Interest rates are rising, which is making fixed-income investments like bonds and CDs look more attractive lately. But the stock market is still packed with dividend payers that deliver higher yields today -- with the added bonus of expected growth to that payout in the years ahead.
Below, we'll highlight a few companies that offer investors a healthy mix of these important characteristics. Read on to see why the stocks of Procter & Gamble (PG 1.95%), Garmin (GRMN 0.31%), and Carnival (CCL 0.77%) belong on your income investing watchlist.
Image source: Getty Images.
Procter & Gamble: 3.4% yield
The consumer staples niche is suffering from several industrywide challenges, making it essential that investors choose only the strongest companies. Procter & Gamble fits that mold perfectly. Yes, the owner of hit global franchises like Tide and Pampers has missed sales growth targets for two consecutive years. But it is still modestly outpacing rivals like Kimberly-Clark, whose sales trends are flat, versus P&G's 2% expansion rate.
P&G enjoys industry-thumping profitability, too, in part thanks to aggressive cost-cutting that management says still has room to save billions over the next few years. That key financial advantage has the potential to fund aggressive dividend boosts when pricing trends improve, as P&G believes they will in fiscal 2019.
Garmin: 3.1% yield
GPS device specialist Garmin has demonstrated that it has what it takes to thrive in the brutally competitive consumer electronics industry. Unlike rival Fitbit, whose fortunes turn on just one or two brands, Garmin boasts a broad portfolio of products spanning categories like wearable fitness trackers, car and boat navigation, and hiking smartwatches. That diversity has helped deliver rising overall sales despite weakness in certain category niches.
Garmin recently boosted its 2018 outlook and now believes revenue will jump 6% as profitability hits another high this year. Those rising targets reflect consistent success at designing, introducing, and marketing products that resonate with its customer base. Its dividend payout doesn't have a long track record of growth, meanwhile, but it is well covered by cash flow and earnings. And the dividend represents an unusually high yield for a growing tech company.
Carnival: 3.3% yield
Wall Street has sent Carnival's stock lower recently thanks to worries over slower growth and rising fuel costs. In my view, that drop represents an opportunity for income investors to pick up a well-run business at a discount.
Image source: Getty Images.
Carnival's sales pace has sailed past management's targets in each of the last two quarters. Its most recent 5% jump in net revenue yields, a core growth metric in the industry, combined with rising ticket prices to push operating income higher by 10%. "We delivered another strong quarter," CEO Arnold Donald told shareholders back in late July.
Carnival's forecast for the second half of 2018 is conservative, and that's the right track for management to take given the uneven demand rebound in the hurricane-ravaged Caribbean market. Yet even if sales are sluggish over the next few quarters, this industry leader is likely to benefit from favorable long-term demographic and economic trends.
Its slate of 18 new ships set to come on line over the next five years should boost Carnival's sales base without putting too much pressure on prices. If the company can strike that delicate balance, as it has over the last few years, then investors are likely to see a healthy flow of rising dividend income from the cruising specialist.
