My Top Dividend Stock To Buy In June
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My top dividend stock to buy in June is a very under-the-radar company. Chances are, you’ve probably never heard of it before, but you’ve undoubtedly used products that rely on this business and its technology.
The company I’m talking about is Universal Display Corporation (OLED). You can check out some of my other top stocks to buy here.
Universal Display is a behind-the-scenes company that develops and licenses the technology used in OLED displays, which stands for Organic Light-Emitting Diodes. These are the high-end screens found in many smartphones, TVs, tablets, laptops, smartwatches, and other electronic devices.
So, in a nutshell, when you buy an iPhone or a Samsung Galaxy, there’s a good chance the display inside is using technology that Universal Display helped create.
With that said, the company makes money in two ways. First, it licenses its patented OLED technology to manufacturers and collects royalty revenue on products that use it. Second, it sells the specialized materials that are used inside OLED screens.
Source: Fiscal.AI
Despite being such an important business in today’s high-tech world, Universal Display’s share price has been taking a beating. While much of the tech sector has been on an absolute rampage lately, OLED is down more almost 25% year-to-date.
One reason for the recent pullback is the company’s most recent earnings report. Revenue came in at $142 million, which is down quite a bit year-over-year, EPS was down as well, and to add insult to injury, management also lowered its full-year revenue guidance.
From what they said on the earnings call, it seems like the main issue right now is that demand for consumer electronics just isn’t as strong as the company was hoping. Higher costs and supply constraints aren’t helping either.
These factors have been driving the share price down all year long. And when you combine lower sales, reduced guidance, and uncertainty around the consumer environment, it makes sense that the market isn’t too excited about the stock.
Still, screen time is only going up, and OLED technology continues to find its way into more and more products. So while the business may be facing some near-term headwinds, the long-term demand still seems to be intact.
Source: Fiscal.AI
Despite its short term troubles, Universal Display has historically been a very consistent grower, with revenue, earnings per share, and free cash flow all increasing at high-single-digit rates or better over the past decade.
Plus, the company has a net cash position on its balance sheet, which means that it’s holding more cash than debt. So at the very least, Universal Display is not at risk of going bankrupt anytime soon.
Source: Fiscal.AI
As for the dividend, the current yield is sitting at right around 2%. That’s nothing special on the surface, but it is way above the company’s historical average yield, which speaks to just how much the share price has pulled back.
Not to mention, Universal Display has a delectable dividend growth history, delivering consistent double-digit increases over the past decade. And with the payout ratio sitting at only around 40%, there still looks to be plenty of room for future dividend growth.
All in all, I think Universal Display is looking pretty interesting right now. Like I said earlier, screen time is only going up, so I think this is a pretty important business, and now may not be a bad time to give it a closer look.
Universal Display isn’t the only good buying opportunity out there though. There are plenty of other stocks starting to look interesting right now, and I’d love to hear from you: Which discounted stocks do you have your eye on as we jump into June? Write to me here and let me know.
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"What motivated you to start investing in dividend stocks?"
- h1n14lifegaming | YouTube
This is a great question, and when I think back on it, there were a few things about dividend investing that made me gravitate toward it.
First and foremost, as a brand-new investor, the concept of owning a company and having it send you a regular paycheck was very straightforward to me. I could easily wrap my head around that.
Even without any prior investing experience, it felt much more like actual long-term investing and business ownership than trying to chase high-flying returns in stocks like Beyond Meat or Virgin Galactic, which were some of the hot, hyped-up names at the time.
So that passive paycheck component really resonated with me, and so did the idea of the dividend snowball effect. The dividends you receive at the start might not be very substantial, but I understood that this is one of those things that just gets better the longer you do it. If you continue investing and reinvesting your dividends, those paychecks grow larger and larger over time, and there's really no cap on how high they can go.
At 26 years old, I felt like I had enough time on my side to let that process play out. I knew it would take years to build a meaningful stream of dividend income, but I also knew that if I stayed patient and disciplined, time would take care of the rest.
Another thing I really appreciated about dividend investing was the idea that you don't have to sell your stocks down the road to benefit from them. If the companies you own are paying you a growing stream of dividends, you can just live on that in retirement.
Additionally, one of the things I like most about dividend investing is that you're not completely dependent on the share price for your returns. Although dividends are never guaranteed, they're generally much more predictable than share prices, which can swing pretty dramatically for reasons that might have nothing to do with the underlying business.
As long as a company remains financially healthy, the dividend can be maintained and will likely grow over time. Plus, many of the companies paying those dividends were businesses I already knew and understood, like Procter & Gamble, Microsoft, Coca-Cola, and McDonald's. I liked that dividend investing allowed me to take part in the success of these recognizable businesses rather than trying to speculate on some obscure biotech company I knew nothing about.
I could probably talk about this topic for a lot longer, but in a nutshell, dividend investing has always felt more like true business ownership to me than any other approach to the stock market. And as I'm writing this, I'm realizing that many of the reasons I fell in love with dividend investing in the first place are still true today, if not even more true than when I first started.
To me, dividend investing really is the gift that keeps on giving.
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LAST WORD 👋
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