In light of Goldman Sachs Group Inc.’s (GS, Financial) advice regarding investing in high dividend yield stocks as U.S. Treasury yields decline, five stocks in the All-in-one Screener’s “Dividend Growth Portfolio” are Infosys Ltd. (INFY, Financial), Intel Corp. (INTC, Financial), Novo Nordisk A/S (NVO, Financial), Snap-on Inc. (SNA, Financial) and Texas Instruments Inc. (TXN, Financial).
Semiconductor stocks boost Dow’s rebound from early-August lows
On Monday, the Dow Jones Industrial Average closed at 26,135.79, up 249.78 points from last Friday’s close of 25,886.01 and 656.37 points from last Wednesday’s close of 25,479.42.
Semiconductor stocks like Micron Technology Inc. (MU, Financial), a stock longtime investor David Tepper (Trades, Portfolio) nearly sold out of during the second quarter, traded higher on the heels of the U.S. giving Chinese telecommunications provider Huawei an extra 90 days to buy supplies from U.S. companies to service existing customers according to U.S. Commerce Secretary Wilber Ross.
GuruFocus’ Dividend Growth Portfolio identifies good investing opportunities as Treasury yields fall
According to CNBC columnist Yun Li, Goldman said in a note last Friday that with the 10-year Treasury constant maturity rate falling close to 1.5%, investors should “look for opportunities in dividend stocks.” GuruFocus’ All-in-One Screener contains a predefined screen called the “Dividend Growth Portfolio,” which screens for high-quality companies that offer a dividend yield of at least 2.1%.
A backtest of the “Dividend Growth Portfolio” since January 2006 using a 12-month rebalance period, with stocks ranked by dividend yield in descending order, returned a cumulative 372.08% during the period between January 2006 and August 2019, outperforming the Standard & Poor’s 500 index cumulative return of 192.62% and the Dow cumulative return of 231.85%. Figure 1 illustrates the annual performance of the Dividend Growth Portfolio compared to that of the benchmark indexes.
Figure 1
Infosys
Infosys, an India-based provider of consulting and information technology services, has a dividend yield of 2.21%, outperforming 66.86% of global competitors.
GuruFocus ranks Infosys’ financial strength and profitability 8 out of 10 on several positive indicators, which include robust interest coverage, a strong Altman Z-score of 10.27 and operating margins that are outperforming approximately 80% of global competitors despite contracting approximately 1.3% per year on average over the past five years. Additionally, Infosys’ business predictability ranks 4.5 stars out of five on strong and consistent revenue and earnings growth over the past 10 years.
Gurus with large positions in Infosys include Ken Fisher (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
Intel
Santa Clara, California-based Intel designs and manufactures microprocessors and platform solutions for the global personal computer and data center markets. GuruFocus ranks the company’s profitability 8 out of 10: Even though the three-year revenue growth rate of 8.60% underperforms 59.61% of global competitors, Intel has a strong Piotroski F-score of 7 and operating margins that have increased 5% per year on average over the past five years and are outperforming over 93% of global semiconductor manufacturers.
Gurus with large positions in Intel include Fisher and PRIMECAP Management (Trades, Portfolio).
Novo Nordisk
Novo Nordisk, a Danish biotech company, designs and markets various human and modern diabetes-care products. According to GuruFocus, Novo Nordisk’s debt-to-equity ratio of 0.08 and cash-to-debt ratio of 3.42 suggest strong financial strength, even though the latter underperforms 63.09% of global competitors.
Snap-on
Kenosha, Wisconsin-based Snap-on manufactures and sells tools, equipment, diagnostics, repair information and systems solutions primarily for independent vehicle centers and new vehicle dealerships. GuruFocus ranks Snap-on’s profitability 8 out of 10: Even though the company’s three-year revenue growth rate of 4.20% underperforms 67.07% of global competitors, its operating margin has increased approximately 5.10% per year over the past five years and is outperforming approximately 93% of global competitors. Additionally, the company’s business predictability ranks five stars out of five on strong and consistent revenue and earnings growth over the past 10 years.
Texas Instruments
Texas Instruments manufactures analog chips and digital signal processors used in wireless connections and microcontrollers. The Dallas-based company also manufactures well-known graphing calculators, including the TI-83, TI-84 and TI-89 Titanium.Ă‚
GuruFocus ranks Texas Instruments’ profitability 8 out of 10: Even though the company’s three-year revenue growth rate of 6.7% underperforms 64.66% of global competitors, its operating margin is near a 10-year high of 44.56% and outperforms 97.08% of global semiconductor companies.
Disclosure: No positions.
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