Strong Cash Generation Makes Wells Fargo and Wall-Mart a Safe Stock for Dividend Investors
Wells Fargo & Co. (WFC) is a diversified financial services company. The company is always considered as a safe haven for retirees and defensive investors, amid its long dividend history and strategy of returning a significant portion of cash to investors. According to figures from Correct Trade stockmarket reports, Wells Fargo currently offers a quarterly dividend of $0.38 per share, yielding around 3.11%.
In the last five years alone, it has increased its dividends by 50%. Wells Fargo has been increasing its dividends at almost double digit rates since 2008. The company’s sustainable growth in revenues, earnings, and cash flows are the key drivers behind its success and dividend growth.
WFC: 3-Year Performance
In the last three years, it has expanded its revenue base from $83 billion to $86 billion. WFC is now expecting its revenue to stand above $87B by the end of this year. On the other hand, its earnings growth is standing around 7% in the last three year.
The company has substantial potential to generate increasing cash flows. In addition, it is operating in a less-capital intensive industry, which provides further room to pay increasing returns to investors.
Consumer Spending at Walmart
On the other hand, Wall-Mart (WMT) is the largest departmental store by market capitalization of $225 billion. At present, Wall Mart offers a quarterly dividend of $0.50 per share, yielding around 2.74%. Wall-Mart is a dividend aristocrat, as it had increased its dividend over the last 43 consecutive years.
Wal-Mart’s extensive footprint and penetration in end market along with strong brand recognition allow it to generate a sustainable growth in financial performance, which further allows it to pay increasing dividends. The company’s dividends are completely safe on the back of strong cash generation potential.
Quarterly Results
In the latest quarter, the company generated free cash flows of $6.3 billion, when its dividend payments accounted for only $1.5 billion. The huge gap in free cash flows and dividend payments clearly shows that the company’s cash generation potential is offering a huge for a further dividend increase.
Both, Wall-Mart and Wells Fargo are safe picks for dividend investors, amid their cash generation and extensive business structures. Buying and holding these stocks for increasing dividends and steady share price appreciation is a good strategy.