Most investors are seeking outperformance when buying stocks. One of the most popular measures of investment outperformance is alpha. Put simply, alpha is a financial metric that compares the performance of a given investment, with a suitable index for that investment.

Investors looking to outperform over the long run should take a closer look at high alpha stocks.

Alpha is one of several performance measures that are commonly used to evaluate an investment security or portfolio. The following 3 stocks have high alpha scores, and pay dividends to shareholders.

Autoliv, Inc. (ALV)

Autoliv is a global manufacturer of airbags, seatbelts, and steering wheels for automobile manufacturers all over the globe. The company is the industry leader in a critical and growing segment of the automobile manufacturing process.

Autoliv posted fourth quarter and full-year earnings on January 31st, 2025, and results were mixed. The company saw adjusted earnings-per-share of $3.05, which was 16 cents per share ahead of expectations. Revenue was off 5% year-over-year to $2.62 billion, missing estimates by $90 million.

The company noted a record high for operating profit, operating margin, and earnings despite the fact that sales declined 5% year-over-year due to currency translation and sales mix.

Adjusted operating margin was 13.4% of revenue, which was aided by strict cost controls and labor productivity gains. Headcount declined 9% year-over-year on fewer direct production personnel. Gross margin was 21% of revenue, up 180 basis points year-over-year.

The company has $480 million remaining on its share repurchase program heading into 2025. In Q4, $102 million was spent on repurchases.

Autoliv’s earnings-per-share has been volatile in the past decade, and the overall trajectory has been flat. The company struggled during the Great Recession given its exposure to the automobile market, which of course declined significantly as a result of the economic downturn. However, the recovery was swift and strong. 

We’re estimating long-term earnings growth of 14% annually from this year’s base, which is higher than prior estimates. We like the company’s margin expansion and buyback program to power earnings-per-share. Autoliv is performing well against benchmarks over the long term. Light vehicle production is generally back to normalized levels, but there was a sizable decline in late-2021 due to supply constraints globally, and there are signs of continued volatility.

ALV has increased its dividend for 5 years and the stock currently yields 3.1%.

ASML Holding N.V. (ASML)

ASML Holding is one of the largest manufacturers of chip-making equipment in the world. The company’s customers include a wide variety of industries, and ASML is present in 16 countries with about 31,000 employees.

ASML has a current market capitalization of ~$275 billion and produces more than $30 billion in annual revenue.

ASML posted fourth quarter and full-year results on January 29th, 2025, and results were strong once again. The company noted revenue was 28% higher year-on-year to $9.6 billion, and beat estimates by more than $200 million.

Earnings-per-share came to $7.10, which beat estimates by 12 cents. Quarterly net booking were $7.4 billion, of which $3.1 billion was EUV.

China accounted for total net system sales of 27%, while the US was still the largest segment at 28%. It is unclear as of yet how export controls may play a part in this going forward.

For this year, guidance was initiated with a very wide range of ~$31 billion to ~$36 billion in sales, with gross margins expected to be 51% to 53% of revenue. Q1 gross margins are expected to be 52% to 53%, implying the possibility of deterioration for the remaining three quarters.

ASML’s earnings growth has been nothing short of outstanding. The company saw its earnings-per-share grow at a rate of 25% annually from 2016 to 2018, but 2019 saw a deviation from that trend. That sort of growth is very difficult to come by in any industry, and ASML’s share price has appreciated accordingly.

We see 18% growth annually in the coming years as ASML continues to take advantage of favorable macro trends, and the pause in earnings growth for 2024 makes ASML’s base from which to grow more sustainable. We see a return to outstanding earnings growth starting in 2025. We see continued revenue growth as the primary driver of future returns. ASML is the only source of Extreme Ultraviolet, or EUV, lithography machines, which allows customers to produce ever-smaller integrated circuits. 

In a sense, ASML has what amounts to a monopoly on a very lucrative segment of the semiconductor industry. This should help drive low double digit or better revenue gains in the years to come, on average.

ASML yields approximately 0.7%.

Stepan Co. (SCL)

Stepan Co. was founded in 1932 and at the outset, it sold only one product: a chemical to keep dust down on Illinois’ country roads. Since that time, it has grown to manufacture basic and intermediate chemicals, with surfactants making up most of its revenue. It should do about $2.3 billion in revenue this year. 

Stepan is also a Dividend King, having increased its payout for 57 consecutive years. 

The company posted fourth quarter and full-year earnings on February 19th, 2025. Revenue was down 1.2% year-on-year to $526 million, but did beat estimates by almost $5 million. Adjusted earnings-per-share came to 12 cents. Global sales volume was off 1% year-over-year as double-digit growth in surfactants was offset and then some by demand weakness in polymers. Surfactants were up 3% year-over-year in Q4 to $379 million. 

Cash from operations came to $68 million during the quarter, while free cash flow was $32 million. EBITDA for the year was $187 million on an adjusted basis.

The company’s competitive advantage is in its diverse, global customer base and many decades of engineering experience. Stepan’s competitors cannot easily supplant its position with existing customers given the often-custom nature of what Stepan engineers for them.

Stepan’s payout ratio is about 43% of earnings, which indicates a secure dividend payout.

Disclosure: No positions in any stocks mentioned