For more than a decade, growth stocks have outperformed on Wall Street. The combination of historically low lending rates and ongoing quantitative easing measures by the country’s central bank has made it easy for fast-growing companies to hire, acquire and innovate.
But over the very long term, the data conclusively shows that dividend-paying stocks are the real outperformers. According to a study by JP Morgan Asset Management published in 2013, companies that initiated and increased their payments over four decades (1972-2012) generated an average annual return of 9.5%. This compares to a meager average annual return of 1.6% for companies that have not paid a dividend.
Now imagine if you could get the best of both worlds – a fast growing business that was able to take advantage of historically low lending rates. and a board of directors determined to share part of the company’s profits with its shareholders.
The following trio of companies are among the fastest growing dividend-paying stocks on the planet with a payout of at least 2%.
AstraZeneca: 2.4% yield
While most pharmaceutical stocks are slow and stable cash cows, Big Pharma AstraZeneca (NASDAQ: AZN) has turned into a growth stock that also offers a yield of 2.4%, the best on the market. AstraZeneca’s Secret Sauce is a combination of fast-growing specialty therapies, along with a game-changing acquisition.
On the organic growth front, four brand name drugs are leading the charge. Within its oncology division, the Tagrisso, Imfinzi and Lynparza trio increased sales by a double-digit percentage, which helped push cancer drug revenue up 20% in the first quarter to a just over $ 3 billion. Meanwhile, sales of the next-generation type 2 diabetes drug Farxiga soared 50% in the first quarter, with annual sales of $ 2.5 billion. These branded products are expected to help sales of the oncology and cardiovascular segments grow by double-digit percent through the middle of the decade.
From an acquisitive perspective, AstraZeneca is in the process of purchasing a developer of ultra-rare disease drugs Alexion Pharmaceutical (NASDAQ: ALXN). The deal is expected to be finalized this quarter. While it is risky for Alexion to develop treatments to target patient pools often measured in the thousands, the payoff when a drug is successful is that no insurer pushes back high list prices and non-existent competition.
What AstraZeneca will love about Alexion is the company’s diligence in creating a next-generation replacement therapy for its successful drug Soliris. The replacement, known as Ultomiris, is administered less frequently than Soliris and over time is expected to swallow up most of Soliris’ income, assuming its label expansion continues. This will secure Alexion’s cash flow for a decade to come, enabling AstraZeneca to invest in innovation and generously reward its patient shareholders with superior payouts.
Between 2020 and 2025, AstraZeneca’s revenue may double.
Innovative industrial properties: 2.8% yield
Another bona fide growth stock that pays an above-market dividend yield is the Cannabis-Focused Real Estate Investment Trust. Innovative industrial properties (NYSE: IIPR).
Without getting too technical, IIP, as the company is known, acquires medical marijuana cultivation and processing facilities with the intention of leasing them for long periods. Although acquisitions are the main source of growth for the business, it has a modest component of organic growth integrated through annual rent increases of over 3% and property management fees of 1.5% linked to the rate of rent. annual basic rental.
As of July 6, Innovative Industrial Properties owned 72 properties covering 6.6 million square feet of rental space in 18 states. All of its buildings were fully leased, with a weighted average lease term of 16.7 years. With the company very likely having a full ROI on its $ 1.6 billion in invested capital in probably seven or eight years (if not sooner), the IIP should be an income sauce for its shareholders.
It also doesn’t hurt that federal cannabis reform in the United States has gone nowhere. As long as marijuana remains illicit at the federal level, access to basic banking services will be uneven, at best, for US multi-state operators (MSOs). Innovative Industrial Properties stepped in with its sale-leaseback program to alleviate this problem. IIP acquired properties for cash and immediately re-let them to the seller. This way MSOs get the money they need, while the IIP gets a long-term tenant.
After reporting $ 116.9 million in revenue in 2020, Wall Street is looking for nearly $ 269 million in revenue by 2022, making it perhaps the fastest growing dividend stock on the planet. .
Broadcom: 3.1% return
If you’re looking for supercharged growth and income potential, the semiconductor company Broadcom (NASDAQ: AVGO) is a good candidate to consider purchasing. After seeing double-digit average annual sales growth in the years leading up to the pandemic, Wall Street expects revenue growth to average high single-digit through the middle of the decade.
The 5G revolution is at the heart of Broadcom’s success. It’s been a decade since we’ve seen a major upgrade in wireless infrastructure, which suggests consumers and businesses will be eager to update their devices for faster download speeds. Broadcom generates a significant portion of its revenue by manufacturing the 5G chips and accessories used in smartphones. In short, we are talking about a multi-year increased demand track for the company.
In addition to the 5G cycle that increases sales, Broadcom is also at the center of a data shift. Since the pandemic hit, businesses have been forced to push online and in the cloud in order to stay in touch with their customers and employees and keep projects on track. As this push to the cloud accelerates, the demand for storage will increase. Broadcom, which provides the connectivity and access chips used in data centers, will be a clear beneficiary.
But maybe Broadcom’s real asset is the company’s payment. Ten years ago, the company paid $ 0.09 per quarter to its shareholders. But in the last quarter, its investors were raising $ 3.60 ($ 14.40 per year). That’s a 3,900% increase in his quarterly payout in 10 years. Few, if any, tech stocks offer a more attractive income / growth profile.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.