We recently compiled a list of the 10 Unstoppable Dividend Stocks to Buy. In this article, we will have a look at where Garmin Ltd. (NYSE:GRMN) ranks among other unstoppable dividend stocks to buy.
It’s undeniable that dividends have played a key role in the market’s returns over the past year. While they hit a rough patch for a bit, these stocks still have plenty of room to grow. Their rising significance is tied to the fact that US companies are boosting their dividend payouts, thanks to strong cash flow. Many US firms, particularly in the tech sector, have substantial cash reserves on their balance sheets. Due to this, several major tech companies have introduced dividend policies this year, sparking renewed interest in dividend stocks.
In addition, with the market shifting away from top-performing stocks and the Federal Reserve likely to reduce interest rates, dividend stocks remain a valuable option for investors seeking solid returns. Dan Lefkovitz, a strategist for Morningstar Indexes, also supported investing in dividend stocks this year. Here are some comments from the analyst:
“Investing in dividend-paying stocks is a good way to participate in equities over the long term. There have been long stretches when the dividend-paying section of the market has outperformed. Eventually, they’ll come back into favor.”
When it comes to dividend stock investing, the attention is often split between high yields and dividend growth. Analysts tend to favor dividend growth, as it offers a more reliable income stream. In contrast, high yields can sometimes be misleading, hinting at potential financial difficulties. A report from RBC Wealth Management highlights that high-yield stocks have been lagging behind those with lower yields this year. By July 2024, stocks yielding less than 1% delivered an average return of 18%, significantly outperforming the 0.9% average return of stocks yielding over 3%. The report also mentioned that the Dividend Aristocrats, companies that have raised their payouts for at least 25 consecutive years, have historically performed well both during and after economic downturns. Their success is built on appealing valuations relative to the broader market and business models that have proven durable in the face of economic uncertainty. Currently, these equities are trading at a trailing twelve-month P/E of 24.95, which indicates confidence in the stability and growth of these companies.
Several reports have highlighted that while dividend growth companies might not deliver instant gratification, they provide significant long-term advantages. Nuveen, an Illinois-based financial planning firm, also expressed a positive view on dividend growth strategies this year, noting their strong historical track record. The report emphasized that companies focused on growing their dividends possess qualities that pave the way for solid performance in the future. Over the long haul, companies that consistently boost or introduce dividends have outpaced other market segments, achieving higher annualized returns with less volatility. While they may not always shine in every market condition, their steady, risk-adjusted returns over time make them a cornerstone for any equity portfolio—truly a case of “slow and steady wins the race.” With that, we will take a look at unstoppable stocks that pay dividends.
Our Methodology:
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with year-to-date (YTD) gains of at least 30%, as of the close of September 9. The stocks were then arranged in ascending order of their YTD gains.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Garmin Ltd. (NYSE:GRMN)
Year-to-Date Return as of September 9: 44.6%
Garmin Ltd. (NYSE:GRMN) is a multinational tech company that mainly specializes in GPS technology. The company stands out among its competitors due to its advanced technologies and the integration of artificial intelligence (AI) for personalized training plans and workouts. It has also gained from the continuous expansion of its product offerings. Since the start of 2024, the stock has gained nearly 45% and in the past 12 months, it returned over 73%. It is among the best unstoppable stocks that pay dividends.
As a dividend payer, Garmin Ltd. (NYSE:GRMN) reported a strong cash position in the second quarter of 2024. The company’s operating cash flow for the quarter came in at $255 million and its free cash flow amounted to $218 million. Its revenue was $1.5 billion, which showed a 14% growth from the same period last year. The revenue growth was driven by its innovative product range and robust, diversified business model. The company expressed satisfaction with its 2024 performance to date, which has surpassed expectations, leading to an upward revision of its full-year revenue and EPS guidance.
Diamond Hill Capital mentioned Garmin Ltd. (NYSE:GRMN) in its Q4 2023 investor letter. Here is what the firm has to say:
“Other bottom contributors included our short positions in Garmin Ltd. (NYSE:GRMN) and International Business Machines (IBM), as well as our long position in Chevron. Outdoor fitness and adventure equipment maker Garmin benefited from strong growth in its fitness and auto original equipment manufacturer segments. Over the long term, we believe the company’s high-end wearables products will face significant competition from competitors like Apple and Samsung.”
Garmin Ltd. (NYSE:GRMN) currently offers a quarterly dividend of $0.75 per share. It has always remained committed to its shareholder obligation as the company paid $144 million to investors through dividends in the most recent quarter. The stock supports a dividend yield of 1.64%, as of September 9.
Garmin Ltd. (NYSE:GRMN) was popular among elite funds in Q2 2024 as hedge fund positions in the company grew to 31 during the quarter, from 24 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these funds have a collective value of over $801.2 million. With over 2 million shares, Select Equity Group was the company’s largest stakeholder in Q2.
Overall, GRMN ranks 8th on our list. While we acknowledge the potential for GRMN to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
