The Holy Grail for income investors is finding quality companies with significant payouts that will continue to generate income over the long haul. It’s important to remember, though, that companies with large dividends are not all created equal. In some cases, a high yield can be a red flag that indicates trouble in the underlying business.
Separating the wheat from the chaff can be an arduous and time-consuming process, but we’re here to help. We asked three Fool.com contributors to choose top companies with high payouts. Read on to find out why they chose the following stocks.
Top Tech Stocks To Own Right Now: Alibaba Group Holding Limited(BABA)
China e-commerce giant Alibaba (NYSE:BABA) has morphed into the face of the booming China tech revolution. As a result of essentially becoming the Amazon.com (NASDAQ:AMZN) of China with a super-charged digital retail business and rapidly growing cloud business, Alibaba stock has gone from $60 to $200 over the past two-plus years.
But the stock has been stung recently by a plethora of headwinds, none of which have staying power or will materially affect the company’s still robust long-term growth narrative.
First up, there are the currency headwinds. There was a recent devaluation of China’s currency, and that creates foreign exchange risks for Alibaba. But as MKM Partners points out, such currency risks always created weakness in shares in the near-term, and never materialized into anything meaningful. As such, present currency headwinds should be viewed as a buying opportunity.
Second, there are also concerns about Alibaba’s profitability. Alibaba has long been a staple for both big revenue growth and healthy margin expansion. But the latter part of that narrative — the margin expansion part — has been lacking recently as big investments into New Retail and cloud have diluted the margin profile of the business.
This isn’t anything to freak out about. Alibaba is investing big for the future. Eventually, big investment businesses will turn into big growth, big margin businesses, and the overall profitability profile of Alibaba will improve dramatically.
Overall, then, the risks presently facing Alibaba stock are over-stated. With the stock now trading at under 30-times forward earnings against the backdrop of 60%-plus revenue growth, it looks like July could be a big bounce-back month for Alibaba stock
Top Tech Stocks To Own Right Now: Canopy Growth Corporation(CGC)
Canopy Growth Corporation is one of the few marijuana stocks that generated a solid return in the first six months of the year. The Canadian marijuana grower’s share price is up 25% year to date.
Can Canopy Growth keep its momentum going? Probably so. The market for adult use of recreational marijuana opens in Canada in October. Canopy already has supply agreements for recreational cannabis with several provinces. The company has also cranked up its capacity to meet what’s expected to be a surge in demand.
An even greater opportunity for Canopy lies in global medical marijuana markets. The company reported record sales in Germany in its fiscal fourth-quarter results. Canopy is also expanding into other international markets. And with its big partner Constellation Brands, the company plans to get into the cannabis-infused beverage market. Canopy CEO Bruce Linton recently hinted in a CNBC interview at the potential for launching a zero-calorie beverage infused with cannabis.
Top Tech Stocks To Own Right Now: Select Income REIT(SIR)
Dividend Yield: 9.1%
Select Income REIT (NASDAQ:SIR) specializes in both office and industrial properties leased to single tenants. Buildings as diverse as corporate headquarters and leasable land parcels make up SIR’s portfolio of properties. SIR also owns 69.2% of the shares in Industrial Logistics Properties Trust (NASDAQ:ILPT). ILPT makes up its industrial properties and much of its office property.
Like many real estate stocks, this stock has seen little stock price appreciation. SIR stock currently trades around $22.50 per share, less than $1 higher than its $21.75 per share IPO price in 2012. In six years of trading, the stock has never risen more than 40% above this IPO price. It has also never fallen more than 20% below its original price.
Hence, like most REITs, dividends will constitute the majority of profit earned in SIR stock. The dividend has seen a steady increase since the 2012 IPO. The annual dividend started out at 91 cents per share in 2012. It has seen a sustained move higher since and last increasedto $2.04 per share. The quarterly dividend has remained at that 51 cents per share per quarter for two years. If that trend continues, 2018 will become the first year in its history not to see a dividend increase.
However, even if investors do not see a higher dividend, a yield of 9.1% will still provide income investors with a stable amount of income at a high return.
Top Tech Stocks To Own Right Now: Turquoise Hill Resources Ltd.(TRQ)
Headquartered in British Columbia, Turquoise Hill Resources Ltd. (NYSE: TRQ) is a Canadian mineral exploration firm focused on the Pacific Rim region.
Over the last several years, Turquoise Hill has developed several significant mining projects, including the Oyu Tolgoi Project in Mongolia – one of the world’s largest copper and gold porphyry deposits.
Over the last fiscal year, Turquoise Hill has beat earnings by an average of 225% while heavily investing in the expansion of its mining operations across the globe.
The company’s rapid expansion and investment has given Turquoise Hill some aggressive production estimates for 2018.
The company’s 2017 projections estimated that Turquoise Hill will pull between 125,000 to 155,000 tons of copper and 280,000 tons of gold over the course of 2018.
Last month, Turquoise Hill doubled down on these figures and stated that it had the potential to outpace initial estimates.
Turquoise Hill currently trades for $2.76. However, with rapid expansion fueling rising profit potential, analysts estimate that the company could hit $4.00 in the near future. This is a gain of 43%.
Both Turquoise Hill and Mizuho are great penny stock investments for July. But our top penny stock has better profit potential than both of these picks.
An international steel company, our top penny stock to buy in July, is set to generate substantial returns as trade war tensions continue to rise…