As we find ourselves grappling with the latest coronavirus pandemic headlines and trying to understand the extent the crisis has had on the economy and our personal investment portfolios, it’s hard not to feel uncertain about the future.
I’m sure hedging against any further losses is likely on a lot of people’s minds, and this is where dividend investing can come in handy.
With dividend-focused investing, goals will be a bit different compared to other strategies. Income investors are in it for the long haul, and are buying and holding stocks to receive those coveted quarterly payouts.
Dividends also offer unique insight into a company’s overall health and fundamentals, like profits, free cash flow, future growth, and even if the management team is focused and efficient.
Additionally, if a company is able to steadily grow its dividend over time, then that shows us they are on the right financial track.
This is a big reason why dividends matter.
These simple dollar payouts signal to investors that a company is in good health and that it can competently manage its cash flow.
Dividends also become ultra-important during times of low-growth or recessionary periods.
Not only can they provide a cushion for investors, but dividends can give relief during these periods as well—you can pocket that extra cash if you need to, save it and use it in case of an emergency.
But the option of reinvesting your dividend dollars is key.
By buying additional shares with the money you receive, you can grow your investments quickly and quietly, so when it comes time for retirement, for instance, you will have already generated a steady stream of revenue for yourself.
3 Dividend Stocks to Watch
Let’s take a look at three dividend stocks to add to your watchlist that provide steady income and a healthy balance sheet.
Walmart (WMT): Walmart is the world’s largest retailer, and its stores have been able to remain open throughout the outbreak since the majority of what it sells are essential items.
The company has seen a recent sales surge, and sales from its 4,700+ U.S. stores jumped almost 20% in March. Walmart has also been rolling out new digital initiatives to help cater to those who aren’t able to visit a store; it’s planning on expanding its Amazon (AMZN) Prime Now competitor Express Delivery, which will deliver orders within two hours.
WMT has a dividend yield of about 1.8%, and is a #3 (Hold) on the Zacks Rank. Back in February, the company boosted its cash payout, and his increased its dividend for 47 consecutive years. Shares are trading at 24X its trailing 12-month earnings compared to the broader Retail-Wholesale sector (roughly 27X).
Procter & Gamble (PG): A consumer staples giant, Procter & Gamble is known for its large portfolio of household brands like Tide, Bounty, Dawn, Gillette, Crest, Charmin, Pampers, and many, many others.
PG closed out a strong 2019, and is currently benefitting from consumer stockpiling of things like toilet paper. For 2020, the company expects organic sales to grow 4% to 5% and earnings to expand 8% to 11%.
It also has a solid, growing yield of 2.8% (the company has increased its dividend annually for more than six decades now, proving its resiliency during a downturn), and the stock currently sits at a #3 (Hold) on the Zacks Rank. On a trailing basis, PG trades at around 22X compared to the broader Consumer Staples space (18.6X).
Digital Realty Trust (DLR): Digital Realry is one of the largest REITs in the world, and develops, acquires, and operates data center properties. Its tenants are basically the who’s-who of tech names: Facebook (FB), Oracle (ORCL), IBM (IBM), Uber (UBER), and Verizon (VZ), among others.
Demand for data storage will only increase, especially right now, as more people than ever before are working from home, video conferencing friends and family, and needing to take advantage of as much cloud storage as they can. A business like DLR, then, will always have a need going forward. The REIT is a #3 (Hold) on the Zacks Rank, and boasts a growing yield of 3%. Currently, DLR trades at about 22.4X trailing FFO compared to the Real Estate industry (13.8X).
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Walmart Inc (WMT): Free Stock Analysis Report
Verizon Communications Inc (VZ): Free Stock Analysis Report
Uber Technologies Inc (UBER): Free Stock Analysis Report
Procter Gamble Company The (PG): Free Stock Analysis Report
Oracle Corporation (ORCL): Free Stock Analysis Report
International Business Machines Corporation (IBM): Free Stock Analysis Report
Facebook Inc (FB): Free Stock Analysis Report
Digital Realty Trust Inc (DLR): Free Stock Analysis Report
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