Dividend Investing Ideas Center
Have you ever wished for the safety of bonds, but the return potential...
Iuri Struta Jan 20, 2021
Dividend.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.
Companies yielding high dividends have been trending this week. Energy-related companies Antero Midstream and Kinder Morgan are second and fourth on the list this week, respectively. Meanwhile, real estate company Realty Income is third on the list. The stock trending the most this week, however, remains a low-yield, high-growth one, namely Taiwan Semiconductor.
Don’t forget to read our previous edition of trends here.
Taiwan Semiconductor (TSM) has taken the first position on the list this week, with an increase in viewership of 43%. Taiwan Semiconductor, a leading manufacturer of chips based on designs from companies like Advanced Micro Devices (AMD) to Nvidia (NVDA), has benefited from the multi-year boom in semiconductors. Its stock has surged by more than 80% over the past 12 months alone, extending a five-year rally to 338%.
Demand for computing power has been accelerating in recent years as a growing number of industries – including automobiles, cloud storage and mobile phones – binge on it. On top of that, a further boost was delivered by the ongoing struggle of Intel (INTC), a leading integrated semiconductor company that has had issues with its manufacturing process of the latest generation chips.
Indeed, in an apparent move that it is throwing in the towel, Intel is now considering outsourcing the manufacturing of its latest generation chips to Taiwan Semiconductor, which should provide another boost to the company.
Taiwan Semiconductor just recently posted a set of strong results for the three months ending December, with profits rising by 23% to $5.1 billion compared to the same period a year ago. The company said it expects results to continue to improve over the next quarters.
Taiwan Semiconductor’s dividend yields a modest 1.4%, with the company paying shareholders around 45% of its earnings.
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Antero Midstream Partners (AM) has taken the second spot on the list with a rise in viewership of 34%. Antero is by far the highest-yielding company from this week’s trends, returning a whopping 14.4%. Antero is involved in the delivery of oil from its former parent Antero Resources in the Marcellus and Uttica shale plays.
Like most shale companies, Antero’s stock has been pummelled in recent years, as oil prices have been extremely weak. Antero shares are down by 76% from their peak in early 2017. However, the company does not face existential threats given its relatively low leverage, declining capital expenditures, and improving returns on invested capital.
Indeed, from its March low, the stock has risen 241%. Antero stock is likely to continue to be volatile, but it could deliver handsome returns for those willing to stomach risk, particularly if oil prices recover or at least stabilize.
Check out our latest Best Dividend Stocks List here.
Realty Income (O) is one of the few quality real estate investments that could continue to deliver strong returns in the coming years. Realty has seen its viewership rise by 19% over the past two weeks and has been trending on more than one occasion in 2020 on Dividend.com.
Realty’s stock has not yet recovered to its pre-pandemic levels, suggesting that it could continue to rise when the pandemic abates. Realty shares are down around 2% since the start of the year, partly due to a near $600 million capital raise to acquire new properties in the U.S. and the U.K.
Realty shares have delivered strong returns since its initial public offering in 1994, largely thanks to pursuing a diversified portfolio strategy that has helped it successfully navigate downturns. In the current crisis, some of its tenants like LA Fitness and AMC Theaters have suffered from stay-at-home orders, but others like Walgreens (WBA), 7-Eleven and Dollar General (DG ) have enjoyed growing revenues as they remained open and saw strong sales.
Realty’s dividend yields an annual 4.8%, resulting in a payout ratio of nearly 200%, which could be considered worrisome for some investors.
Energy infrastructure company Kinder Morgan (KMI) is last on the list this week, with an advance in traffic of 19%. Kinder Morgan shares have continued their rally this year, rising by 14%. However, the stock remains below its pre-pandemic highs.
Kinder Morgan has ditched the risk-on business model of taking on debt to fuel expansion around five years ago. Since then it has transformed into a high-dividend cash cow. As a result, the company operating 85,000 miles of oil and gas pipelines and 152 terminals has withstood the pandemic. Its cash flows have outpaced capital expenditures, allowing it to keep the dividend in place.
Kinder Morgan’s dividend yields a strong annual 6.6%.
Taiwan Semiconductor has had a strong few years as it rode the semiconductor boom. Despite yielding a high dividend, Antero Midstream seems to be in good shape. Realty Income has seen its stock fall as it raised capital to finance new acquisitions. Finally, Kinder Morgan is a high dividend energy infrastructure play that could continue to appreciate.
Be sure to check out Dividend.com’s News section for next week’s Market Wrap and other great dividend investing news.