Do you love dividends? With the markets as bullish as they are, finding quality stocks that have great business models, are operating in future-forward industries, pay their investors on a regular basis, and are on sale is a big challenge.
However, two that have been falling in price over the past few months are PetMed Express (NASDAQ: PETS) and Qualcomm (NASDAQ: QCOM). Both are yielding more than the 1.5% you will get with the average stock on the S&P 500, and can make for terrific long-term investments.
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1. PetMed Express
After the WallStreetBets and Reddit-fueled bullishness of January, many stocks fell sharply as investors cashed out their gains while others reevaluated overpriced investments. PetMed briefly skyrocketed to a high of $57 on Jan. 27 as a result of speculative retail investors. Things have cooled off, however, and since Feb. 1, shares of the pet pharmacy company are down more than 11% while the S&P 500 has risen by 10%.
With a quarterly dividend of $0.28, investors who buy the healthcare stock today can earn a yield of 3.6%. On a $25,000 investment, that equates to $900 a year you could be earning from PetMed, just in recurring income. That is without factoring in any gains you might earn from the stock rising in value. And with people spending more on pets than ever before, there is good reason to be bullish on the stock and its sector.
The American Pet Products Association (APPA) says that in 2020, pet product sales hit a record $103.6 billion, rising 8.3% higher than the previous year's tally of $95.7 billion. That is also much higher than the typical 3% to 4% growth the industry sees. And APPA projects that for the current year, the growth rate will continue to sit above average at 5.8%.
PetMed does business as 1-800-PetMeds and delivers health products including pet medications for dogs, cats, and horses. In its most recent earnings report, released on Jan. 19, sales for the period ending Dec. 31, 2020 totaled $65.9 million and grew 10% year over year. It is an impressive rate of growth given that in fiscal 2020 (which goes up until the end of March), sales of $284.1 million were up less than 1% from the $283.4 million the company reported in the previous year.
With more people owning pets and spending money on them, PetMed looks to be a solid buy and is a great option for income investors who want to score a top dividend yield.
2. Qualcomm
A solid tech stock you can buy on the dip that pays a dividend is Qualcomm. Since the start of February, it has declined by an even steeper rate of 17%. Its yield of 2% is noticeably smaller than PetMed's, but it can still generate a decent $500 in annual dividend income on a $25,000 investment.
The chipmaker is coming off a strong first quarter when it last released its results on Feb. 3. Sales of $8.23 billion for the period ending Dec. 27, 2020 came in slightly below the $8.27 billion analysts were expecting. But the top line was still up an impressive 62% year over year, while profits of $2.5 billion more than doubled.
Qualcomm makes chips that are used in 5G devices, and that is likely going to be a source of strong growth for the company moving forward as next-generation phones continue to roll out and hit the market. Qualcomm's revenue for products used in mobile handsets totaled $4.2 billion in Q1 and grew 79% year over year.
One of the hottest sectors to invest in right now is 5G. According to analysts at Market Research Future, the 5G technology market will be worth more than $700 billion by 2025, growing at an incredible compound annual rate of 70.83%. And so whether you love Qualcomm for its dividend or just want to get exposure to the industry, this stock can be another solid investment to hang on to for the long run.
10 stocks we like better than PetMed Express
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Qualcomm. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
