When it comes to these big dividend companies, the more the better.
Dividend stocks aren’t in high demand now that investments like CDs offer higher yields than most dividend investors. After all, you can still earn risk-free yields of 4% or more with bank-issued CDs. This is more than double the current yield on the S&P 500 index.
Ironically, this situation may allow investors to reap superior long-term returns if they focus on buying these two dividend stocks while Wall Street looks for other gains. yeah.
You’ve probably heard of these companies and may even have them in your portfolio. Still, there are some good reasons to consider increasing your positions in Costco Wholesale (COST 0.48%) and Apple (AAPL 1.23%).
costco cash flow
Wall Street is blind to several factors that could boost Costco stock in 2025. The recent surge in customer numbers proves that the retailer remains popular with its members even in this inflationary environment. Same-store sales rose 9% through early October.
Demand for discretionary items is increasing at Costco, which bodes well for gross margins. And don’t discount the recent dues increases that are currently impacting your subscriber base.
But the biggest reason to like Costco stock may be the least familiar to investors. The chain’s annual cash flow has increased to $12 billion, meaning it can easily fund growth initiatives while leaving shareholders with plenty of excess cash.
Dividend investors may not be thrilled about Costco’s sporadic, one-time dividend payments. But if you can live with unpredictable income payments, this stock offers a good balance of growth and dividends.
Apple’s product innovation
Apple is scheduled to release its fourth-quarter results in late October, but investors don’t have to wait until then to own a little more of this financial juggernaut. Three months ago, Apple announced that its net sales declined slightly through the first nine months of this year, primarily due to weak demand in its core iPhone business.
Many Wall Street analysts expect a dramatic shift in the fourth quarter, with sales rising 13% to $94 billion due to the iPhone 16 lineup.
The company’s margins have already improved during this period of contraction, and shareholders could see a sharp increase in profits if sales trends pick up again heading into 2025. Rapid growth in the services business is also a factor pushing profitability towards new highs.
AAPL Gross Profit Margin, data by YCharts.
Apple’s dividend yield is relatively low at 0.4%. After all, most of the company’s profits go toward high-return investments, including spending on research and development that keep the company at the top of the consumer technology industry. Another blow to this dividend stock is the fact that the stock is trading near all-time highs, increasing the risk of paying too much for the stock.
Still, Apple checks just about every box an investor would want in a long-term holding. Customer loyalty rates are impressive, profit margins are sky-high, and cash flow is growing toward a record $120 billion a year. If you’re the type of income investor who is willing to be patient while a combination of dividend increases and share buybacks yields higher yields over the next few years, paying a little more for that type of business may be worth it. Makes sense.
It’s worth remembering that even if you don’t own many shares, you likely have a lot of exposure to Apple stock. The company accounts for a large portion of the overall market revenue, and a large portion of many index funds and mutual funds. As long as you’re aware of this exposure, you can consider investing a little more in Apple now to grow your portfolio’s returns.
