3 Dividend Stocks On My Christmas List

Here we are, with less than two full weeks of trading left in what has been a brutal year. These past two weeks have treated investors well creating what is now referred to as a “Santa Claus Rally.” This period covers the last five trading sessions of the year and the first two of the new year. The S&P 500 has been positive about 79% of the time during those days since 1928, with an average gain of roughly 1.7%.

Christmas time could not come soon enough in a year in which we have seen the S&P 500 endure through a bear market that shows no sign of slowing anytime soon.

On the year, the S&P 500 (SPY) is down roughly 20%.

What Goes Down Must Come Up?

Given the performance of the stock market in 2022, the only good thing about all this is that long-term investors like myself are getting some discounts on some great stocks.

Santa may not save the stock market this year, but I have three high-quality dividend stocks that are on my Christmas list.

Dividend Stock #1 – Qualcomm (QCOM)

Qualcomm is a leader within the semiconductor space and the company currently has a market cap of $125 billion.

On the year, shares of QCOM are down over 35%.

Qualcomm has some great technology that is able to power many different industries, including:

• Mobile Phones

• Computers

• VR and AR

• Automotive

• Wearables

• Wireless

• IoT

• Smart Home

• 5G

Automotive continues to be a major growth driver for the business, as the number of chips already in vehicles today is high. The technology only continues to evolve especially as we get closer to self-driving technology.

The Automotive segment of the business has reported contracts of $30 billion in its pipeline, a year over year increase of $20 billion, and this is during times when many expect the economy to slow in the near-term.

Apple (AAPL) has utilized Qualcomm chips for a number of years and then the two companies went through a number of years where they sued one another and even after all of that, Apple to this day is still utilizing QCOM chips. This speaks loudly to the strength of Qualcomm’s products, especially there popular snapdragon chip.

In terms of the dividend, the company pays an annual dividend of $3.00 per share, which equates to a dividend yield of 2.7%. Over the past five years, QCOM has increased their dividend at an average annual rate of 5.5%. The company has now increased their dividend for 19 consecutive years and counting.

Now we get to valuation, where we can see shares trading well below their five year average (blue line). Currently, the company trades at a P/E of just 9.5x, which is incredibly low for a company of their stature. EPS is expected to dip in their current fiscal year before returning to growth in fiscal 2024.

Over the past five years, shares of QCOM have traded closer to an average of 18.7x.

Dividend Stock #2 – American Tower (AMT)

When it comes to communication, everything and everyone is connected to a cellular device it seems like. We are also seeing the likes of AT&T (T), Verizon Communications (VZ), and T-Mobile (TMUS), battle it out to acquire customers. We are seeing them offer high trade in values for old phones, and subsidizing the cost of new Apple iPhones.

Instead of trying to choose a winner out of those companies, why not invest in the infrastructure behind it all, which is American Tower (AMT).

American Tower is the leading cell tower REIT in the industry in a time when the demand for strong cell service and data range is climbing higher.

AMT currently has a portfolio of ~223,000 communication sites and that is expected to climb with the continued rollout of 5G. The intrigue behind 5G is the speed at which it can deliver data, blowing that of 4G out of the water. Where 5G falters is the fact that its range is limited, which increases the need for more cell towers, thus benefiting someone like AMT.

On the year, shares of AMT are down nearly 30%, presenting a great opportunity in shares of this cell tower REIT.

A single tenant tower provides very low margins for AMT, but when they are able to lease out more space and bring in an additional one or even two tenants, margins skyrocket.

American Tower offers a unique mix of a decent yield and dividend growth. Very rare are you able to find a REIT with strong dividend growth like we see with AMT.

Currently, AMT pays an annual dividend of $6.24 per share which equates to a dividend yield of 3.0%. The company has a five-year dividend growth rate of 18% and has increased their dividend for 10 consecutive years now. The dividend is well covered with a low payout ratio of only 64%.

Looking at valuation, shares of AMT have largely traded at a premium when compared to the overall REIT market. Over the past five years, shareholders have paid an average of 25.5x AFFO for shares of AMT.

Today, shares of AMT trade at an AFFO multiple of 21.1x, well below their five-year average, and look quite intriguing at these levels.

Dividend Stock #3 – Prologis (PLD)

The next dividend stock on my Christmas list is yet another REIT, and it is Prologis. Prologis is the leader within the warehouse REIT space.

Shares have been under pressure in 2022, down over 30% on the year.

The company has $165 billion is assets that is made up of 4,914 buildings leased out to 5,800 customers.

Prologis has grown over the years, especially as the e-commerce sector has grown. However, that sector has slowed considerably from the pandemic boom we saw and Amazon (AMZN) made some comments about being over extended in terms of their warehouse space. Amazon is the company’s largest tenant.

This sent shockwaves through the sector and on top of that, in almost the same week, the company announced the acquisition of Duke Realty for $23 billion, which again sent shares of PLD falling.

As the e-commerce sector continues to expand over the years, so too will PLD as the demand for warehouse real estate will continue to climb giving PLD even more pricing power.

Shares have been unable to recover since that fall, but I am using this as an opportunity to scoop up shares of this blue-chip REIT. The company is backed by a strong A rated balance sheet.

In terms of the dividend, PLD pays an annual dividend of $3.16 per share which equates to a dividend yield of 2.8%.

Shares of PLD currently trading at a forward P/AFFO of 24x. Over the past five years, PLD shares have traded with an average AFFO multiple of 28.7x.

Investor Takeaway

All three of these companies are high on my watchlist to add or initiate a position to early in 2023. The growth for all three companies is well defined even in the face of a slowing economy in 2023.

Do you own any of these Dividend stocks on my Christmas list? Let me know down in the comments section below.