Verizon Communications Inc. (VZ), Cisco Systems, Inc. (CSCO): Stocks for the Dividend Investor, Part 3

For example, AT&T’s dividend is only covered just under two times by operating cash flow, after the deduction of investing activities, while Verizon Communications Inc. (NYSE:VZ)’s is covered more than two times and using the same method, Cisco Systems, Inc. (NASDAQ:CSCO)’s payout is covered more than five times.

But why should you investing these growth stocks, what makes them appealing? Well, obviously, growth. While their peers are paying out large amounts of their profits to shareholders, these companies are re-investing for growth and this growth will translate into shareholder returns in the future through rising share prices.

Future growth

Here are the historic and predicted growth rates of these growth companies compared to the dividend dogs I analysed in the first article of this series.

Verizon Communications Inc. (NYSE:VZ) and Cisco have both grown much faster than Urstadt and AT&T, which both offer higher dividend yields. This rapid growth has translated into capital gains for Verizon’s shareholders but not for Cisco’s investors. However, after Cisco Systems, Inc. (NASDAQ:CSCO)’s most recent results and analysts predictions that the company will grow earnings-per-share by around 29% on average for this year, I believe the company’s shares are set for significant future capital growth.

Additionally, Verizon’s EPS are expected to grow 40% this year.

Conclusion

Overall, any portfolio should contain some stocks that offer the potential for growth as well as a solid dividend payout. Verizon Communications Inc. (NYSE:VZ) and Cisco Systems, Inc. (NASDAQ:CSCO) offer investors the potential for capital growth, backed up with a dividend yield that is above the market average and inflation.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems (NASDAQ:CSCO).

The article Stocks for the Dividend Investor, Part 3: Growth and Income originally appeared on Fool.com.

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