Fran Radano, portfolio manager at Janus Henderson Investors, has selected three US income stocks that you should invest in
At Janus Henderson's North American Income Trust (NAIT), we concentrate on US income stocks that are high-quality franchises that regularly make money and have strict capital-allocation guidelines that emphasize investing in the company to maintain a competitive edge while paying a progressive, covered dividend. If there is more money than this, it can be used for bolt-on mergers and acquisitions or to buy back shares in the event that the stock is moved from long-term fair value evaluations. Since the fund's founding in 2012 (after being converted from the Edinburgh Tracker Trust), the NAIT has a solid track record of increasing revenue reserves and paying a progressive dividend. The portfolio's average dividend is three percent, and its average dividend growth is a compelling six to seven percent.
Our revenue reserves are sufficient to cover payouts for a full year and could be utilized if necessary. But during the 2020 pandemic, there was only one minor dividend reduction, and there hasn't been one since. Although US income stocks may not come to mind for many UK investors, there are a number of them that have attractive and increasing dividends. The US has a track record of outperforming other countries in terms of earnings growth, which frequently translates into higher dividend growth.
How to invest in income stocks in the US.
The technology infrastructure firm Dell (NYSE: DELL) is in a unique position to profit from the upcoming wave of corporate investment in AI applications. It is a favored supplier of AI servers and data-storage technology due to its size, extensive global supply chain, and close ties with clients in both the public and private sectors. Recurring cycles of technology updates will help Dell as businesses transition from testing to deployment. The company's disciplined cost control and transition to higher-value technology infrastructure support growing profitability. Reduced debt and capital gains sustain the yield. We think Dell's valuation falls short of accurately capturing the firm's exposure to AI capital expenditures and the sustainability of demand.
BFIA problems nowadays. Another US income stock that provides a unique blend of steady growth and high-quality earnings is Johnson and Johnson (NYSE: JNJ). It is a focused, innovative pharmaceutical company and a leader in medical technology that should easily generate mid-single-digit revenue growth following the spin-off of its consumer-health division in 2023. Its franchises in oncology, immunology, and cardiovascular treatments are best-in-class, which will sustain cash flows over time, and its diverse drug pipeline lowers risk. The medical technology industry is expanding rapidly, and the company's legal problems appear to be the worst. As a result, investors' trust and assessments are being restored. Johnson & Johnson continues to be a key investment in erratic markets thanks to its solid balance sheet, steady free cash flow, and long history of dividend growth.
One of the world's leading companies in the capital markets is Morgan Stanley (NYSE: MS). After making a strategic shift to wealth and investment management, which produces steady, fee-based revenues, its earnings have become more resilient. While maintaining upside exposure to market appreciation and net asset inflows, these annuity-like income streams offer downside protection. Due to its strong capital position, the company is able to increase dividends and buy back shares. We think that Morgan Stanley's stronger position will result in notable profits linked to sustained expansion in the financial markets.
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