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Unlocking Potential: The Road to Record Dividend Payouts for Top Stocks in 2024

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Investors often fixate on a stock’s yield without delving into the underlying reasons for that yield. While Apple (NASDAQ: AAPL) may have a low yield, it’s a result of the stock price eclipsing dividend raises.

Air Products and Chemicals (NYSE: APD) alongside MSC Industrial Direct (NYSE: MSM) boast yields over 3% with consistent dividend growth histories. Despite lagging behind the S&P 500 over five years, these companies are poised to set records this year in dividend payouts, showcasing their commitment to rewarding shareholders.

In 2024, anticipate groundbreaking dividends from these three players and witness their unwavering dedication to shareholder value creation through the years ahead.

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Image source: Getty Images.

Decoding Apple’s Capital Strategy: Looking Beyond Dividends

Daniel Foelber (Apple): Apple raised its dividend for the 11th straight year to $0.24 per share per quarter last May. An upcoming raise is expected upon reporting Q2 fiscal results in May, but the question lingers on the scale of the increase.

Although Apple has implemented modest one-cent raises for years to maintain the streak, these increments fail to allure income-oriented investors, especially with the stock’s mere 0.5% yield.

Underneath the hood, Apple possesses the capacity for more substantial dividends but opts for buybacks over dividends in its capital allocation strategy.

In the previous quarter, Apple allocated $3.83 billion towards dividends and $20.14 billion towards buybacks. A hypothetical scenario where all capital is funneled into dividends would yield 3%, doubling the S&P 500’s 1.5% while overshadowing tech counterparts.

The strategic choice of buybacks has reaped immense benefits with Apple’s stock soaring over 825% in the last decade and a 36% reduction in outstanding shares. Nonetheless, with the business now slower-growing and mature, a shift towards dividends seems prudent.

Despite facing a rough patch with declining Chinese sales and lagging in AI developments compared to peers, Apple remains robust with substantial capital to metamorphose into a high-yield dividend stock or drive growth. Underestimating Apple’s resilience and potential could spell investor regret.

Air Products: A Legacy of Record-Breaking Dividends

Scott Levine (Air Products): Air Products is on course to deliver an unprecedented dividend to shareholders in 2024, showcasing its remarkable consistency over decades. For 42 years running, Air Products has consistently upped its dividend, positioning it as a prime choice for income-focused investors seeking reliability.

Not stopping there, Air Products offers a 3% forward yield at a bargain, making it an enticing prospect for both income and value investors.

Owning 750+ production sites and 1,800+ miles of gas pipelines, Air Products remains crucial for several sectors like healthcare, energy, and aerospace, enhancing its resilience against singular industry downturns.

Altogether, its sturdy asset portfolio fortifies its competitive edge, deterring potential disruptions and safeguarding its market position.

In its 42nd year of dividend hikes, Air Products recently elevated its quarterly dividend to $1.77 per share in January, signifying a 9% compound annual growth rate since 2014. This remarkable trajectory underscores the company’s unswerving pledge to reward stakeholders without endangering its financial health, maintaining an average 62.3% payout ratio over a decade.

Traded at 13.5 times operating cash flow, below its five-year cash flow average of 17.4, Air Products presents an opportune moment for investors to tap into this premium dividend stock.

MSC Industrial Direct: Charting a Path to Record Dividends

Lee Samaha (MSC Industrial): Despite facing headwinds in the first quarter of 2024 due to unforeseen market conditions, MSC Industrial Direct anticipates a challenging yet transformative year with potential tailwinds on the horizon.

Specializing in metalworking products and services, MSC Industrial’s fate is entwined with the manufacturing sector’s performance, heavily influenced by industrial activity fluctuations and the broader economy.

Although current conditions bear signs of softening, an imminent economic upturn and a resurgence in U.S. manufacturing amid interest rate adjustments could pave the way for recovery.

Furthermore, MSC Industrial bolsters its earning quality by expanding its vending machine network and leveraging customer site sales, providing a beacon of hope for improved performance. Investors can bask in a reliable dividend yielding 3.3% while awaiting the sectoral resurgence bound to uplift MSC Industrial.

While short-term uncertainties loom, MSC Industrial harbors a promising future aligning with the U.S. manufacturing sector’s upward trajectory.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, serves on The Motley Fool’s board of directors. Daniel Foelber, Lee Samaha, and Scott Levine hold no positions in the mentioned stocks. The Motley Fool is long on Amazon, Apple, MSC Industrial Direct, Microsoft, and Nvidia. Additionally, The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. Detailed disclosure information can be accessed through The Motley Fool’s disclosure policy.

The opinions expressed remain those of the author and do not necessarily align with Nasdaq, Inc.’s perspectives.

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