{"id":31623,"date":"2023-07-05T08:52:44","date_gmt":"2023-07-05T12:52:44","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/3-megatrend-midcap-stocks-growing-payouts-up-to-385\/"},"modified":"2023-07-05T08:52:46","modified_gmt":"2023-07-05T12:52:46","slug":"3-megatrend-midcap-stocks-growing-payouts-up-to-385","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=31623","title":{"rendered":"3 Megatrend Midcap Stocks Growing Payouts Up To 385%"},"content":{"rendered":"
\n

No matter what Jay Powell says, interest rates are<\/em> topping out here\u2014and that\u2019s put three \u201cstealth\u201d stocks (growing payouts double digits!) in perfect position to gap higher.<\/p>\n

This trio are midcap stocks\u2014<\/em>which we love now because of, well, history: at times like this, midcaps, particularly midcap dividend growers,<\/em> soar.<\/p>\n

Here you can see that the Vanguard Mid-Cap ETF (VO
\n
\n VO
\n <\/fbs-ticker>), <\/strong>in purple, rose when the yield on the 10-year Treasury fell at the start of the pandemic. But look at the right side of the chart: as rates soared, midcaps slipped. That opens a buy window as Powell steps to the side and (eventually) cuts, flipping rates lower\u2014and midcaps back up.<\/p>\n

There\u2019s more to like about midcaps now, too, such as their mainly domestic focus, which makes them winners from the building boom here in the US as companies move home from basket cases like Xi\u2019s China and Putin\u2019s Russia.<\/p>\n

<\/fbs-ad><\/p>\n

But we\u2019re not<\/em> simply going to buy VO and call it a day. Fact is, midcap ETFs hold too many stocks that pay low (or no) dividends.<\/p>\n

This doesn\u2019t mean VO is useless to us, though! We\u2019re simply going to \u201ccherry-pick\u201d its portfolio for holdings with spiking dividends and cash flows. Here are three that make the grade, ranked from third to first:<\/p>\n

ETF Cherry-Pick #3: A 385% Dividend Grower With Curb Appeal<\/h2>\n

Lawn-equipment maker The Toro
\n
\n TTC
\n <\/fbs-ticker> Co. (TTC) <\/strong>is a smart sleeper pick as rates roll over. Over the past decade, it\u2019s delivered near-400% dividend growth, with recent payout hikes accelerating.<\/em> On cue, its stock has followed along.<\/p>\n

That makes Toro\u2019s 1.4% yield easier to bear, and the payout is set to keep growing as Toro puts supply-chain problems behind it and more people swap their gas mowers for battery-electric models. According to Fortune Business Insights, the cordless-mower market will nearly double between 2022 and 2029, from $2.61 billion to $4.6 billion.<\/p>\n

So why is Toro in third? Two words: interest rates. In its last earnings report, the firm reported strong results from its professional division (serving clients like golf courses) but softer sales to homeowners. The residential market could remain a bit soft until rates do definitively turn downward.<\/p>\n

Moreover, Toro is paying 96% of its last 12 months of free cash flow as dividends\u2014too tight for our liking. Management is still calling for solid 7% to 9% sales growth this year, but we\u2019d like to see rates definitively turn down, and Toro\u2019s payout ratio swing back the other way, before buying.<\/p>\n

ETF Cherry-Pick #2: An Industrial Play With a \u201cRefreshed\u201d Payout<\/h2>\n

Cintas
\n
\n CTAS
\n <\/fbs-ticker> (CTAS) <\/strong>is another stock whose products are decidedly unsexy: it sells work uniforms, mats, cleaning supplies and first aid and safety products to a wide range of businesses. Its 0.94% current yield doesn\u2019t exactly get our hearts racing, either.<\/p>\n

Even so, Cintas should be on any serious dividend investor\u2019s radar because, even though it did cut payouts during the pandemic (understandable, with workplaces shuttered), it\u2019s gotten right back on track, raising its payout 53% in just the last two years.<\/p>\n

That\u2019s because Cintas\u2019 results have come roaring back with the economy: in its latest quarter, revenue jumped 11.7% and adjusted earnings per share soared 16.7%. That means we\u2019ve got more payout growth to come, especially with dividends accounting for just 33% of its last 12 months of free cash flow, far below my 50% \u201csafety line.\u201d<\/p>\n

That snags second spot for Cintas, but it falls short of the crown because it trades at 39-times its last 12 months of earnings\u2014high for a stock posting strong numbers against early last year, when we were still emerging from lockdowns. That performance will be tough to match next year.<\/p>\n

The bottom line? Put this one on your watch list\u2014if (when!) we get a recession, it could be worth picking up on the dip.<\/p>\n

ETF Cherry-Pick #1: A Savvy Builder Laying the Foundation for a Big Yield<\/h2>\n

AECOM (ACM) <\/strong>is a construction-and-design firm that\u2019s profiting from soaring government infrastructure spending. And there\u2019s no end in sight to that particular outlay: most of the $1.25 trillion earmarked for roads, bridges and the like in the Infrastructure, Investment and Jobs Act and the Inflation Reduction Act is still waiting to head out the door.<\/p>\n

But it is<\/em> heading out the door\u2014and showing up in AECOM\u2019s backlog, which hit a record high in the latest quarter.<\/p>\n

Meantime, AECOM continues to execute and tap into wider trends. Earlier this month, for example, the Chemours
\n
\n CC
\n <\/fbs-ticker> Company (CC)<\/strong> hired AECOM to oversee construction of its green-hydrogen facility in France.<\/p>\n

The government of Ukraine has also brought in AECOM to help with the country\u2019s rebuild from Putin\u2019s despicable war. Under the deal, AECOM will share its engineering expertise on specific projects and help manage Ukraine\u2019s overall reconstruction plan.<\/p>\n

It\u2019s a clear case of doing well by doing good. Good for them. Go AECOM.<\/p>\n

Meantime, we get to grab a dividend in its youth. AECOM only started payouts in early 2022, but it already delivered a 20% hike earlier this year. And with its backlog, revenue and earnings all trending higher, I expect another strong payout hike next year.<\/p>\n

Moreover, AECOM\u2019s payout accounts for just 18% of its last 12 months of free cash flow, and it\u2019s a big buyer of its own shares, taking 13% off the market in just the last three years. That creates a sweet \u201cfeedback loop\u201d for us, as buybacks pump up earnings per share, influencing future share prices. They also leave AECOM with fewer shares on which to pay dividends, driving bigger payout hikes down the road.<\/p>\n

Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

No matter what Jay Powell says, interest rates are topping out here\u2014and that\u2019s put three \u201cstealth\u201d stocks (growing payouts double digits!) in perfect position to gap higher. This trio are midcap stocks\u2014which we love now because of, well, history: at times like this, midcaps, particularly midcap dividend growers, soar. Here you can see that the […]<\/p>\n","protected":false},"author":1,"featured_media":31624,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-31623","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\n3 Megatrend Midcap Stocks Growing Payouts Up To 385% | iFintechWorld<\/title>\n<meta name=\"description\" content=\"No matter what Jay Powell says, interest rates are topping out here\u2014and that\u2019s put three \u201cstealth\u201d stocks (growing payouts double digits!) in perfect\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=31623\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta 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