Robinhood stocks have generally been associated with speculative buys or meme trades. That’s not inherently bad — it’s a good idea to set aside some space in your portfolio for speculative plays. Even if only one or two stocks provide multi-fold returns, those gains can positively impact the health of your overall portfolio.
At the same time, it’s important to have exposure to fundamentally strong stocks with a relatively low beta and attractive dividend yield. With market valuations looking stretched in the near-term, it’s a good time to build a portfolio of stocks that pay dividends.
Most of the stocks in this list have dividend growth visibility and can provide stability to the core portfolio. These seven Robinhood stocks are worth holding for the long term:
- Apple (NASDAQ:AAPL)
- Lockheed Martin (NYSE:LMT)
- Rio Tinto (NYSE:RIO)
- Target Corporation (NYSE:TGT)
- Helmerich & Payne (NYSE:HP)
- Enterprise Products Partners (NYSE:EPD)
- Pfizer (NYSE:PFE)
Robinhood Stocks: Apple (AAPL)
AAPL stock currently pays an annualized dividend of 88 cents. Given the company’s business growth and cash flow potential, I believe dividends will consistently increase over the next decade.
For the third quarter of 2021, Apple reported revenue growth of 36% on a year-over-year (YOY) basis to $81.4 billion. In the same period, the company’s earnings per share growth was 102%. The stock looks attractive at a forward price-to-earnings (P/E) ratio of 26.7.
Another reason to like Apple is that its revenues are diversified. iPhones still make up the largest portion of its sales, but growth has been healthy in the wearables and services segment. With aggressive investment in product innovation, it’s likely this trend will sustain across all of its offerings.
Apple’s entry into the electric vehicle (EV) market is also likely to keep investors interested. With strong brand loyalty and recognition, it is likely to make inroads in this sector with high growth potential for the next decade.
From a financial perspective, Apple reported $21 billion in operating cash flow (OCF) for Q3 2021. This would imply an annualized OCF of $84 billion. Therefore, the company has ample financial headroom for share buybacks and higher dividends.
Lockheed Martin (LMT)
Recently, UBS highlighted its top 20 dividend stocks for yields in difficult times. Lockheed Martin was among the names in the list, and that’s not surprising.
LMT stock has an annualized dividend of $10.40 and a current yield of 2.9%. Further, at a forward P/E of 13.4, the stock seems poised for upside from current levels.
Lockheed has a strong order backlog of nearly $142 billion that provides clear revenue visibility. This will likely help deliver strong operating and free cash flows.
For the current year, the company expects operating cash flow of $8.9 billion. Further, for Q2 2021, the company reported free cash flow of $950 million. This would imply an annualized FCF of $4 to $5 billion. Clearly, there is ample financial headroom for dividends and share repurchase.
In terms of order inflow, Switzerland recently selected the company for a $5.5 billion order. With increasing orders from outside the United States, the company is positioned for healthy growth.
It’s worth noting that many North Atlantic Treaty Organization (NATO) allies are still short of their defense spending target. Lockheed Martin is well-positioned to benefit as defense budgets increase in the coming years.
Robinhood Stocks: Rio Tinto (RIO)
Inflation has recently become a growing concern. With artificially low interest rates, it’s likely the rally will sustain for commodities. Additionally, as global GDP growth accelerates, industrial commodity prices will probably remain firm. This is where Rio Tinto comes in.
Currently, RIO stock offers an annualized dividend of $6.85, which translates into an attractive dividend yield of 8.65%. Furthermore, the stock trades at a trailing-12-month P/E of 6.89. Valuation indicates further upside potential for the stock after some consolidation.
Rio Tinto has already been delivering healthy numbers. For the first half of 2021, the company reported EBITDA of $21 billion and free cash flow of $10.2 billion. The company also ended Q2 2021 with a net cash position of $3.1 billion. With healthy cash flows, the company is set to maintain dividends.
It’s important to note that Goldman Sachs recently opined that the iron ore bull market is unlikely to run out of steam. Goldman expects firm prices through 2023 and possibly into 2024. Therefore, it’s a good time to remain invested in RIO stock.
Target Corporation (TGT)
TGT stock has trended higher by more than 88% in the last 12 months. It offers a dividend yield of 1.38%.
The upside for Target stock has been driven by several fundamental factors. In Q1 2021, the company reported comparable sales growth of 22.9%. Even in Q1 2020, the company’s comparable sales growth was 10.8%. This growth acceleration has pushed TGT stock upwards.
Another factor that has supported the stock is the company’s efforts to build an omni-channel sales presence. For Q1 2021, the company’s comparable digital sales surged by 50%. Services such as drive-up, order pick-up and same-day delivery have supported growth in this segment.
Additionally, Target’s EBITDA margin could see a boost from growth in its owned brand sales, which rose 36% on a YOY basis in Q1 2021.
Target reported $1.1 billion in operating cash flows and $7.8 billion in cash and equivalents for the quarter. There is ample financial flexibility for higher investments coupled with potential for dividend growth. As a matter of fact, the company recently increased dividends by 32%.
Robinhood Stocks: Helmerich & Payne (HP)
Global economic growth is accelerating and creating several opportunities in the oil and gas sector. Oil is trading near $70 levels and if prices remain firm, a strong recovery in the onshore and offshore drilling sector is likely.
Helmerich & Payne provides land-based drilling rigs. Its stock has been in consolidation mode for the last six months and offers a dividend yield of 3.6%. With rig utilization increasing, a breakout on the upside seems imminent for HP stock.
In terms of positive business development, the company exited Q1 2021 with 94 active rigs and increased that number to 109 by Q2. The positive trend has sustained and as of Q3 2021, the company reported 121 active rigs.
Since the price of oil is relatively firm, Helmerich & Payne’s number of active rigs is likely to increase. This will have a positive impact on the company’s EBITDA and cash flows.
It’s worth noting that Helmerich & Payne has maintained a strong credit profile even with industry headwinds. As of Q3 2021, the company reported a total liquidity buffer of $1.3 billion.
Enterprise Products Partners (EPD)
EPD stock is another appealing name among Robinhood stocks. Currently, the limited partnership unit offers an annualized cash distribution of $1.80 and dividend yield of 8%.
As an overview, Enterprise Products is a provider of midstream energy services. This includes natural gas and crude oil pipelines. Additionally, the company offers refined product services. It currently has 50,000 miles of pipelines for NGL, crude oil, natural gas and refined products.
The company has $3.1 billion worth of projects under construction. This can ensure sustained growth in cash flows and provides upside visibility in cash distribution per unit. It has reported 22 consecutive years of cash distribution growth.
Furthermore, as of Q2 2021, the partnership reported $5.4 billion in cash and undrawn credit facilities. Therefore, Enterprise Products is fully financed for its current investment plan.
It reported a leverage ratio of 3.24x as of June 2021. I don’t see that as a concern with healthy cash flows from existing assets. Debt servicing is likely to be smooth.
Recently, Enterprise Products acquired an ethylene storage business and trading hub from Nova Chemicals. With a strong balance sheet, acquisitions like this are likely to accelerate growth and upside in cash flows.
Robinhood Stocks: Pfizer (PFE)
After under-performing for few quarters, PFE stock has finally witnessed a breakout on the upside. It seems very likely the upside momentum will sustain. PFE stock still trades at a forward P/E of 11.9 and has a dividend yield of 3.22%.
For Q2 2021, Pfizer reported strong numbers with operational revenue growth of 86%. Excluding the impact of the Covid-19 vaccine, revenue growth was 10%.
The markets were concerned about several of its drugs losing exclusivity and the impact that could have on revenue. However, Pfizer has a strong pipeline of candidates that are likely to offset the loss.
For the current year, it expects to invest $10 billion to $10.5 billion in research and development. The company expects compound annual growth of 6% in revenue through 2025.
It’s also worth mentioning that revenue from Pfizer’s Covid-19 vaccine is likely to remain robust in the coming year. The company will have enhanced manufacturing capacity, and revenue could see upside from booster doses and vaccination of adolescents.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.