One of the disadvantages of being a long-term growth investor is that any gains you make are on paper until you actually sell your stocks. If you want to have cash flowing into your account that you can put to use, then buying some dividend stocks is worth considering. And some of them even increase their payouts over time.
A couple of attractive options for income-oriented investors are Amgen (AMGN 0.60%) and Restaurant Brands International (QSR 1.43%). These stocks both pay you more than the S&P 500 average of 1.3%, and they're both generous when it comes to rate hikes -- more than doubling their dividend payments in the past seven years. And if you decide you have enough cash coming in, you can take some of that dividend income and reinvest it back into stocks to make the most of your investment.
Although both of these stocks have fallen more than 10% in the past six months, with solid fundamentals, now could be a great time to buy them at reduced prices.
1. Amgen
Drugmaker Amgen pays its investors a yield of 3.4%. Its quarterly dividend of $1.94 is 10% higher than the $1.76 the company was paying out a year ago. And that is more than double the $0.79 that it was paying back in 2015, rising at a compound annual growth rate (CAGR) of 13.7% since then.
The big question is whether the healthcare company can continue making such strong rate hikes in the future. In Amgen's most recent results, for the period ending Sept. 30, 2021, the company reported a diluted per-share profit of $3.31, which is well above its quarterly dividend per share. And that was down 3.5% year over year. In a post-pandemic world where hospitals are operating normally and patients are back to making regular trips to the doctor's office, Amgen should perform even better.
In the long term, investors don't have much to worry about. Last year, the Food and Drug Administration approved its lung cancer drug, Lumakras. The drug may be a blockbuster as early as 2023, with some analysts projecting it could hit $1.4 billion in sales by then. Plus, the company has close to two dozen phase 3 trials ongoing across multiple therapeutic areas that could drive even more long-term growth for the business.
Amgen looks to have a bright future ahead, and it wouldn't be surprising for its dividend to continue to rise.
Image source: Getty Images.
2. Restaurant Brands International
Restaurant Brands owns some top names in the fast-food industry, including Burger King, Tim Hortons, and Popeyes. It recently added to that list with the purchase of Firehouse Subs for $1 billion. The company is also aggressively growing internationally. In recent months, it announced plans to launch its Popeyes chain in South Korea and France.
On top of all this growth, the company is also a top dividend stock to own. Its yield of 3.8% is even higher than Amgen's. Its last dividend increase was a modest one -- an increase of just one cent in 2021 to $0.53 -- and that's at a much slower pace than in the past. Historically, the company has been much more generous with regard to rate hikes; since 2017, Restaurant Brands has nearly tripled its dividend payments, growing them at a CAGR of 31%.
That's clearly not a sustainable rate of increase, and so a drop was to be expected. The company has slowed its rate of increases significantly, with the pandemic likely playing a key role in that decision. But even just keeping the dividend payments going, let alone raising them, is a testament to the strength of Restaurant Brands' business during these challenging times.
In the trailing 12 months, Restaurant Brands has continued to post a healthy profit margin of more than 13% of revenue. Although its per-share profit hasn't always been higher than its dividend during that time, the business looks to be in fine shape today. Its diluted earnings per share was $0.70 for the period ending Sept. 30, 2021 -- a significant 49% improvement from a year ago when COVID-19 lockdowns were having a negative impact on its operations. With a return to normal in the economy, Restaurant Brands will likely be able to continue to build on these strong results in future quarters.
If the company can maintain that level of quarterly profit, then that would put Restaurant Brands at a payout ratio of just under 76%. And that's without the economy being fully back to normal. Better times could be ahead for Restaurant Brands, and that's why I'm confident that the dividend could continue to rise as the payout ratio will likely come down in future quarters.
Whether you're looking for a potential recovery stock to buy or just a great dividend investment, Restaurant Brands makes for an excellent option to meet either of those needs.
