While it’s no longer earnings season, plenty of good dividend-paying stocks will soon report their numbers.
In this environment, with the stock market having already gone up and monetary stimulus on the decline, individual stock selection becomes absolutely key. I think it’s very fair to expect little in the way of a tailwind from the broader market this year.
Dividend-Paying Stocks with Capital Gains Potential
I’m still a fan of existing winners in a slow-growth world with equity prices fully valued. There is a kind of velocity to earnings among the stock market’s best performers. There are plenty of businesses growing at a rate faster than the general economy. Good performers should continue to outperform the broader market.
One company worth keeping an eye on in this market is Cracker Barrel Old Country Store, Inc. (NASDAQ/CBRL). This stock is yielding right around three percent. Restaurant companies are proven wealth creators in an environment where consumers feel more confident with their disposable income.
Cracker Barrel is definitely the kind of wealth creator that long-term investors can consider when the market is down. Not only has the company been able to grow its sales and earnings over the last several quarters, but lower prices for gasoline have helped with the company’s overall traffic.
According to the company, its total sales for its fiscal second quarter of 2015, ended January 30, 2015, grew 8.2% over the same quarter last year to $756 million. This is solid growth for a mature brand in an otherwise lackluster economy.
The company cited that comparable store restaurant sales grew 7.9% in its second quarter while comparable store retail sales increased 3.2%.
Earnings grew 27% to $47.2 million with earnings per diluted share growing 26% to $1.96. Management increased its adjusted earnings per diluted share range for all of fiscal 2015 to between $6.40 and $6.50. The company reports its next fiscal quarter this week.
Two Bank Stocks to Benefit From the Interest Rate Spread
When an interest rate cycle changes, often the biggest beneficiary is a financial institution. It’s kind of like when oil prices fall but the retail price of gasolines takes weeks to do so commensurately. There’s a good markup to be had and it happens with the cost of money.
Two financial institutions stand out to me in this market.
Wells Fargo & Company (NYSE/WFC) is not the fastest growing bank on the landscape, but it’s got a very solid track record of wealth creation, and a decent yield.
I also like Bank of Montreal (NYSE/BMO), which has been in a stock market downtrend lately and is trading right near its 52-week low with a dividend yield just over four percent.
Canadian banking stocks have proven to be very good wealth creators over time with strong dividend payouts to shareholders. This group is very much worth looking at when the market is down. (See “Two Best Dividend-Paying Stocks for June 2015.”)
There’s no need for equity investors to be rushing into new positions in this market. But investors do need to be invested in something. The right combination of dividend growth and capital gains potential is what’s attractive in this market currently.