Companies often begin paying large dividends when their growth starts to level off. Few high-growth companies pay large dividends, but there are a handful of companies that have been rewarding investors with both impressive growth and a juicy dividend in recent years.
Several of these companies are growing revenue via acquisitions, but some of them are still finding ways to grow organically.
Here are eight stocks the Morningstar analyst team recommends that have generated at least 15% average annual revenue growth over the past three years and pay at least 3% dividend yields.
British American Tobacco
Despite an extremely challenging environment for tobacco companies, British American Tobacco reported three consecutive years of double-digit revenue growth from 2016 to 2018. Vaping and cannabis had seemingly breathed new life into the tobacco industry, but recent backlash on vaping once again puts tobacco companies at the mercy of regulators. Analyst Philip Gorham says traditional tobacco products will continue to drive tobacco industry profits for the next decade while regulations are sorted out. In the meantime, British American shares pay a 7.2% dividend. Morningstar has a “buy” rating and $59 fair value estimate for BTI stock.
KeyCorp is a large U.S. regional bank that owns 1,300 branches across 16 states. Analyst Eric Compton says KeyCorp has struggled to reach previous peak levels of profitability given Federal Reserve interest rate cuts, but it has de-risked its business by reducing exposure to commercial real estate. KeyCorp’s 2016 buyout of First Niagara has helped drive earnings growth in the past three years. KeyCorp pays a 4.1% dividend with just a 40.1% payout ratio. Morningstar has a “buy” rating and $21 fair value estimate for KEY stock.
MPLX is a crude oil transportation master limited partnership based in Ohio. Analyst Stephen Ellis says MPLX has completely restructured its business in recent years, including the acquisition of $12 billion in assets in 2017 and a buyout of Andeavor Logistics that closed in late July. Ellis says he has been impressed with management’s execution, and the MLP pays an impressive 9.6% dividend. MPLX’s asset purchases drove annual revenue growth of at least 44% in each of the past three years. Morningstar has a “buy” rating and $39.50 fair value estimate for MPLX stock.
Nokia is a global telecommunication hardware, software, and services company headquartered in Finland. Nokia’s revenue growth over the past three years is driven almost entirely by its $17 billion 2016 merger with Alcatel-Lucent, which boosted revenue by nearly 90%. Analyst Mark Cash says 5G network build-outs will be the next potential revenue growth source for Nokia. Network, software and technology divisions all contributed to a revenue beat last quarter, and Nokia shares pay a 4.4% dividend. Morningstar has a “buy” rating and $7.80 fair value estimate for NOK stock.
Regency Centers Corp.
Regency is the largest U.S. shopping center real estate investment trust, owning and operating 421 total properties. While most retail REITs are facing stiff e-commerce headwinds, analyst Kevin Brown says Regency’s high-quality portfolio is relatively insulated given its exposure to grocery stores, restaurants, fitness centers and other service-oriented businesses. The grocery properties are especially impressive and drive much higher sales per square foot than the national average. Regency pays a 3.3% dividend and grew revenue by 13.9% in 2018. Morningstar has a “buy” rating and $75 fair value estimate for REG stock.
Molson Coors Brewing Co.
Molson Coors is one of the world’s largest brewers, capturing more than 3% of the world’s beer market and paying a 3.9% dividend. Analyst Jaime Katz says an explosion of new craft beers and breweries will likely continue to pressure Molson Coors, but the 2016 merger of MillerCoors and Molson Coors will ultimately create $200 million in annualized cost synergies. That $12 billion mega-merger is responsible for much of the company’s revenue growth in the past three years. Morningstar has a “buy” rating and $66 fair value estimate for TAP stock.
Viper Energy Partners
Viper is a U.S. MLP specializing in the acquisition of oil and gas property mineral rights. Viper generates royalties from its properties without having to invest capital in drilling expenses. Ellis says Viper’s recent $150 million acquisition of Santa Elena Minerals is a smart play given nearly two-thirds of the acquired acreage is operated by Diamondback Energy. Ellis says Diamondback and Viper’s financial relationship means Diamondback will prioritize drilling on the Santa Elena land. Viper pays a 6.7% dividend. Morningstar has a “buy” rating and $36 far value estimate for VNOM stock.
Wynn is a casino operator primarily focused on the Las Vegas and Macau, China markets. Wynn derived about 70% of its total revenue from Macau in the second quarter. Trade war uncertainty has weighed on Wynn stock, but analyst Dan Wasiolek says trade war headwinds are transitory, and the high-end Macau market will ultimately recover. Wynn revenue jumped 41% in 2017 after opening its new Macau property, and its Encore Boston Harbor property just opened in June. Morningstar has a “buy” rating and $164 fair value estimate for WYNN stock.