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The right dividend stock can be an investor's best friend. That's because with high-quality dividend stocks you can beat the market and get outstanding returns for years on end. Reliable payouts, strong balance sheets, and superior cash flow generation are just a few of the reasons investors should buy these two dividend stocks this month.
1. Apple (NASDAQ: AAPL )
Once a fierce growth stock, Apple is finally showing the world that it can put shareholders first. The tech titan now plans to return as much as $100 billion to shareholders by the end of 2015, thanks to its updated capital return program. In April, Apple increased its quarterly dividend by 15% to $3.05 per share, and made the shareholder-friendly decision to repurchase $60 billion worth of Apple stock. According to Apple CEO Tim Cook:
We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases.
And who can blame him? At its current valuation, not many people would dispute the fact that Apple's stock is wildly undervalued. Additionally, Apple's sale of $17 billion in bonds is a good way to increase its domestic cash stash without having to pay repatriation taxes on its overseas cash hoard.
On top of its strong balance sheet, Apple remains one of the most recognizable brands in the world. Moreover, even if Apple doesn't release any new game-changing products in the next few years, it will still be able to support a healthy dividend at its current payout.
2. Six Flags (NYSE: SIX )
This theme park operator has come a long way since emerging from bankruptcy in May 2010. Today, the stock is up more than 27% year to date and boasts a dividend yield of 4.8%. Six Flags is home to the tallest roller coaster in the world, as well as one of the largest wildlife safaris outside of Africa. Six Flags kicked off the summer by featuring new rides in all 18 of its U.S. parks, according to Six Flags CEO Jim Reid-Anderson.
But don't worry. Unlike some Disney theme parks, a visit to Six Flags won't break the bank. That's because Six Flags offers a variety of pricing options including season passes and special in-park promotions. Recently, the company has generated increases in its overall attendance, as well as increases in per-capita spending and total revenue. In fact, season passes helped the company increase the number of visitors to its parks by 8% in the past year.
In fact, revenue climbed more than 30% year over year during Six Flags' first quarter, which helped lift the stock's earnings per share. Additionally, management has greatly improved operating efficiency, which should translate into good cash flow from operations going forward. Together, these factors suggest that the company should have no problem supporting its annual dividend payout of $3.60.
Similar to Apple, this is a stock that knows how to reward shareholders. Six Flags has already repurchased 6.1 million shares so far this year. With the summer finally under way, it's never been a better time to take advantage of this stock's above-average dividend yield.
Why dividends matter
High-quality, dividend-paying stocks can reward investors with reliable income for years. Not to mention that with dividend stocks investors have the option of reinvesting those dividends for potentially bigger gains down the road.