ARK Invest founder Cathie Wood is known for her partiality to young-ish companies with vast growth potential. That partiality can be seen in the names of some of her investment firm's suite of exchange-traded funds, including ARK Fintech Innovation ETF and ARK Next Genomic Revolution ETF. For income investors, the downside of following Wood's lead is that these funds invest in often-unprofitable businesses that are still years away from paying dividends.
But with a sprawling portfolio across six large and popular ETFs, there are several significant ARK Invest holdings that habitually remunerate their shareholders. Sorting through the pile of stocks, I've found some good ones worth considering: Pfizer (PFE 0.52%), Deere & Co. (DE -1.36%), and Intercontinental Exchange (ICE 1.00%). Let's find out a bit more about these three dividend-paying stocks.
Although pharmaceutical giant Pfizer is a 172-year-old business, it's enjoying some accelerated name recognition and popularity right now. That's mostly thanks to Comirnaty, the COVID-19 vaccine that it developed along with BioNTech. So far, Comirnaty is the only COVID-19 vaccine fully approved by the Food and Drug Administration among the three currently authorized for emergency use in the U.S.
Comirnaty is powering a Pfizer resurgence these days. The company has smashed analyst estimates in its past few earnings reports. In its latest, the sales of vaccines (mainly Comirnaty, of course) rocketed 641% on a year-over-year basis to $9.2 billion.
Yet in its recent earnings reports, Pfizer has gone out of its way to note that the rest of its business is generally strong, healthy, and growing as well. For example, in the second quarter, revenue not including Comirnaty jumped by 10% year over year, which is a high number for such a veteran operator. Pfizer's No. 2 segment in terms of sales, oncology drugs, saw a 16% improvement, and the hospital drugs segment grew by 17%.
With all of these tailwinds, it's little wonder that Pfizer raised its full-year 2021 guidance considerably, by at least 8% for revenue, and 11% for per-share adjusted net profit.
Meanwhile, quarterly cash flow continues to land in the 11-digit range, providing more than enough for the modest but welcome annual raises to its quarterly dividend. At the moment, Pfizer (which is held by ARK Next Genomic Revolution ETF) pays $0.39 per share, which yields a relatively chunky 3.6%.
2. Deere & Co.
The most recent dividend raise among this pack belongs to agricultural machine and technology king Deere & Co. Reinforcing the idea that its business is robust and growing like a well-tended crop, the company declared a sturdy 17% hike to its quarterly payout in August.
Leveraging its position as a top name in agricultural equipment, Deere has lately been leaning on technological innovation to drive its growth. After all, farmers are always looking for a faster and/or higher-yielding way to grow their products. This dynamic played a big part in the company's impressive third quarter, in which its net sales shot almost 30% higher year over year, with headline net income doubling and then some.
That likely won't be the last Deere double on the bottom line. It's forecasting the same for net income across the entirety of 2021, with that all-important line item landing at $5.7 billion at a minimum, against 2020's $2.75 billion.
With growth like that, especially with a well-known company, bulls like Wood have piled into the stock, and it's currently teasing all-time highs. But the company's tech-powered future continues to look very bright, and the agriculture sector will always be hungry for efficiency-boosting solutions and reliable equipment.
At the moment, Deere, a double-dip held by both ARK Space Exploration and Innovation ETF and ARK Autonomous Technology and Robotics ETF, has a dividend yield of 1.2%.
3. Intercontinental Exchange
It's probably safe to say that most people have never heard of the rather blandly named Intercontinental Exchange. But they're almost surely familiar with its star subsidiary, the New York Stock Exchange. Those more attuned to the financial sector might be acquainted with its collection of niche securities marketplaces such as Creditex.
In short, as the name implies, Intercontinental Exchange runs securities exchanges like the NYSE and affiliated products and services. Being an intermediary that makes much of its revenue by facilitating (although not directly participating in) transactions can be quite lucrative.
Combine that with volatile securities markets that keep investors engaged, and you have a good recipe for high profitability, if not necessarily stunning organic growth. From 2016 to 2020, on the back of such growth (plus semi-frequent acquisitions), the company managed to increase its annual top-line steadily. It advanced from just under $5.6 billion in revenue in 2016 to a shade above $7.6 billion last year.
Profitability is a bit more up-and-down, but recently Intercontinental Exchange has consistently managed to land well in the black. Across the same stretch of time, the company's net margin has ranged from 26% to 45%. At the upper part of their range, those numbers would be the envy of even the most efficient middleman businesses.
Increasingly, more of that profit is coming back to shareholders. Intercontinental Exchange, of which ARK is an investor through ARK Fintech Innovation ETF, has a habit of raising its payout once every year. These days, the $0.33 per share quarterly disbursement has a dividend yield of 1%.