Let’s start out by saying we’re HUGE fans of The Motley Fool. Tom and David Gardner believe in taking a long-term outlook on picking good companies and they’ve done very well at it! On December 10, a post written by Sean Williams recommended three stocks with dividend payments that might double in 2016. That’s right – double! If you’re like us, the thought of a dividend payment from a solid company doubling is pretty exciting. When we took a closer look, however, things weren’t quite as exciting as they first seemed.
Sean’s recommendations were Amgen (NASDAQ:AMGN), Littelfuse (NASDAQ:LFUS) and Allegiant Travel (NASDAQ:ALGT). We’re not disagreeing with any of the reasons for his prediction (you can read those for yourself if you like) but, rather, pointing out why these would not be companies we would pick right now. Amgen is currently trading only 13% below the 52 week high so it’s not at a bargain price right now and it’s current dividend of 2% doesn’t meet our minimum of 3%. Littelfuse is also not on sale as its trading very close to it’s 52 week high and with a current dividend of 1% it wouldn’t make our cut even if it did double – which nobody can say for sure that it will – so it’s out. Finally, Allegiant Travel does offer an attractive price right now at 27% below the 52 week high and even boasts middle of the road P/E and EPS of 17.56 and 9.91, respectively. It falls short of the dividend target though by paying only 0.69%. For a strategy that focuses on dividends, that’s an abysmal choice!
So what, exactly, are we trying to say? Simply, just because you read that a company could possibly double its dividend doesn’t mean you should own the stock. Even if a source you trust – like the guys at Motley Fool – recommends it, take some time to do a little thinking of your own. On these three, we pass.