Investors Can Sleep on These 3 Dividend Stocks

Investors Can Sleep on These 3 Dividend Stocks

In a time of economic uncertainty, there is something to be said about low-risk dividend stocks. Companies whose fortunes aren’t directly tied to economic health and that pay a reliable dividend can be a comforting investment to those that aren’t keen on taking on a lot of risk.

Here we highlight three stocks that offer a steady dividend and some peace of mind as the economic recovery unfolds. They aren’t likely to make you rich anytime soon, but they will make for some more restful nights ahead

Is Coca-Cola Still a Buy-and-Hold Stock?

If Coca-Cola (NYSE:KO) is a refreshing investment for value legend Warren Buffet, it should be good enough for the rest of us. Regardless of the economic backdrop, there will always be consumer demand for sodas, juices, teas, and other beverages.

With this said, restrictions on large gatherings during the pandemic have impacted Coke’s recent financial performances and brought more volatility than usual to the stock. However, with the worst likely over, the company appears to be on the path back to more normalized sales patterns. As family picnics and outdoor concerts gradually return along with restaurant traffic, Coke should start to see higher volumes based on group size rather than stockpiling.

Despite recording 11% lower revenue in 2020, Coke kept its dividend hike streak going serving up a $1.64 payout to loyal shareholders. The 2.4% dividend increase made it 59 straight years of higher dividends.

In the near-term Coke is a conservative way to play the economic reopening theme. Its beverage portfolio is more in tune with health and wellness trends with brands like Vitaminwater, PowerAde, and Minute Maid. As activities like youth sports and amusement park attendance normalize, Coke’s performance should improve.

Longer-term Coke’s rising dividend and defensive nature make it the classic buy and hold stock. So, investors can simply opt to have what Warren’s drinking.

What is a Good Non-Cyclical Dividend Stock?

Speaking of defensive stocks, Unilever (NYSE:UL) is about as non-cyclical as its gets. The U.K.-based consumer products giant is the company behind many of our favorite personal care and food items. Dove soap, Axe body spray, Q-tips, and Vaseline are all Unilever brands. So too are popular indulgences like Ben & Jerry’s ice cream, Lipton iced teas (and soups), Hellmann’s mayonnaise, and even the beloved Popsicle brand.

Unilever is definitely, a mature, low growth business, but sometimes slow and steady wins the race. After rising 9% and 6% in 2019 and 2020, respectively, the low volatility stock is down approximately 8% this year offering investors a good chance to stock up.

Although the elevated demand for Unilever’s food products has waned in recent quarters, it’s pretty much a sure bet that people will still be scooping up their go-to items as shopping patterns normalize. And as usual, this should lead to some solid profits for Unilever and sizeable dividends for shareholders.

Unilever has one of the strongest balance sheets in its peer group that supports an ability to pursue growth opportunities such as product expansion and establishing a greater presence in developing markets. The ADR currently has a 3.4% trailing dividend yield which about twice the average dividend yield of the consumer staples sector. This is an easy stock to throw in the cart as a core long-term holding.

Is it a Good Time to Buy 3M Stock?

3M (NYSE:MMM) has been one of the least volatile U.S. large cap stocks over the last ten years. Although it’s not a consumer defensive company, it’s highly diversified end markets generate some reliable financial results. With broad exposure to the automotive, aerospace, transportation, electronics, and health care industries as well as the consumer space, a downturn in one segment can be easily offset by strength in another.

The company has had some choppy performances in recent quarters. Some of it has related to the pandemic and some has not. Demand for home improvement, cleaning, food safety, and personal safety products has been strong. On the other hand, COVID-19 restrictions have forced the automotive, industrial, office supplies, and oral care businesses to re-evaluate how to adjust to the post pandemic economy.

Fresh off a corporate restructuring, though, 3M looks to be in a good position to capitalize on improving conditions in its key markets and achieve its earnings growth goal. Management is aiming to reduce annual operating expenses by at least $250 million. Based on the initial progress, this looks feasible and should drive higher margins and steady single digit growth over the long-term.

3M consistently rakes in some $30 billion in revenue each year and even in slow or no growth years it rewards shareholders with a higher dividend. In fact, 3M has gone toe to toe with Coca-Cola in raising its annual dividend in each of the last 59 years. The Dow Jones index mainstay has a 3.1% dividend yield and at 23x earnings is trading at the lower end of its historical valuation range. It deserves to be a mainstay in any long-term investment portfolio.

By: MarketBeat

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Top Dividend Stocks for January 2021

Dividend stocks are companies that pay out a portion of their earnings to a class of shareholders on a regular basis. These companies usually are well established, with stable earnings and a long track record of distributing some of those earnings back to shareholders. These distributions are known as dividends, and may be paid out in the form of cash or as additional stock. Most dividends are paid out on a quarterly basis, but some are paid out monthly, annually, or even once in the form of a special dividend.

While dividend stocks are known for the regularity of their dividend payments, in difficult economic times even those dividends may be cut in order to preserve cash. One useful measure for investors to gauge the sustainability of a company’s dividend payments is the dividend payout ratio. The ratio is a measure of total dividends divided by net income, which tells investors how much of the company’s net income is being returned to shareholders in the form of dividends versus how much the company is retaining to invest in further growth.

If the ratio exceeds 100% or is negative (meaning net income is negative), this indicates the company may be borrowing to pay dividends. In these two cases, the dividends are at a relatively greater risk of being cut.

You may like this: Financial Ratios

Below, we look at the top 5 dividend stocks in the Russell 1000 by forward dividend yield, excluding companies with payout ratios that are either negative or in excess of 100%. Each of the dividend stocks listed below significantly underperformed the Russell 1000’s total return over the past 12 months of 19.7%, as of December 21, 2020.1 All data below is as of December 22, 2020.

Lumen Technologies Inc. (LUMN)

  • Forward Dividend Yield: 10.08%
  • Payout Ratio: 86.56%
  • Price: $9.92
  • Market Cap: $10.9 billion
  • 1-Year Total Return: -17.7%1

Lumen Technologies, formerly known as CenturyLink, is an integrated communications company that offers services including local and long-distance voice, broadband, Ethernet, colocation, hosting, data integration, video, network, information technology, and more.

Brookfield Property REIT Inc. (BPYU)

  • Forward Dividend Yield: 8.86%
  • Payout Ratio: 63.63%
  • Price: $15.01
  • Market Cap: $587.3 million
  • 1-Year Total Return: -10.0%1

Brookfield Property is a real estate investment trust (REIT) that owns, develops, builds, manages, and leases various commercial properties. Among the company’s portfolio of properties are restaurants, malls, entertainment facilities, and parking areas. On November 6, the board of directors declared a quarterly dividend of $0.3325 per share on its Class A Stock payable on December 31, 2020, and a quarterly dividend on the 6.375% Series A Cumulative Redeemable Preferred Stock of $0.39844 per share payable on January 1, 2021.2

New York Community Bancorp Inc. (NYCB)

  • Forward Dividend Yield: 6.65%
  • Payout Ratio: 82.59%
  • Price: $10.22
  • Market Cap: $4.7 billion
  • 1-Year Total Return: -8.3%1

New York Community Bancorp is a holding company with multiple banking subsidiaries, including Queens County Savings Bank, Roosevelt Savings Bank, Atlantic Bank, and others. Through these subsidiaries, New York Community Bancorp offers a full range of banking products and services to businesses and consumers. The company primarily serves customers in the New York City metropolitan area.

Brandywine Realty Trust (BDN)

  • Forward Dividend Yield: 6.50%
  • Payout Ratio: 43.84%
  • Price: $11.69
  • Market Cap: $2.0 billion
  • 1-Year Total Return: -20.2%1

Brandywine Realty Trust is a REIT that owns, manages, leases, acquires, and develops urban, downtown, and suburban office properties primarily on the East Coast and in Texas. Its services include asset management, development and construction, investment, marketing and leasing, and property management. On December 8, the board declared a quarterly cash dividend of $0.19 per common share and OP Unit payable on January 20, 2021. The quarterly dividend is equivalent to an annual rate of $0.76 per share.3 

TFS Financial Corp. (TFSL)

  • Forward Dividend Yield: 6.41%
  • Payout Ratio: 66.57%
  • Price: $17.47
  • Market Cap: $4.9 billion
  • 1-Year Total Return: -6.8%1

TFS Financial is a holding company engaged in retail consumer banking, mortgage lending, and similar services through its subsidiaries. The company’s businesses include originating and servicing residential real estate mortgage loans and attracting retail deposits. Its main business is retail consumer banking.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors.

Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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Top 10 Dividend Stocks – January 2021! In this video I show the top 10 stocks in January of 2021 that the thousands of dividend investors on my discord server (https://discord.gg/kkSr5FY) had the opportunity to vote for that they were buying or planning to buy. Then I’ll end this video with a powerful life story that is worth hearing and reflecting on, so I recommend you watch this entire video. Referral Link to M1 ➜ https://m1.finance/AUzJllYh-gGh To get access to my Spreadsheet 2.0 then please sign up as a Patreon Aristocrat or King (and double check my Patreon site to ensure I’m still offering access, as I only have limited seats available). You also get other perks for signing up including the ability to watch my videos on my Discord before I release them to the public, and the ability to vote on what thumbnail I’ll use in some of my future videos, and you gain direct access to me.

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How Determining the Dividend Rate Pays off for Investors The dividend is the percentage of a security’s price paid out as dividend income to investors. more

Special Dividend A special dividend is a non-recurring distribution of company assets, usually in the form of cash, to shareholders. more

Dividend Yield Definition The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. more

Dividend Payout Ratio Definition The dividend payout ratio is the measure of dividends paid out to shareholders relative to the company’s net income. more

Dividend Clientele Dividend clientele refers to a group of shareholders that have a common preference for a company’s dividend policy. more

Dividend Definition A dividend is the distribution of some of a company’s earnings to a class of its shareholders, as determined by the company’s board of directors. more

Guide To Dividend Funds For Retirees: 36 Best Buys

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You could live off dividends. Although stocks on average yield only 1.7%, it is quite feasible to assemble a collection of blue chips that are paying out 3% of their purchase price. That means a $1 million pot could produce $2,500 of monthly income, with reasonable prospects for seeing that income keep up with inflation over the next several decades.

You could do this yourself, buying a lot of dividend-rich stocks on your own. Or you could have the work done for you by owning a fund. This guide will steer you to 36 excellent choices—8 open-end funds and 28 exchange-traded ones—that yield 3% or better.

These funds are cost-efficient. The open-end (that is, traditional mutual) funds on this list are no-loads running up expenses no higher than 0.25% of assets annually. The ETFs cost no more than 0.15% annually.

Example: the iShares Core High Dividend ETF, whose $5.6 billion is invested in AT&T T +0.9%, Exxon Mobil XOM -0.6% and 73 other stocks. Expenses are a very reasonable 0.08%, or $8 annually per $10,000 invested.

Pay attention to expense ratios. If you are not careful, you can send a lot of money down a drainhole. This principle will be illustrated below.

Here are the winning funds:

By historical standards, a 3% yield from stocks isn’t terrific; the average payout rate over the past century is considerably higher. But you take what you can get. For a retiree aiming to live off a portfolio without eating it away, blue chips are a lot more plausible than bonds these days. U.S. Treasuries due in 2040 yield only 1%, and they are guaranteed to fail at keeping up with the cost of living.

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Stocks, unlike those Treasuries, are risky. They periodically crash. You can perhaps withstand that uncertainty. You could put some of your money in low-yielding bonds and plan on selling bonds, not stocks, if and when you need extra spending money during a bear market.

There’s more to reflect on than the risk. Here are five other things to think about before making a big commitment to high-dividend stocks as a source of retirement income.

1. You’re making a trade-off. Growth and yield are two different ways to get a total return. More of one means less of the other.

You can choose the mix. Young savers might prefer growth, owning companies like Netflix NFLX 0.0% and Amazon AMZN -0.7%, which pay out nothing but are fast-growing. Retirees might prefer AT&T and Exxon, which pay rich dividends but are on a plateau.

The average stock falls between these extremes. The Vanguard Total Stock Market index fund yields 1.7% and owns companies that collectively grow at a moderate pace, faster than Exxon but slower than Amazon.

It is delusional to think that you can have high yields without sacrificing growth. If stocks yielding 3% had as much growth as the average stock, then their total return would be 1.3% higher than the total return on the market. And if that were true, we could all become arbitrage billionaires by owning the high yielders while shorting the market. This is not going to happen.

Accept the reality. To get a high yield, you have to give something up.

2. Dividends aren’t the only way to draw income. If you need to spend 3% of your portfolio every year, you are not compelled to buy stocks like AT&T. There’s a second method to obtaining cash. You could invest in stocks with lower dividends and sell some shares periodically.

You could, for example, buy that Vanguard fund covering the whole market (its ticker is VTI), pocket the 1.7% in dividends, and then supplement the income with the sale every year of 1.3% of your fund shares.

Go with the high-dividend funds if you prefer. There is something appealing in that arrangement to people who were trained by the grandparents to never “dip into capital.”

The truth, though, is that the sustainability of your capital is not determined by its current yield, or by the number of shares you sell off. It is instead determined by your total return. Don’t assume that your capital will last any longer with a high-dividend fund than it would with VTI.

3. You can wind up with a lopsided portfolio. Aim for the very highest yields and you’ll probably have an overdose of oil companies, real estate investment trusts and European stocks. These might do very well for the next decade, but they might do horribly. Pay attention to diversification. In selecting from the high-yield list, don’t overdo the sector and global funds.

4. There will be cuts. Derivatives speculators in Chicago are betting that the dividend on the S&P 500 index will fall from $58 in 2019 to $56 in 2020 and $51 in 2021 before beginning a slow recovery. Allow for this. The yields you see in the table sare for a trailing 12-month interval. They somewhat overstate what you’re likely to collect in the near future.

Cuts are especially likely among the energy funds with double-digit yields.

5. Costs matter. The funds on our Best Buy list are cost-efficient. A lot of what brokers sell is not.

Paying more costs than you have to can do serious damage. An incremental percentage point of cost compounds, over 30 years, to a 26% slice out of a static account (one without contributions or withdrawals).

Some investors are incapable of conceptualizing this. To illustrate, I will cite one curious fund that is much sought after by yield seekers: Gabelli Equity Trust.

This closed-end uses borrowed money to buy more stocks, which means that it should have outsized returns in bull markets and very bad results in bear markets. How has it done? Not well. Despite the leverage, it hasn’t kept up with the bull market over the past decade.

Given that disappointment and the fund’s savage 1.3% expense ratio, you’d expect that shares would trade at a hefty discount to the portfolio value. Instead, they trade at a 3% premium.

What is the appeal of this fund? It pays an enormous dividend, equal to 12.6% of the portfolio annually. Evidently the buyers haven’t been informed about the fund’s lagging total return. They are gullible enough to think that it’s easier to retire on a fund with a high payout.

It’s okay to seek dividends. It isn’t okay to be naive.

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I aim to help you save on taxes and money management costs. I graduated from Harvard in 1973, have been a journalist for 45 years, and was editor of Forbes magazine from 1999 to 2010. Tax law is a frequent subject in my articles. I have been an Enrolled Agent since 1979. Email me at williambaldwinfinance — at — gmail — dot — com.

Source: https://www.forbes.com

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