The stock market is usually driven by growth names. While some of those stories fail to pan out, when the going gets tough, the market tends to pivot towards certainty. And nothing is as certain as regular cash dividends.
Over time, dividend payers outperform non-dividend payers. And dividend stocks that grow their payouts do even better than those with a consistent payout. So it’s no surprise that companies that can grow their dividends now are getting some big market attention.
One such example is
FedEx (FDX). Shares rallied nearly 15 percent as the company announced a dividend increase.
That’s helped the company move higher, but shares are still down nearly one-third in the past year. global shipping has weighed on growth expectations, but the company has still seen earnings rise nearly 25 percent in the past year.
Action to take: This global leader in the shipping industry is now trading at under 9 times forward earnings. Plus it will now have a starting yield over 1.5 percent, with more room for growth in the years ahead as the economy recovers from its current slump. That makes the company worth accumulating now.
For traders, the January $280 calls, last going for about $10.70, offer a mid-double-digit return on a rally in shares in the back half of the year. By then, we should have a better idea of where the economy is going, which should lead to a move higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.
