Focus on Dividends

September 10, 2020

11 Top-Rated Utility Stocks to Buy Now

Utility stocks rarely thrill, but they're typically a source of generous income and more even-keeled returns. Consider these 11 picks.

While perhaps not as thrilling as the tech startups that make next-generation consumer electronics or fancy cloud computing tools, utility stocks still play a very important role in any well-rounded investment portfolio.

After all, the most dynamic technologies aren't worth anything if there isn't electricity to power them. In 2020, power is nearly as crucial as food and shelter to consumers – and in a digital economy, it's even more important for businesses.

That adds up to a strong baseline of reliable revenue, regardless of the ups and downs of the unemployment rate or consumer spending. And as a result, many low-risk investors find themselves drawn to utility stocks for the stability as well as the dividends typically paid out by this sector.

If you're interested in utilities for any of these reasons, here are 11 utility stocks that are grabbing the attention of Wall Street analysts recently.

September 8, 2020

10 Blue-Chip Stocks Ideal for Any Investor

The large caps aren’t just safer but they can also provide surprisingly robust upside

Even in the best of circumstances, blue-chip stocks hardly inspire much enthusiastic attention, particularly among younger investors. Sure, they make up core holdings of our retirement funds. But as an individual play, many if not most people are angling for hot growth names, not necessarily industry giants. After all, you’re probably not going to get rich by betting on companies everyone knows about.

That sentiment is multiplied ten-fold during this novel coronavirus pandemic. Initially, virtually everything crashed at the onset of the crisis. But as Wall Street digested the dynamics of the new normal, the usual suspects – as in, the sexy high-fliers – stole most of the limelight. Not too many were excited about gambling on blue-chip stocks.

And that’s largely because electing blue chips is hardly what you call gambling. If you want to have your hundred-bagger potential, you can easily do so with the over-the-counter exchanges. But bear in mind that 90% of startups fail. With such glaringly bad odds, you will soon end up in the poorhouse if you’re not careful.

Immediately, such a high failure rate should change your mind about high-risk growth ventures. Sure, they have potential, but potential doesn’t pay the bills. On the other hand, you can improve your odds of success in the markets by sticking with proven blue-chip stocks to buy. Their days of triple-digit returns may be over, but these stalwarts dominate their industries for a reason.

Best of all, tried-and-true organizations over the long run usually beat the benchmark S&P 500 returns quite handily. And because many of them pay dividends, you can look very smart by just picking household names. Have I changed your mind yet? Here are 10 blue-chip stocks to consider for a new way to approach profitability.

September 7, 2020

Aflac: Buy This Undervalued, Accidently High Yielder

Even after a 64% rally off of its March lows, Aflac still offers a valuation and yield that compare very favorably to its historical averages

Whenever the market has a temper tantrum and decides to sell everything, it often throws out good stocks along with the bad. This can lead to a situation where the dividend yield is considerably higher than usual. This is what investors refer to as an accidently high yielder.

One excellent example of this is Aflac Inc. (NYSE:AFL). Shares of Aflac sold off along with the rest of the market in March as the Covid-19 pandemic spooked the market and resulted in dramatic selloffs in nearly every industry. Shares of Aflac have recovered somewhat from the lows, but the stock sits more than 30% off of the 52-week high.

While making a new 52-week high might not occur for sometime due to the uncertainty that remains in the market, Aflac's current yield is more than 50 basis points above its 10-year average.

This may not sound like much, but the share price would have to increase more than 20% in order for the stock to trade with its 10-year average dividend yield.

Shares of the company also trade below the long-term average. This could be a great opportunity for investors to acquire shares of an undervalued stock offering a higher than usual dividend yield.

September 5, 2020

Home Depot Inc: A Surprisingly Strong Dividend Stock

Up 20% Already…More to Come?

“Home Depot Inc Is Now a Top Pick for Dividend Investors”—that’s the title of an Income Investors article I wrote back in March. In that piece, I explained why Home Depot Inc (NYSE:HD) could be “a solid income opportunity.”

I hope you took advantage of that piece. Even though the U.S. economy took a major hit due to the COVID-19 pandemic—and the stock market had a major sell-off in March—Home Depot’s business has actually been firing on all cylinders. In fact, since that article was published on March 5, HD stock has surged 20.5%.

The best part is, the opportunity might not be over just yet. Although Home Depot stock is now more expensive than when I last wrote about it, its dividend growth potential remains as strong as ever.

You see, Home Depot’s founders started the business back in 1978 with the goal of building home improvement superstores larger than any of the competitors’ facilities. And they’ve indeed accomplished that, as the company is now known for its big-box format stores.

Operating 2,293 stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, Canada, and Mexico, Home Depot Inc is currently one of the largest home improvement retailers in the world.

Of course, being a brick-and-mortar retailer means the company faces two challenges: COVID-19 and ecommerce.

The coronavirus outbreak has turned into a worldwide pandemic; as a result of the lockdowns, sales plunged at numerous retail businesses. At the same time, consumers have been shopping increasingly online, and the rise of ecommerce has led to the decline of many physical retailers.

The good news is that Home Depot, Inc managed to turn those headwinds into catalysts.

September 3, 2020

Automatic Data Processing Could Be an Excellent Long-Term Buy

The company's most recent quarter was negatively impacted by Covid-19, but the stock offers a solid, safe yield

Automatic Data Processing Inc. (NASDAQ:ADP), the largest provider of business outsourcing solutions in the U.S., held up well during its most recent quarter. Given the number of jobs that have been lost over the last quarter to the Covid-19 pandemic, this is a surprising result. At the same time, Automatic Data Processing offers a yield higher than its historical average that is well protected by free cash flow.

Let's look closer at Automatic Data Processing to see why long-term investors should consider buying shares of the company now.

Company background, quarterly highlights and analysis

Automatic Data Processing is composed of two segments: Employer Services, which provides payroll and tax services, and Professional Employer Organization Services, which supplies all-inclusive human resources services to smaller companies. Employer Services account for 70% of revenues, while the PEO services contributed the rest. Automatic Data Processing works with more than 700,000 corporate customers around the country. The company is valued at just under $60 billion as of Tuesday's close.

Automatic Data Processing reported earnings results for the fourth-quarter and full fiscal year 2020 on July 29 (the company's fiscal year ends June 30).

Revenues were down 3% to $3.4 billion, though this was $55 million ahead of what Wall Street analysts had expected. Adjusted earnings per share of $1.14 were flat from the prior year, but 18 cents better than consensus estimates.

For fiscal 2020, revenue improved 3% to $14.6 billion. Organic growth was 4% when adjusted for currency exchange rates. Adjusted earnings per share grew 47 cents, or 8.6%, to $5.92.

September 2, 2020

5 Stable Dividend Stocks to Buy as Fixed Income Vanishes

Bond yields are at all-time lows, but these dividend stocks are stable alternatives

Income in the bond market is rapidly disappearing, and that’s a weird concept to try and wrap your head around.

For decades — centuries, even — investors around the world have bought fixed-income instruments for relatively risk-free income. The concept is simple. You give money to a government or corporate entity who turns around and pays you interest for lending that money to compensate for risk and time.

But this simple concept has been flipped on its head recently. Specifically, the “interest” part of the above fixed-income equation has gone out the window. Consider the following:

-The 10-year Treasury yield is around 0.6%.

-The 30-year Treasury yield has plunged to all-time lows around 1.3%.

In other words, across the world, the income part of the fixed-income equation is rapidly disappearing. Weird, right?

Despite this, U.S. equities are still giving investors income. That is, the S&P 500‘s dividend yield presently hovers just below 2% — significantly above all-time low levels (roughly 1% in 2000) and also on the upper end of where the S&P 500 dividend yield has hovered over the past 20 years.

Big picture, then, while the fixed income market is suffering from disappearing income, some stocks are still paying good income.

The implication? Buy stable dividend stocks that pay more than any other relatively risk-free bond in the world will. As investors grow tired of not even beating inflation by buying a 10-year Treasury note, they will inevitably pile into stocks which: 1) have much higher yields, and 2) have a history of steady and consistent dividend hikes.

Without further ado, let’s take a look at five dividend stocks that fit this description.

September 1, 2020

8 Dividend Aristocrat Stocks to Buy Now

Here are the best dividend stocks to buy in a risky environment

After the big shock in March, many investors are still looking for defensive stocks to buy now. Of course, in the most extreme example, you can elect to go all into cash. However, history has proven that to be the worst thing to do. Instead, this is a good time to consider dividend aristocrats.

First, market uncertainty incentivizes stable dividend stocks to buy now. How so? Passive-income generating companies typically perform better than high-flying growth names during bearish phases.

For one thing, investors can still collect their payouts even if their portfolio isn’t doing too well. Moreover, organizations that have a history of consistent payouts tend to be levered toward secular or otherwise steady industries.

And there’s no better paragon of stability than dividend aristocrats. For those who are unfamiliar with the term, dividend aristocrats have three main requirements: they must be equities traded in the S&P 500, have 25 years-plus of dividend increases and meet size/liquidity benchmarks.

However, a word of caution. Just because you put dividend aristocrats in your list of stocks to buy now doesn’t guarantee a smooth ride. If the markets turn volatile, you can expect virtually all names to incur red ink.

But the major selling point is magnitude. With dividend aristocrats, you’re limiting your potential losses due to the robustness of the target company. Better yet, the volatility provides a rare discount for these stalwarts of industry.

So with that in mind, here are eight stocks to buy now with a long track record of payouts:

August 30, 2020

Is 3M a Bargain or a Value Trap?

A venerable company's share price is down, driving up the dividend and perhaps creating an opportunity

For more than a year and a half, the share price of the 3M Company (NYSE:MMM) has trended downward.

Most recently, it was part of the spring market meltdown, from which it rebounded to some extent. As Chairman and CEO Mike Roman noted in the second-quarter earnings release on July 28th, "our results were significantly impacted by the global economic slowdown."

3M also has been wrestling with liabilities from the past, primarily around PFAS, or perfluoroalkyl and polyfluoroalkyl substances. Thus, it reported significant legal liabilities, including more than $600 million paid out in the first half of 2020. In its 10-K for 2019, the company recorded a pre-tax charge of $897 million related to PFAS liabilities.

The demand for masks and other personal protective equipment has been a bright note fpr the company, but second-quarter results were mixed. Sales and earnings per share were down from the same period last year, but operating cash flow and adjusted free cash flow were both up. More important, perhaps, was the news that monthly sales numbers were improving, albeit slowly. 3M continues to withhold guidance for the full year.

With the share price relatively low, is 3M a stock that deserves investor attention, or is it a value trap? In this article, we will attempt to assess this by studying 3M's fundamentals, dividends, buybacks and guru investors.

August 29, 2020

2 Safe Dividend Stocks for a Risky Market

Today, I have two safe dividend stocks to recommend to you for a possible market pullback now that it’s climbed all the way back to all-time highs. Because in the short term at least, it’s crucial to have some safety in your portfolio…

We don’t know what is going to happen. This year is a perfect example of that fact. Who knew that the year 2020 would thrust the country and the world into the throes of a pandemic that would force us into our bunkers and crash the economy? Didn’t see that coming?

And the market just loves it. Sure, there was a violent selloff in the early days. But stocks have come all the way back. In fact, the S&P 500 just made a new all-time high. The index is reflecting a market that seems to think things are better now than before the pandemic ever happened.

How can that be?

The market isn’t stupid. And it usually gets things right. The market is forward looking. It looks six to nine months into the future. In that span, it sees a rapidly recovering economy drowning in Fed stimulus and record-low interest rates, with money having no place else to go but stocks to fetch a decent return.

The market is looking past the virus to a very positive environment for stocks. While the economy will not be back to pre-pandemic shape for a much longer time, things will be going in the right direction. Besides, we got the long overdue bear market and recession over with and now the Fed is friendly.

I hope that turns out to be right. And I believe in the U.S. economy. It almost always proves stronger and more resilient than the negative media reflects. It is also true that the market indexes have been driven higher by the amazing performance of technology stocks, as business has largely been even better for the sector during the pandemic. But many stocks and sectors are still beaten down and are more reflective of the current realities on the ground.

I also believe that we are in a longer-term secular bull market. In the grand scheme of things, this pandemic will fade and stocks will continue to perform strongly. But the near term is looking awfully dicey. There’s an awful lot of risk out there for a market at all-time highs.

Who knows what the virus will do? There could be a second wave that is worse than the first. The market seems confident that a vaccine will be coming in the quarters ahead. But that could prove to be wishful thinking. Then there’s the presidential election. Elections always inject unwanted uncertainty into the equation, but this time it’s worse. There is a risk of an uncertain or contested outcome in November that could wreak havoc on the markets.

I’m by no means a gloom-and-doomer. I just think that under the current circumstance it is prudent to eye some relatively safe dividend stocks with businesses that will continue to thrive regardless of the course of this virus or who’s elected President. Here are two to consider.

August 27, 2020

10 Safe Dividend Stocks You Can Rely On

2020 has hammered home the importance of investing in safe dividend stocks, such as these 10 picks with conservative payout management.

When investors evaluate dividend stocks, they'll typically look at the yield first, then maybe delve into how much it's growing. Far less exciting is how safe the dividend is – but if 2020 isn't a lesson in why it's important to invest in safe dividend stocks, nothing is.

Hundreds of companies have reduced or suspended their dividends this year, including dozens of big-name firms such as Boeing (BA), Ford (F) and Disney (DIS). For younger investors, that's less money you can put back to work and compound over time. For investors who rely on dividends in retirement, that's literally an income reduction that can negatively impact your quality of life.

So, how do you identify safe dividend stocks? One of the easiest places to start is with the dividend payout ratio, which measures the percentage of profits that are paid out as distributions. It's an easy calculation: Simply divide dividends per share by earnings per share. The higher the percentage, the more net profits go toward sustaining the dividend – and the more risk that a sudden reduction in profits would lead to a negative dividend action.

The average S&P 500 payout ratio in 2019 was 42%. That's a fine benchmark, but in the spirit of finding truly safe dividend stocks, we're going to explore a group of companies with a payout ratio of 25% or less. We're also going to look for stocks that have a history of relatively recent dividend growth, even if that growth has temporarily stalled as a result of COVID-related financial hurdles.

Here are 10 safe dividend stocks that have plenty of breathing room. Some have slumped in 2020, while others have bucked the trend and shot meaningfully higher. But in all cases, conservative dividend management is serving them (and investors) well.

August 26, 2020

Cisco share – price plunge! A buy with a 3.3% dividend?

The Cisco share (CSCO) has after disappointing quarterly results lost 11 percent in one fell swoop. Sales fell by 9 percent compared to the previous year and, according to management’s forecast, should fall by a further 10 percent in the current quarter. It seems as if Cisco, despite the high demand for conference software such as WebEx, is more of a victim of the Corona crisis, instead of benefiting from the acceleration of digitization triggered by the virus.

On the other hand, the drop in the share price has driven the dividend yield to an attractive 3.3 percent, close to an all-time high. How to explain the weak numbers and whether the Cisco share is a bargain, you will find out in this share analysis. In addition, Cisco is one of the 20 stocks that we save each month in the starter depot. If our judgment is negative, the share is up for grabs.

The business model: This is how Cisco makes money

Cisco is one of the dinosaurs of the Internet. Its routers and switches have been ensuring that the flow of data from A to B works for decades. Internet hardware is accordingly one of Cisco’s core business. At the latest with the strategy of “intent-based networking” introduced in 2017“However, things started to change. Intent-based networking tries to master the increasing complexity of the configuration of the network landscape. To meet this challenge, Cisco simplifies the configuration with software. Instead of configuring the network landscape directly, very technically and specifically, the software is told in a much more general and at the same time simpler way what the network should look like. The software then takes care of the actual configuration. “Intent-based networking” also makes good business sense for Cisco. Compared to hardware, software scales better, achieves higher margins and can more easily ensure predictable sales through subscription models.

August 24, 2020

CVS Health Corp: A Dividend Growth Stock in Disguise

Why CVS Stock Deserves Special Attention

At first glance, CVS Health Corp (NYSE:CVS) doesn’t seem that appealing to dividend growth investors. With an annual yield of 3.1%, it’s not exactly a high-yield stock. And because the company has been paying the same quarterly dividend since 2017, there hasn’t been much payout growth lately, either.

However, if you decide to ignore CVS Health stock right now, you could miss out on a serious dividend growth opportunity.

Let me explain.

To most consumers, CVS is known for its pharmacy chain business. The company has more than 9,900 retail locations in 49 states, D.C., and Puerto Rico. Around 70% of the U.S. population lives within three miles of a CVS pharmacy. Every day, the company’s stores serve 4.5 million customers. (Source: “CVS Health at a Glance,” CVS Health Corp, last accessed August 21, 2020.)

At the same time, CVS Health Corp has about 1,100 walk-in clinics and the company is one of the largest pharmacy benefits managers in the United States.

Now, healthcare is known as a recession-proof industry, which means healthcare stocks could come in handy this time around.

August 22, 2020

$10 Billion Reasons to Start Buying Intel Stock Now

INTC stock gets no respect and therein lies an opportunity

I am not usually a fan of buyback programs, especially not as a reason to chase a stock. Intel (NASDAQ:INTC) announced this week that it intends to buy back $10 billion worth of its own stock. This may be a reason to start buying into INTC stock for of two reasons. First, it’s cheap and recovering so investors would not be chasing it. And second, I think the intent of the buyback from management is to project confidence in the company’s future. You don’t buy an asset unless you believe it will be improving, so they may have good plans forward.

Usually there is a stigma that comes with buybacks because it could suggest that its managers have no better ideas than this. Case in point, you never see Amazon (NASDAQ:AMZN) doing this because it invests every penny into future businesses.

Intel here is trying to align the Wall Street risk profile for the company with the reality of its position among investors. Simply put, there is no respect for this formidable company especially if you compare it to Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA).

I can’t fault the critics for not liking it because management has been very disappointing for a long while.