According to Trivariate Research, there hasn’t been much to cheer about for dividend investors lately. The S&P 500 yield is currently 1.15%, nearing its lowest level in 50 years, founder Adam Parker noted in a note this week. He said the only time the stock has fallen was during the tech bubble, when it hit a bottom of 1.09%. He suggested that responsibility may lie on the shoulders of the big tech companies that dominate the index. Information technology stocks are the largest stock in the S&P 500, accounting for 35%. Big tech companies like NVIDIA and the S&P 500 have repeatedly hit new highs this year, although they’ve endured some volatility lately due to the enthusiasm for artificial intelligence. “The percentage of companies paying dividends remains at 56%, not significantly different from the past 25 years,” Parker wrote. “So what’s driving this current regime are clearly the largest companies by market capitalization and companies with low or no dividends.” For example, Nvidia’s dividend yield is a meager 0.02%, Microsoft’s dividend yield is 0.76%, and Alphabet’s dividend yield is 0.29%. Additionally, the proliferation of non-dividend-paying and low-dividend stocks has left high-dividend stocks in the third worst position in the past 25 years, he said. He noted that high-yield defensive sectors such as consumer staples, communications and pharmaceuticals have traditionally been weak. But concerns about valuations and the direction of the Federal Reserve’s monetary policy have hurt tech stocks recently. After seeing significant declines in the previous session, the overall market rebounded on Friday. Nvidia ended Thursday in the red despite reporting blockbuster results, but closed slightly lower on Friday. Chip stocks are up 33% since the beginning of the year, but are down nearly 12% since the beginning of the month. Parker’s Long-Term Dividend Stock Ideas When it comes to dividends, there are a variety of strategies investors may follow, whether they focus on high dividends or steady growth. Parker said companies that have increased their dividends since COVID-19 have slightly outperformed their industry groups. He said the increases were most effective in real estate, utilities and energy. Specifically, Parker said that among companies that raised their payout ratios, those in the lowest payout ratio quintile (payout ratios less than 16.2%) outperformed their industry group average over the next two years. To do so, he has compiled a long list of ideas focused on companies that have recently announced dividend increases. Parker said the company is in the bottom fifth of payout ratios and is prepared to increase its dividend again in the future. Here are some of the names that made the list. Earlier this month, Cinemark Holdings increased its quarterly dividend by 12.5% starting December 12th to shareholders of record as of November 28th. The current dividend yield is 1.24%. The company reported higher third-quarter sales, but profits were lower than expected. The company also said it had repaid pandemic-related debt. In addition to increasing its dividend, Cinemark announced that it will buy back $300 million in stock. According to FactSet, the average analyst rating for the stock is “overweight,” with an upside of nearly 16% from the average price target. Cinemark is down about 5% so far this year. Capital One Financial is another of Parker’s long-standing ideas. The financial services company recently raised its quarterly dividend from 60 cents to 80 cents, an increase of more than 30% that will be paid on Dec. 1 to shareholders of record as of Nov. 17. The company’s stock currently has a dividend yield of 1.58% COF YTD Mountain Capital One Fiscal Year to Date Capital One’s third-quarter earnings also recently exceeded analyst expectations, coming in at $4.83 per share. Analysts polled by FactSet had expected earnings of $4.38 per share. Analysts’ average rating for the stock is “Overweight,” with an upside of 26% from the average price target. The stock has increased nearly 17% since the beginning of the year. Finally, Cheniere Energy announced a 10% increase in its quarterly dividend from 50 cents per share to 55 cents per share. The stock currently has a dividend yield of 1.07%. Cheniere’s average analyst rating is “buy,” with 32% upside potential compared to the average price target. The stock price has fallen more than 4% since the beginning of the year.
