Growing optimism that the COVID pandemic would soon be controlled, meaning that an economic recovery was on the way, has driven the market higher. Robust December quarter earnings reports, will lots of positive surprises, added fuel to the fire, asserts Harry Domash, editor of Dividend Detective.
Recent predictions say that everybody who wants to be vaccinated will have received their shots by May 31. If that happens, we think many will have “hit the road’ by summers’ end, triggering a rapidly improving economy. I don’t think that current rising interest rate concerns will have much impact, long term.
We’ve added a new pick with double-digit earnings growth prospects to our High Tech portfolio. It’s one of only two major players filling a major tech industry need. Better yet, it’s paying a 3.7% dividend yield, which is high for tech stocks.
We’re recommending Seagate Technology (STX). Founded in 1979, Seagate developed the first 5.25" hard disk drive in 1980. Currently, Seagate and competitor Western Digital dominate the data storage market.
Although incorporated in Ireland, Seagate’s main offices are in Fremont, California. For U.S. residents, Seagate’s dividends are not subject to Ireland’s income tax withholding as long as you fill out the required paperwork with your broker.
Seagate’s fiscal year ends in June and analysts are only expecting around 2% EPS growth in the current (6/2021) fiscal year, but 22% EPS growth next year. In our view, those forecasts are likely to be exceeded.
The fact is, tech-driven applications are coming fast and furious, and most need data storage. Seagate raised its quarterly dividend by 3% in December and its current yield is 3.7%, which is high for a tech stock.
We’re finally adding a third regional bank to our U.S. banks portfolio. It was worth the wait. This new pick, paying a 3.9% yield, the highest in the portfolio, has strong earnings growth prospects.
We’re recommending Huntington Bancshares (HBAN). The bank currently operates over 800 full-service branches in seven, mostly Midwestern, states. However, Huntington recently agreed to acquire TCF National Bank, which operates 475 branches mostly located in Michigan, Illinois and Minnesota.
The deal is expected to close mid year and analysts are forecasting double-digit EPS growth for both 2021 and 2022. Huntington is paying a 3.9% dividend yield and we expect around 10% annual dividend growth.
In our ETF Monthly Income portfolio we are buying iShares Convertible Bond (ICVT), which tracks an index of convertible bonds issued by U.S.-based corporations. The fund has returned 72% over the past 12- months and averaged 27% annually over the past three years.
It pays around $0.07 per share monthly, plus a large capital gains distribution ($3.75 in 12/20) in December. Most websites quote iShares dividend yield at 1.1%, which doesn’t include the capital gains distribution. We, however, compute the yield based on its trailing 12-months total payouts, which currently equates to 3.7%.