 3 to 4 years to reach its historical norm. The 3.2% payout is not only higher than the S&P 500’s 2.1% yield, but has also grown at a faster rate.
As the economy improves, money-transfer group The Western Union Company (NYSE:WU) is poised to benefit from a rise in payment activity on a worldwide basis. Here’s the lowdown for owning the shares:
In April, The Western Union Company (NYSE:WU) affirmed its full year 2013 outlook of $1.33–$1.43, indicating that shares are priced at an attractive 11.5x forward multiple. Earnings could reach in excess of $2 as money flows grow in emerging markets such as Mexico.
Money transfers are primarily non-discretionary, meaning that recipients rely on the funds in order to purchase vitals such as food and clothing. Immigrants traditionally move from poorer to wealthier countries, and the favorable U.S. immigration law should have a positive effect on The Western Union Company (NYSE:WU)’s business.
With its international footprint, The Western Union Company (NYSE:WU) has long-term, sustainable competitive advantages; Smaller peers are unable to match its size and scale in order to make inroads. Sending $50 for a $5 fee is a highly-profitable business.
The Western Union Company (NYSE:WU) raised its quarterly dividend to a record $0.125 based on strong operating cash flow, the highest in the company’s history. The money transfer outfit hopes to return more than 70% of operating cash flow to shareholders through share repurchases and dividends.
Foolish takeaway
As interest rates begin to rise, can dividend-paying stocks maintain their current value or will investors shift to cyclicals?
Readers can surmount this question by looking for stocks with cyclical and income components. Ford Motor Company (NYSE:F) pays a 2.5% dividend yield, yet is levered to rising North American and overseas auto sales. General Electric Company (NYSE:GE) gives broad exposure to a recovering economy, while offering a significant 3.2% payout. Finally, The Western Union Company (NYSE:WU) is uniquely situated to benefit from increased money flows around the globe, providing a 3.0% return to investors.
The article Goldman Sachs Weighs in on the Dividend Debate originally appeared on Fool.com and is written by John Macris.
John Macris has no position in any stocks mentioned. The Motley Fool recommends Ford and Western Union. The Motley Fool owns shares of Ford and General Electric Company. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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