If you are looking for the perfect gift this holiday season, it may just be a big dividend stock. As the proverbial "gift that keeps on giving", what other gift pays the receiver an annual income potentially for decades? Not many I can think of.
To narrow down what stocks could be the best dividend payers, I would like a high yield (who wouldn't?), but equally important is a regularly rising dividend payment. Usually, companies pay out a certain percentage of earnings as dividends, so one with steadily growing earnings would be ideal.
Lastly, you'll want to stick with quality stocks that could keep growing and paying dividends to bring in the best returns over the years.
JB Hi-Fi Limited (ASX: JBH)
The electronics retailer has been off in share price around 24% since August because investors think retailers may not have strong returns in the weak economy we have now. Down to around $15.20 a share, the stock offers a large 5.6% yield fully franked and trades at 11x earnings. This Christmas shopping season may be a little bigger for the retailer since there are more in-demand goods like new tablet PCs, Apple products and bigger inventories of games consoles to meet expected demand. Consensus forecast earnings growth is in the mid-single digits. Still, the company's balance sheet is strong and return on equity is around 43%- remarkably high. It's a solid company for the long-term.
Australia and New Zealand Banking Group (ASX: ANZ)
Of the big four banks, ANZ gets the biggest proportion of its revenue from Asia. Growing the banking business in Asia is a high priority for the bank. It may take some time to build up traction, but it will be well worth it as many developing countries in the region are modernising. In the meantime, the stock pays a fully franked 6.0% yield, a whopper for income investors. Its 13 PE ratio is not bad compared to the forecast 16% annual earnings growth rate over the next two years. Dividends have been increasing steadily since 2009. It may be time to add to a position now while the market is weak.
