Companies that pay dividends are generally well established and relatively less subject to market risks. Brian Belski, BMO’s chief investment strategist, stated, “Elevated cash levels, below average payout ratios…and an unprecedented recovery in corporate earnings are setting the stage for an extended rebound in shareholder distribution.”

While the market is rallying on solid job growth and the Fed’s confidence in the economic recovery, factors such as rising inflation, a decline in overall productivity, and an expanding trade deficit could foster significant market volatility in the near term. Thus, fundamentally sound dividend stocks could be ideal bets now. Investors’ interest in dividend stocks is evident in the SPDR Portfolio S&P 500 High Dividend ETF’s (SPYD) 4.4% returns over the past three months and 24.2% year-to-date.

Therefore, dividend stocks Broadcom Inc. (AVGO), Zoetis Inc. (ZTS), and ABB Ltd (ABB) could be solid picks now. These companies have an overall A (Strong Buy) rating in our POWR Ratings system.

Broadcom Inc. (AVGO)

AVGO develops and supplies semiconductor infrastructure software solutions. It operates through two segments, Semiconductor Solutions, and Infrastructure Software. Its category-leading product portfolio serves critical markets like data centers, networking, and others. AVGO is based in San Jose, Calif.

On September 22, 2021, AVGO launched the world’s lowest power L1/L5 GNSS receiver chip, the BCM4778, which is optimized for mobile and wearable applications. Vijay Nagarajan, vice president of marketing for the Wireless Communications and Connectivity Division at AVGO, said, “With the launch of this third generation dual-frequency GNSS receiver chip, Broadcom continues the tradition of raising the bar for mobile GNSS.”

Over the last five years, AVGO’s dividend payout has grown at a 49.3% CAGR. While the four-year average dividend yield for AVGO is 3.1%, its current dividend translates to a 2.62% yield. On September 2, 2021, its board of directors approved a quarterly cash dividend on its common stock of $3.60 per share, which was paid in September 2021.

AVGO’s non-GAAP net revenue increased 16.4% year-over-year to $6.78 billion in the third quarter, ended August 1, 2021. Its non-GAAP net income increased 28.3% year-over-year to $3.12 billion. Its non-GAAP EPS came in at $6.96, up 28.9% year-over-year.

Analysts expect AVGO’s revenue to increase 14.7% year-over-year to $27.4 billion in its fiscal year 2021. Its EPS is expected to grow  26.1% to $27.94 in the current year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 16.6% in price to close yesterday’s trading session at $548.62.

AVGO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

AVGO has a B grade for Growth, Quality, Momentum, Sentiment, and Stability. Within the Semiconductor & Wireless Chip industry, it is ranked #1 of 101 stocks. Click here to see the additional POWR Rating for Value for AVGO.

Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in AVGO for a 25% gain. Learn more about the RTR service here.

Click here to checkout our Semiconductor Industry Report for 2021

Zoetis Inc. (ZTS)

ZTS, in Florham Park, N.J., discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products in the United States and internationally. It commercializes products primarily across species, including livestock and companion animals.

On August 4, 2021, ZTS announced its agreement to acquire Jurox, a privately held animal health company that  develops, manufactures, and markets a wide range of veterinary medicines for treating companion animals and livestock. Zoetis CEO Kristin Peck said, “Jurox’s portfolio plays to the strengths of our core business and will be a complementary fit with the solutions we deliver to veterinary professionals, livestock producers and pet owners.”

Over the last three years, ZTS’ dividend payout has grown at a 27.5% CAGR. Its current dividend translates to a 0.46% yield. On October 14, 2021, its board of directors declared a fourth quarter 2021 dividend to holders of the company’s common stock of $0.25 per share, payable on December 1, 2021, to holders of record on Friday, October 29, 2021.

For its fiscal third quarter, ended September 30, 2021, ZTS’ revenue increased 11.4% year-over-year to $1.99 billion. In addition, the company’s net income came in at $552 million, up 15.2% year-over-year. Its EPS also increased 16% year-over-year to $1.16.

ZTS’ revenue is expected to be  $7.7 billion in its fiscal year 2021, representing a 15.3% year-over-year rise. The company’s EPS is expected to increase 18.2% year-over-year to $4.55 in the current year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 24.9% to close yesterday’s trading session at $217.77.

It is no surprise that ZTS has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Quality, and a B grade for Growth, Stability, and Sentiment.

ZTS is ranked #7 of 203 stocks in the Medical – Pharmaceuticals industry. Click here to see the additional POWR Ratings for ZTS (Value and Momentum).

Click here to checkout our Healthcare Sector Report for 2021

ABB Ltd (ABB)

Headquartered in Zurich, Switzerland, ABB manufactures and sells electrification, industrial automation, and robotics and motion products for utilities, industry and transport, and infrastructure worldwide.

On October 28, 2021, ABB announced its investment in building technology startup BrainBox AI. Oliver Iltisberger, president of ABB’s Smart Buildings division, said, “I am confident that ABB’s investment in BrainBox AI, when combined with our ABB Ability Building Ecosystem, will help us leapfrog current approaches to digital transformation, further reduce energy costs and play our part in addressing climate change.”

The stock’s dividend payout has grown at a 1.9% CAGR over the last three years and at a CAGR of 37.1% in the past five years. While the four-year average dividend yield for ABB is 3.5%, its current dividend translates to a 2.46% yield.

ABB’s orders increased 28.8% year-over-year to $7.87 billion for its  fiscal third quarter, ended September 30, 2021. The company’s revenues came in at $7.03 billion, up 6.8% year-over-year. Also, its gross profit was  $2.29 billion, up 25.1% year-over-year.

For its fiscal 2021, analysts expect ABB’s revenue to be $28.93 billion, representing a 10.9% year-over-year rise. In addition, the company’s EPS is expected to increase 43.9% year-over-year to $1.41 this year. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 35.2% to close yesterday’s trading session at $34.74.

ABB’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has a B grade for Growth, Momentum, Quality, and Stability.

Click here to see ABB’s rating for Value and Sentiment as well. ABB is ranked #3 of 80 stocks in the Industrial – Machinery industry.

Click here to check out our Industrial Sector Report for 2021

AVGO shares were trading at $555.54 per share on Friday afternoon, up $6.92 (+1.26%). Year-to-date, AVGO has gained 29.82%, versus a 26.43% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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