Pfizer Inc. (NYSE:PFE), Boeing (NYSE:BA), and JPMorgan Chase (NYSE:JPM) are three top stocks that our Motley Fool contributors think are perfect dividend-paying companies to include in portfolios. Are these stocks right for you? Read on to learn more about how these successful companies could reward investors with gains.
Pfizer's race to sustainability
Todd Campbell (Pfizer): Successful investors like buying great companies at fair prices. Historically, dividend-paying companies like Pfizer outperform their non-dividend-paying peers, and Pfizer's current valuation suggests it could be a bargain.
Pfizer's been struggling for years to overcome headwinds associated with losing patent protection on its $13 billion-per-year blockbuster cholesterol drug Lipitor, and now, Pfizer's finally on the verge of returning to sustainable growth.
The company's turnaround rests on both a big push into oncology and a big bet on biosimilars, which are drugs that work similarly to brand-name biologics despite being inexact copies.
In the first quarter, Pfizer reported that total oncology revenue grew 35% worldwide year over year to $1.35 billion. The growth came primarily from two sources. First, sales of its breast cancer drug Ibrance jumped 58% year over year to $679 million. Second, the company's acquisition of Medivation last year landed it 50% of the top-selling prostate cancer drug Xtandi, which added $131 million in sales to the top line in Q1.
The company's biosimilars sales are growing even more quickly. It launched Inflectra, a biosimilar to the multibillion-dollar autoimmune-disease drug Remicade, late last year; in Q1, that helped biosimilar sales clock in at $105 million, up 62% year over year.
Despite the company guiding for sales and profit to increase in 2017, share prices have made little headway. As a result, the company's forward price-to-earnings ratio is below 12, and the company's dividend yield has climbed to nearly 4%. Given its potential to deliver top- and bottom-line growth, a low P/E, and an industry-leading dividend yield, I think buying this stock now is a savvy move.
A successful company with a superior dividend
Rich Smith (Boeing): It seems to me that if you're a "successful investor" yourself, and looking to invest in a dividend stock, then the logical choice is to invest in a successful dividend stock, right? Maybe a company that pays an above-average dividend, and perhaps even one that dominates its field of business?
Maybe...a stock like Boeing?
Most investors know that Boeing is a successful business, and one half of a global airplane-building duopoly comprising Boeing and Airbus (NASDAQOTH:EADSY). But what many investors may not know is just how much more successful Boeing is than its archrival. So let me fill you in.
According to data from S&P Global Market Intelligence, with $95.6 billion in trailing sales, Boeing's business is 27% bigger than its next-best rival Airbus. What's more, with trailing net profits of $5.1 billion, Boeing is 280% more profitable than Airbus -- a full order of magnitude more profitable.
Boeing's marquee business Boeing Commercial Airplanes generated $3.1 billion in operating profits over the past 12 months, nearly twice the $1.6 billion in profits pumped out at Airbus Commercial Aircraft. And that's only the least of Boeing's advantages. The company's smaller, but vastly more profitable, defense, space, and security units earned Boeing $3 billion over the past year. That's as compared to Airbus Defence and Space -- which lost money in the same period. Suffice it to say that whether viewed as a whole, or broken down and examined piece by piece, Boeing stands head and shoulders above its rival. It's a successful business, and unlikely to be brought down by competition any time soon.
From an investing perspective, there's even less contest between Boeing and Airbus. Boeing stock sells for 22 times trailing earnings (pricey, but still cheaper than the average stock on the S&P 500). Airbus, in contrast, sells for more than 47 times earnings. It's nearly twice the average cost of an S&P 500 stock, despite being a below-average business. And of course, Boeing pays its shareholders a 3% dividend yield, far more than a shareholder can expect to receive from Airbus.
In my book, this all makes Boeing the better dividend stock, and the better stock, period.
Bank on this stock
Dan Caplinger (JPMorgan Chase): The financial industry used to be a haven of strong dividend stocks, but the financial crisis temporarily put an end to that status for the sector. Yet nearly a decade later, some big banks have distinguished themselves from the crowd, and JPMorgan Chase has done an admirable job of recovering and regaining most of its past success. It took JPMorgan only a couple of years for its stock to regain its pre-crisis levels, and CEO Jamie Dimon and his leadership team have worked hard to restore the bank's reputation and make the most of opportunities in the post-crisis industry landscape.
From a dividend perspective, JPMorgan's dividend yield of 2.7% might not look all that impressive. But the company's quarterly payout has risen ninefold since its crisis low of $0.05 per share, and the $0.50-per-share payment that it makes now is actually almost a third more than what it paid before the financial crisis. Moreover, JPMorgan only pays out about 30% of its earnings to shareholders as dividends, setting the stage for future dividend increases in the years to come.
JPMorgan stock has climbed recently on hopes for a more favorable deregulated environment for big banks. Yet JPMorgan has thrived even under stronger regulation, and that bodes well for the company no matter what the political future brings.
Dan Caplinger owns shares of Boeing. Rich Smith has no position in any stocks mentioned. Todd Campbell owns shares of Pfizer. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.