- A ‘money cow’ generates regular money circulation with little funding.
- Coterra Power’s low-cost, long-life belongings generate dependable money circulation all through the ups and downs of the financial cycle.
- Coterra administration is planning to extend the bottom dividend by 33% in 2023.
- Altria Group shocked the market with a brand new $1 billion inventory buyback program.
- LyondellBasell is a number one participant within the chemical compounds business and the third largest holding within the ‘COWZ’ ETF.
- Each Altria Group and LyondellBasell are ‘Dividend Contenders,’ firms which have raised their dividend for 10 to 24 years.
With market volatility on the rise within the wake of the , many traders are searching for methods to cut back danger and improve revenue.
Time for a drive out to farm nation!
Positive, agricultural commodities will help defend in opposition to inflation, however we’re speaking about a completely completely different funding class — money cows.
The time period ‘money cow’ refers to an organization with vital market share in a mature business. Usually, it requires minimal capital spending to keep up sluggish but predictable progress. In flip, a money cow generates regular money circulation with little funding — very like a low-maintenance cow produces milk.
Money cows make for enticing investments due to their sturdy money flows and wholesome steadiness sheets — to not point out their means to outperform. From 2018 to 2022, the Pacer U.S. Money Cows 100 Index had an annualized return of 12.2%. The Russell 1000 Index (from which it derives its constituents) returned 9.1%
And whereas the ETF that tracks the Pacer U.S. Money Cows 100 Index (COWZ) is an efficient option to acquire broad publicity to a herd of money cows, hand selecting fund holdings with above common dividends is a good way to spice up portfolio revenue. These three cows supply ‘completely’ massive yields.
1. Is Coterra Elevating its Dividend?
Coterra Power (NYSE:) is a Houston-based oil and gasoline producer with a presence within the Anadarko Basin, Permian Basin and Marcellus Shale areas. The corporate’s low-cost, long-life belongings generate dependable money circulation all through the ups and downs of the financial cycle. Roughly two-thirds of income comes from and pure gasoline liquid (NGL), that are in fixed demand for heating, cooking and industrial processes.
To supply worth to shareholders, Coterra is aiming for no less than half of free money circulation (FCF) to be returned as dividends or buybacks. The corporate banked $5.5 billion in FCF final yr on greater commodity costs and returned $3.2 billion to traders. Final yr, it pays a base and variable dividend, which amounted to $2.49 per share. This equates to a 9.8% trailing yield. However with administration planning to extend the bottom dividend by 33% in 2023, a double-digit yield might be on the horizon.
2. Is Altria Group’s Dividend Steady?
Altria Group (NYSE:) has an 8.1% ahead yield that’s backed by the income generated by its cigarettes, cigars, smokeless tobacco and nicotine pouches. Whereas this received’t earn it a spot in an ESG fund anytime quickly, it’ll present regular revenue to traders that need to profit from business management that dates again greater than 100 years.
On prime of beating fourth-quarter earnings expectations, Altria Group shocked the market with a brand new $1 billion inventory buyback program. For a corporation that exited 2022 with $4 billion in money, repurchasing shares ought to present draw back safety for the inventory — which has hovered between $40 and $50 since June 2022.
Whereas a few of the money might be used to proceed to pay down debt, there needs to be lots leftover for the dividend. And it’s a dividend that might continue to grow if Altria’s 13-year streak of dividend hikes stays intact. The streak places this money cow in one other choose group of ‘Dividend Contenders,’ firms which have raised their dividend for 10 to 24 years.
3. Is LyondellBasell a Money Cow?
LyondellBasell Industries NV (NYSE:) is a number one chemical business participant and the third largest holding within the ‘COWZ’ ETF. Its merchandise are in fixed demand for meals and water security, healthcare, gasoline effectivity and extra in roughly 100 international locations. Over $6 billion in money was generated from working actions in 2022, a byproduct of getting the primary or second largest international market share in a number of product classes.
LYB ended final yr with a 46% greater money place of $2.2 billion. Extra work is required to cut back the $12.8 billion debt steadiness, however the money circulation is greater than enough to maintain the dividend. Primarily based on the consensus estimate for subsequent 12 months’ earnings, LYB’s payout ratio is a wholesome 44%.
Additionally a Dividend Contender, LYB has elevated its dividend for 11 consecutive years. In Could 2022, the quarterly dividend was raised to $1.19 per share, which supplies the inventory a 5.4% ahead yield. Given LYB’s diversified publicity to progress markets like vehicles, development and electronics, these money funds might be flowing till the cows come house.