Button up your winter jackets, investors, because November is quickly fading away. But as you gear up for the impending holiday shopping season, keep in mind the stock market always has bargains for investors who know where to look. In the case of steady dividend-paying businesses, these stocks offer patient shareholders the opportunity to continue reaping the rewards of their initial purchase for years to come.
With that in mind, we asked five of our contributors to pick one dividend stock ripe for the picking this month. They returned with everything from a well-positioned toy maker to an attractive pharmaceutical giant. Read on to see which stocks they chose, and why they believe each is poised to beat the market going forward:
Steve Symington (Hasbro): I think now is the perfect time for long-term investors to pick up shares of Hasbro (NASDAQ:HAS), which has at its disposal an enviable portfolio of market leading toy brands including (but not limited to) Nerf, Play-Doh, Playskool, Marvel, Transformers, Monopoly, Littlest Pet Shop, and My Little Pony. Perhaps most pertinent to our "November" theme, however, is that Hasbro also has the rights to build Star Wars toys ahead of the crucial holiday season -- and next month's debut of Star Wars: Episode VII The Force Awakens.
In fact, only a few days ago Hasbro CEO Brian Goldner confirmed consumers' appetite for Star Wars toys was so strong after the so-called "Force Friday" event in early September, Hasbro found itself struggling to keep up with demand. At the same time, however, he also insisted, "In the next week or two we'll be caught up, and by the time the movie comes out on December 18th, we'll be in great position."
Nonetheless, shares of the toy maker have barely budged over the past six months, as the negative effects of foreign currency exchange have held back Hasbro's top line. Revenue last quarter, for example, was relatively flat over the same year-ago period on a reported basis, but would have climbed 9% had it not been for the impact of foreign exchange. Meanwhile Hasbro's adjusted earnings per share still rose 7.5%, thanks to a combination of share repurchases and Hasbro's focus on achieving strong sales execution and increased operating efficiencies. When foreign headwinds abate, this should mean Hasbro emerges stronger and more profitable than ever.
In the meantime, patient investors who buy now can sit back and collect Hasbro's $0.46 per-share quarterly dividend -- which has nearly doubled from its level five years ago -- which equates to an annual yield of roughly 2.4% as of this writing.
Don't get me wrong -- there is still risk. The company's biggest business is making and selling drilling equipment, and there are less than half as many drilling rigs operating today (both onshore and offshore) than there were one year ago. NOV, as the company is commonly known, has seen its backlog shrink by 40%, and now rests at about $10 billion in this segment, and is likely to fall more before the trend reverses.
But those drilling systems must be maintained, and NOV is the key supplier to the industry for those items. Plus the very nature of the North American oil and gas boom is that new wells must be continually drilled simply to maintain current levels of production, much less grow.
In other words, NOV can expect, once the industry works way through its inventory of spare parts and cannibalizing idled equipment over the next couple of quarters, this part of its business to produce steady and reliable cash flows, and potentially rebound sharply once the market recovers.
It's not clear how long it will take for NOV's equipment business to fully recover, and that could weigh on the stock price for some time to come. However, this is one of the highest-quality businesses in the industry, with a strong balance sheet and solid base of business to support the nearly 5% dividend yield while weathering the downturn.
Daniel Miller (Procter & Gamble): Those of you investors hoping to avoid holiday madness, but still want to shop, should consider looking at shares of Procter & Gamble (NYSE:PG) which have tumbled about 17% year-to-date. The recent price decline could offer investors a nice discount on a proven dividend juggernaut.
The stock hasn't been hit unfairly as P&G hasn't produced top-line revenue growth that investors expect, but the downside is limited. No matter what the global economic situation is people are going to need P&G's necessity products – think toothpaste, NyQuil, diapers, soap, laundry detergent, toilet paper, among many more.
And, despite lackluster top-line growth recently, the company has excelled at producing strong adjusted cash flow around 90%.
The upside, after this year's sell-off, is that PG has significantly reduced its non-manufacturing headcount since 2012 and worked stringently to cut costs from its operations – PG has even shed roughly 100 brands in an attempt to clean up its core portfolio of businesses. This narrowed focus will improve profitable growth and in the most recent quarter its 250 basis point increase in adjusted gross margins to more than 50% was a positive sign.
Looking more specifically at P&G's effort to cut costs, it has made significant progress in its cost of goods savings. P&G recorded a cost of goods savings of $1.2 billion in FY 2012, with savings over each of the next three fiscal years reaching a respective $1.3 billion, $1.6 billion, and $1.5 billion. P&G estimates it will save $1.4 billion on the cost of goods for its fiscal year 2016 which will bring the five year total to roughly $7 billion.
Despite P&G's stock price decline and struggle to generate top-line revenue growth, the company will emerge from this turnaround a stronger company and will continue to be a key partner for retailers. As it continues to cut costs and increase its margins, long-term investors should be rewarded and will receive a healthy 3.5% dividend yield while they wait for the company's actions to bear fruit.
Brian Feroldi owns shares of Hasbro. Daniel Miller has no position in any stocks mentioned. George Budwell has no position in any stocks mentioned. Jason Hall owns shares of Brookfield Infrastructure Partners and National Oilwell Varco. Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Hasbro and National Oilwell Varco. The Motley Fool recommends Brookfield Infrastructure Partners and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.