Investors acquire Stocks for a variety of reasons. A widespread consideration in stock investing is whether the stock/company you are buying issues dividends. Suppose a Company is a regular dividend issuer. In that case, investors would like to know:
In its most simple form, a dividend is a cash payment made by a company to its shareholders. The payment is derived from a portion of the company's earnings, typically after covering its expenses.
Dividends are typically issued by large established corporations that are cash positive but limited in their opportunities to scale. These corporations seek to return value to their investors via cash rather than increasing their stock price.
Some of the most popular dividend stocks are well-known brands with strong, predictable cash flow or high dividend yield. As a general rule, the riskier the stock, the higher its dividend yield should be to compensate for the risk.
Keep reading to learn about some of the most popular dividend stocks in the US and other major stock markets.
Company: The Coca-Cola Company
Extra Note: The Coca-Cola Company's solid and dependable sales record and healthy profit margins make up for its dividends' relatively low yield compared to other stocks mentioned on this list.
Extra Note: Oligopolies such as US telecommunication companies make attractive dividend stocks for investors. The small pool of competition for these companies means the risks for investors is smaller than for companies that have to rely purely on competitive strengths.
Company: British American Tobacco
Extra Note: While a contentious and vilified industry, tobacco companies have a reputation for charitable dividends. This is why British American Tobacco and Imperial brands remain popular dividend stocks, even with reduced smoking rates in developing countries.
Company: Imperial Brands
Company: Deutsche Lufthansa
Extra Note: Deutsche Lufthansa has temporarily suspended its dividend payments due to global air travel receding to unsustainable levels since the beginning of the Covid-19 pandemic. Before 2020, Deutsche Lufthansa would distribute approximately 20% to 40% of net income in dividend payments to its shareholders.
Extra Note: The original Spanish branch of Telefónica issues dividends twice annually, in June and December of each year. Telefónica engages in several methods to return value to its shareholders, including cash and scrip dividends (i.e., issuing shares in place of a delayed cash dividend).
Company: Novo Nordisk
Extra Note: The Danish Pharmaceutical company's dividend yield is the lowest on this list, yet the company remains an attractive option for investors. The yield, while small, is not altogether inadequate for the industry in which it operates and is seen as tolerable due to the companies domination over diabetic therapies.
Company: BHP Group
Extra Note: Of course, as Australia dominant industry, two of the country's most popular dividend stocks are from companies operating in the mining industry. The attractive yields signify the sector's risk to commodity price movements beyond the control of the miners.
Company: Rio Tinto
Company: Japan Post Bank
Extra Note: One of Japan's favoured dividend stocks, Japan Post Bank seeks to return 50% to 60% of its retained earnings in the form of dividends. By Japanese standards, yields of ~5%, of which Japan Post Bank conforms, is higher than the market average.
Thematic Funds are a great way to gain exposure to a particular industry segment without having to worry about selecting individual stocks that may or may not end up fulfilling their potential. The whole point of an ETF is to give investors broad dynamic exposure as the funds mature and evolve.
This week's theme in the spotlight is Obesity. As you will see, the two ETFs profiled tackle the theme from opposing angles.
When you first hear of the Solactive Obesity index (SLIMID Index), you could be forgiven for thinking it would be comprised of fast food and snack companies like McDonald's Corp (NYSE: MCD) and PepsiCo, Inc (NASDAQ: PEP).
Instead, the Fund is comprised of companies that generate their revenue from treating or alleviating the ailments caused by Obesity. Companies in the index include those developing biotechnology, pharmaceuticals, weight loss, and plus-sized clothing. The Fund holds an interest in 46 different entities as of writing. NOVO NORDISK A/S (CPH: NOVO-B), Herbalife Nutrition Ltd (NYSE: HLF) and Fisher & Paykel Healthcare Corp Ltd (NZX: FPH), are some examples of the largest holdings in the Fund.
In my opinion, betting against the Obesity Fund would be foolish (presuming that the right companies were selected for the Obesity Fund). A growing percentage of the global population is being classified as overweight or obese every year. There is no sign that activities designed to mitigate this problem are having an impact. Consequently, the companies creating the therapies to relieve the associated disease will be there to clean up the mess and justifiably line their pockets.
Since its inception, 31 January 2011, the Solactive Obesity Index has returned 377%. This total growth corresponds with an annualized return of more than 16% for the past ten years.
If you were after a Fund that is comprised of companies making the Obesity epidemic worse, then the market has you covered.
Invesco Dynamic Leisure and Entertainment ETF (NYSEARCA: PEJ) offers exposure to the biggest junk food makers in the US, and entertainment companies where bums in seats are the goal.
The Fund's most significant holding are each between 5% and 6% of total holdings. Yum! Brands Inc (NYSE: YUM), Starbucks Corporation (NASDAQ: SBUX), ViacomCBS Inc (NASDAQ: VIAC), and the Walt Disney Co (NYSE: DIS) are all included in this category.
The Fund has returned 167.92% (or 10.36% annually) since 2011. However, it has trailed the comparable S&P 500 Hotels Rests & Leisure, which has returned 14.81% per annum, indicating that the fund managers have made some poor selections in this time.
Even so, some of the Funds largest holdings may have given the Fund a considerable boost in 2021. AMC Entertainment Holdings Inc (NYSE: AMC) and World Wrestling Entertainment Inc (NYSE: WWE) benefited from the 'meme' mania inflating the price of many US stocks. The latter, which the Fund partially divested as it began to peak. The former, AMC Entertainment, still comprises 2.94% of the Fund's total investment, totalling 808,460 shares. Those 808,460 AMC shares are up by 492% in the past six months and 1,565% in YTD.