Summer in America brings long days with beach vacations, barbecues and travel for many families. Americans often spend more on discretionary items during these three months.
As a result, it’s a good time to add stocks of companies that benefit from the summer months to your portfolio. For instance, airlines and hotels are often busier from June to August because families take long vacations. Summer is also a time for outdoor hobbies, gardening, sitting by the pool and home renovations.
Although these stocks are seasonal picks, they often perform well over the long term, creating value and rising passive income streams. Many of these companies understand dividends matter to investors and increase them annually. Below are four summer dividend stocks to consider.
Home Depot (HD)
Home Depot (NYSE:HD) is the largest home improvement retailer in the United States. The company owned and operated 2,324 U.S., Canadian and Mexican stores at the end of Q1 2023. It is the leader in selling hardware, building material, lawn and garden products, décor, grills, and home improvement products. Total sales exceeded $157 billion in fiscal 2022 and $155 billion in the last 12 months.
The firm operates in an oligopoly with its main competitor, Lowe’s (NYSE:LOW). Combined, the two companies control a large part of the home improvement market. Home Depot grows by selling more items in its enormous stores and adding to the total store count. Consumers and businesses continue to renovate and remodel existing housing stock. Moreover, the number of homes and condominiums rises with increasing population. That said, Home Depot’s sales are sensitive to rising interest and mortgage rates, which cause lower home sales.
Home Depot is solidly profitable with excellent free cash flow. This fact has allowed the company to buy back shares and pay a growing dividend. The firm is a Dividend Contender with a 14-year streak. The forward dividend yield is 2.77%, more than the five-year average of 2.35%. The company has increased the dividend at a double-digit rate for the past decade. But the moderate payout ratio of ~46% gives confidence about future growth and dividend safety. In addition, Home Depot earns a dividend quality grade of B+.
The company is trading at the lower end of its five-year price-to-earnings (P/E) range because investors are worried about high mortgage rates affecting sales. Hence, it may be an opportune time to buy shares.
Dick’s Sporting Goods (DKS)
Dick’s Sporting Goods (NYSE:DKS) benefits from the summer months. Although the retailer sells items for all sports, it gains from increased consumer activity outdoors during the summer. The retailer operates 863 stores in 47 states. Besides the Dick’s Sporting Goods concept, the firm also owns Golf Galaxy, Moosejaw, Public Lands, Going Going Gone, Top Score and GameChanger. Dick’s Sporting Goods has an 8% market share, making it the leading retailer in its category.
Total sales were over $12.368 million in fiscal 2022 and $12.5 million in the last 12 months. Volumes and revenue increase organically by selling more items and adding to the total store count. The firm sells national brands like Nike, Yeti, Peloton, Wilson and so on. In addition, Dick’s is growing its more profitable private label offerings.
Dick’s Sporting Goods is a Dividend Challenger with a nine-year streak of increases. The scale has allowed the company to increase the payout by almost 25% compound annual growth rate (CAGR) in the trailing five years. Dividend safety is excellent, too, with a low payout ratio of around 16%, reasonable leverage and a B+ dividend safety score.
Retailers have generally struggled as the pandemic waned, and Dick’s Sporting Goods is no exception. But the P/E ratio has fallen to ~10x, a reasonable value. Investors may want to dip into this stock.
Marriott International (MAR)
Marriott International (NASDAQ:MAR) is the largest hotel chain in America and globally. The firm operates thousands of hotel properties in 138 countries. The firm’s brand names include Marriott, St. Regis, W Hotels, Ritz-Carlton, Renaissance, Sheraton, Westin, Four Points, Fairfield and so on.
After the decline during the Covid-19 pandemic, revenue has rebounded above 2019 levels. Total revenue was $5.356 million in 2022 and $6.772 million in the trailing 12 months.
As the largest hotel operator, Marriott has the advantage of scale. Consequently, it is growing faster than its peers. Future expansion will come from adding more brands, building more hotels, and managing or franchising additional properties for owners. In addition, Marriott has the most extensive loyalty program, which drives repeat hotel stays.
Marriott International struggled during the Covid-19 pandemic, and the event triggered a dividend suspension. But before that, the firm was a Dividend Contender. The hotel operator reinstated the dividend in 2022 at an annual rate of $1 per share. The minimal payout ratio of approximately 15% suggests more future dividend increases.
The stock is trading at a P/E ratio of ~21x. But burgeoning travel around the world means revenue and profits will probably increase this year. Retail investors should take a look at this stock.
Pool (POOL)
The last stock on our list is Pool Corporation (NASDAQ:POOL), the distributor of pool supplies and related equipment. The company sells chemicals, filters, pumps, lights and parts for building and maintaining pools. It also sells grills, hot tubs, irrigation and outdoor kitchen items.
The firm obviously does better during the summer months when pools are open for the season. The firm has proliferated since it was incorporated in 1993. Total revenue was about $6.18 million in 2022 and $5.973 million in the past 12 months.
Selling pool-related supplies and equipment is profitable and not capital-intensive. As a result, Pool Corporation is returning cash to shareholders. The firm is a Dividend Contender with 13 years of dividend growth. The forward yield is about 1.2%, more than the five-year average. The payout ratio is also low at 21%, combined with an A+ dividend quality grade.
Pool Corporation’s stock price is down from its all-time and 52-week high. The stock typically trades at a premium, but the forward earnings multiple is now below the five-year and 10-year ranges. Hence, we view this stock as a buy now.
On the date of publication, Prakash Kolli held a LONG position in HD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
