What are we looking for?
Wearable-tech leaders paying sustainable dividends despite high R&D spending.
The screen
Google’s reported interest in buying Fitbit Inc. sent that stock climbing 40 per cent this week. It’s also drawn attention to the huge potential for investors in wearable tech.
Fitbit makes and sells wearable devices that track users’ fitness, including steps taken and hours slept. That’s just one expanding wearables market, with smart watches tracking blood pressure and glucose levels among the many others now opening up.
Starting with our list of Canadian and U.S. dividend-paying companies, we singled out those directly profiting from wearable technology and managing to pay dividends despite high research spending. (Unfortunately, Google’s parent Alphabet Inc. doesn’t pay dividends.)
We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on eight factors:
- One point for a long-term (at least five years) record of dividends – two points for more than five years of continual payments;
- Two points if it has raised the payment in the past five years;
- One point for management’s public commitment to dividends;
- One point for operating in non-cyclical industries, which move up and down with the economy. Sharply lower earnings could prompt a company to cut its dividend to conserve cash;
- One point for limited exposure to foreign currency exchange rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
- One point if the company is an industry leader.
Companies with 10 to 12 points have the most-secure dividends, or the highest sustainability rating. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six companies: Microsoft Corp.'s range of fitness wearables includes the Microsoft Band. Apple Watches from Apple Inc. include models approved by the U.S. Food and Drug Administration and Health Canada that can perform electrocardiograms. Medtronic PLC’s deals with both Fitbit and Garmin Ltd. transfer their wearables data to doctors. Nike Inc. heavily invests in wearable tech aimed at athletes. Garmin keeps innovating in the GPS segment with its array of wrist-worn devices. ResMed Inc.’s CPAP sleep apnea devices wirelessly collect user data.
We advise investors to do additional research on any investments we identify below.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.