10 "Autopay" Dividend Stock Picks to Subscribe To
A common element shared by many great dividend stocks that raise their payouts through good times and bad: a low-risk business model that drives recurring revenues. Some of the market's most consistent stock picks have subscription-based models, or razor-razorblade models that generate repeat sales of consumables.
Gillette, now part of Procter & Gamble (PG), pioneered the razor-razorblade model as a way to build recurring sales it could count on and plan around. But it wasn't alone. Printer manufacturers HP Inc. (HPQ) and Seiko Epson (SEKEF) used a similar approach, selling inkjet printers with replaceable ink cartridges. Keurig, now part of Keurig Dr. Pepper (KDP), rose to fame by selling Keurig machine that brewed single-serve K-Cup pods. More recently, tech companies have discovered the benefits of putting customers on subscription models and setting them to "autopay," leveraging cloud-based services to generate recurring fees.
In a CFO Research/Salesforce survey of senior finance executives, more than half of respondents said 40% or more of their company's revenues were subscription- or usage-based. And why not? Profits become more predictable. Customer turnover is reduced because of high switching costs. You can also achieve greater operating efficiency thanks to more predictable demand. Recurring sales also often deliver higher margins, enhancing the bottom line. And finally, many investors prefer less risk, and can be enticed to giving higher valuations to companies with more predictable financial results.
Just ask Adobe Systems (ADBE), which launched its Creative Cloud in April 2012. Revenues have spiked from $4.4 billion in 2012 to $9.0 billion last year. The stock has shot up 700% since then - a performance six times greater than the S&P 500.
What other companies are harnessing recurring revenues? Here are 10 "autopay" dividend stock picks to subscribe
