Here are 2 overlooked dividend stocks

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The stock market can be fun. It can also earn you money. These two things don’t always intersect. And many investors ignore profits and dividends in favor of the latest technology or the compelling story of a charismatic CEO.

CH Robinson in the world (NASDAQ: CHRW) and Best buy (NYSE: BBY) are largely ignored, and that’s a shame. They each have growing dividends and strong companies that should line shareholders’ pockets for years to come. Here are some reasons why you should pay more attention to these actions under the radar.

Image source: Getty Images.

CH Robinson in the world

CH Robinson is a global logistics company. It contracts with transport companies (73,000 in 2020) and helps manage its customers’ freight efficiently and at a lower cost. The morning star estimates that the company’s share in the domestic freight brokerage industry increased from 13% in 2004 to around 18% in 2017. The market is still very fragmented. Since it is simply a middleman and does not own the trucks, planes, ships or railways, its costs may fluctuate with demand. This can be a problem when inflation sets in.

Lately, rising costs have squeezed margins, but the company has the ability to handle headwinds in the short term. And that’s a price for negativity. The current price-to-sales ratio is near its lowest level in two decades.

CHRW PS ratio table

CHRW PS ratio data by YCharts

In addition to the attractive valuation, the company has a dividend yield of 2.3%. He has increased that payout for 24 consecutive years and will soon join the Dividend Aristocrats club, companies that have been doing so for a quarter of a century. Yet it pays less than a third of its profits in dividends. This leaves plenty of room for increases as long as the financial data remains consistent. The company released its second quarter results in July. And for the first six months of this year, revenues have been strong but margins have continued to suffer.

Period Returned Operating margin
1H 2021 $ 10.37 billion 4.7%
1H 2020 $ 7.43 billion 4%
1H 2019 $ 7.66 billion 5.9%
1H 2018 $ 8.20 billion 5%

Data source: CH Robinson Worldwide. 1H = first half.

Management continues to focus on balancing volumes and earnings. In the recent earnings call, CFO Michael Zechmeister estimated that the company processed about $ 60 million in negative margin charges last quarter. That’s triple the $ 20 million he estimates it has existed each quarter since 2012. It’s a good step for shareholders concerned about profitability to follow.

Despite the concerns, CH Robinson has the scale and the experience to rise to the challenge. Although Robert Biesterfeld only became CEO in 2019, he was previously COO and has been with the company for 20 years. For now, this well-run industry leader is on sale.

Best buy

Best Buy is a story of a turnaround. The big box retailer once considered dead (and derisively called Amazonthe showroom) is now in full swing. At the start of the last decade, incomes fell sharply. Indeed, sales fell 22% between 2012 and 2017. It was then that the company began to rebound.

For the year ending Jan. 30, sales increased 12.6% year-over-year. Adjusted earnings per share increased 20%. This happened in a year that included a quarter where sales fell 6% from the previous year due to pandemic shutdowns.

The turnover of the last 12 months is the highest since 2012. And the shareholders have been rewarded. Apart from the special payments in 2015 and 2016, this year marks the eighth consecutive year of dividend increases. The action now returns 2.6%. It’s double S&P 500 index. More importantly, stocks have climbed nearly 250% in the past five years.

BBY Chart

BBY data by YCharts.

Management’s initial projection for revenue growth this year was conservative: between -2% and 1%. After a strong first quarter, this outlook has been revised upwards to between 3% and 6%. Things continue to improve for the company despite the fact that many investors still believe it is well past its peak.

Wall Street will be particularly interested in the outlook when the company reports earnings on August 24. That’s because the most recent consumer confidence reading has dropped dramatically. It was even lower than the lows set at the start of the pandemic. While Best Buy can continue to show growth numbers like these, it won’t be overlooked for long.

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.


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