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7 Stocks That Prove Dividends Matter

Posted on Thursday, April 9th, 2020 by MarketBeat Staff
7 Stocks That Prove Dividends MatterDividends can be an equalizing factor when comparing stocks. For example, you can be looking at one stock that is up 5% and another that is up 7% over a period of time. However, the stock that is up 5% pays a dividend while the one that pays 7% does not. That dividend factors into the stock’s total return. Therefore although the former would appear to offer a better return, the stock that pays a dividend may actually provide a higher total return.

Dividends are a portion of a company’s profit reflected as a percentage. However, this percentage changes with the company’s stock price. For that reason, a common mistake investors make is to chase a yield. But a company that pays a 4% dividend yield may be a far better investment than a company with an 8% yield. Here’s why.

The most important attribute of a dividend is its reliability. Getting a solid dividend one year has very little meaning if the company has to suspend, or cut, its dividend the next year. Investors want to own stocks in companies that have a solid history of paying a regular dividend. Another important consideration is a company’s ability to increase its dividend. This means that the company is increasing the amount of the dividend regardless of stock price. Companies that do this over a specific period of time have achieved a special status. Dividend Aristocrats are companies that have increased their dividend every year for at least the last 25 years. Dividend Kings have increased their dividends every year for at least the last 50 years.

In this presentation, we highlight seven companies that offer a nice dividend and the opportunity for decent growth.

Click on Continue to view the “7 Stocks That Prove Dividends Matter”.

#1 - Sherwin-Williams (NYSE:SHW)

The Sherwin-Williams logo

Sherwin-Williams (SHW)

Years of Consecutive Dividend Growth: 41 Years (Dividend Aristocrat)

Sherwin-Williams (NYSE:SHW) has been giving shareholders solid growth to go along with its super reliable dividend for the last five years. However, the company’s stock has really taken off since its $11 billion purchase of Valspar in 2017.

However, every company is likely to feel some pain from the current mitigation efforts spawned by the coronavirus. Sherwin-Williams reported disappointing fourth-quarter earnings and will likely continue to show weaker numbers in subsequent quarters.

Still, the company has a couple of catalysts that make the company an attractive option as the country works through the coronavirus pandemic. First, interest rates that are at lows not seen since the financial crisis are a motivating factor for current homeowners to make home improvements. And one of the easiest and most cost-effective home improvements that can be made is adding a fresh coat of paint.

Plus, prior to the social distancing guidelines have forced Americans indoors, the housing market was beginning to show the strength that investors were counting on since the Fed first lowered interest rates in 2019.

And to go along with that growth, Sherwin-Williams has a highly reliable dividend that they have increased every year since 1979. And, the company pays out just over 19% of its earnings as dividends.

About The Sherwin-Williams
The Sherwin-Williams Co engages in the manufacture and trade of paint and coatings. It operates through the following segments: America Group, Consumer Brands Group, and Performance Coating Group. The America Group segment manages the exclusive outlets for Sherwin-Williams branded paints, stains, supplies, equipment, and floor covering.Read More 

Current Price: $300.80
Consensus Rating: Buy
Ratings Breakdown: 13 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $346.88 (15.3% Upside)


#2 - McCormick & Co. (NYSE:MKC)

McCormick & Company, Incorporated logo

McCormick & Co. (MKC)

Years of Consecutive Dividend Growth: 34 Years (Dividend Aristocrat)

McCormick (NYSE:MKC) illustrates the larger supply chain issues that our nation will be working through in the wake of the coronavirus. The company has three factories in China, including one in Wuhan the epicenter of the pandemic.

Fortunately, the company is back in business in China. And that is corresponding to an increase in sales in North America as consumers have stocked up before taking shelter in their homes. On the other hand, the company’s restaurant business has basically ground to a halt.

Before pulling their 2020 guidance because of the novel coronavirus, the company had predicted sales growth of 2% to 4%. And analysts feel McCormick may be able to do even better. They are forecasting 6% annual growth for the next five years.

Even if McCormick’s growth comes in at the low end of that estimate, McCormick’s dividend is well supported. The company has had over 30 consecutive years of dividend growth with the most recent hike being in November. The company’s quarterly dividend now sits at 62 cents per share.

“We remain committed to our long history of returning cash to shareholders and I am incredibly proud to announce another dividend increase,” said CEO Lawrence Kurzius via a press release.

Stock #4 has had 52 years of consecutive dividend growth...



About McCormick & Company, Incorporated
McCormick & Co, Inc engages in the manufacture, market and distribution of spices, seasoning mixes, condiments and other flavorful products to retail outlets, food manufacturers and foodservice businesses. It operates through the following segments: Consumer and Flavor Solutions. The Consumer segment operates by selling to retail channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce through the following brands: McCormick, Lawry's, Zatarain's, Simply Asia, Thai Kitchen, Ducros, Vahine, Schwartz, Club House, Kamis, Kohinoor and DaQiao.Read More 

Current Price: $80.46
Consensus Rating: Hold
Ratings Breakdown: 1 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $92.00 (14.3% Upside)


#3 - Abbott Laboratories (NYSE:ABT)

Abbott Laboratories logo

Abbott Laboratories (ABT)

Years of Consecutive Dividend Growth: 48 Years (Dividend Aristocrat)

Abbott Laboratories (NYSE:ABT) has been rewarding shareholders for years. In fact, ABT stock has often been a signature part of a dividend investor’s portfolio. Abbott has increased its dividend every year for 48 consecutive years. Most recently, the company raised its quarterly dividend, which now sits at 36 cents per share, in December.

Right now, Abbott stock is on fire based on its role in providing rapid testing for the novel coronavirus. On March 27, the company received emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA) for its rapid point-of-care COVID-19 test. COVID-19 is the underlying disease that causes the coronavirus.

This was the second such authorization that Abbott received in the month of March. Considering the key role that testing will play in getting the U.S. economy (if not the global economy) back to any semblance of normal, Abbott should be a solid growth stock for the remainder of 2020.

Fortunately, the need for testing should decline. However, the company has much more in its pipeline than its recent contributions to combat the novel coronavirus. The company’s portfolio also includes Similac infant formulas, Glucerna diabetes management products, and i-Stat diagnostic devices.

About Abbott Laboratories
Abbott Laboratories engages in the discovery, development, manufacture, and sale of a broad and diversified line of health care products. It operates through the following segments: Established Pharmaceutical Products, Nutritional Products, Diagnostic Products, and Medical Devices. The Established Pharmaceutical Products segment refers to the international sales of a line of branded generic pharmaceutical products.Read More 

Current Price: $124.06
Consensus Rating: Buy
Ratings Breakdown: 10 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $132.77 (7.0% Upside)


#4 - Stanley Black & Decker (NYSE:SWK)

Stanley Black & Decker logo

Stanley Black & Decker (SWK)

Years of Consecutive Dividend Growth: 52 Years (Dividend King)

For one of the most venerable of dividend stocks, Stanley Black & Decker (NYSE:SWK) has been behaving like a growing start-up. In the last five years the company purchased Newell Tools, a division of Newell Brands (NWL) giving them the Lenox and Irwin brands. Stanley Black & Decker followed that up by negotiating the purchase of the Craftsman tool brand from Sears Holdings (SHLDQ).

And as if that wasn’t enough, the company announced its acquisition of IES Attachments and Nelson Fastener Systems. But Stanley isn’t finished yet. In January, the company announced its intention to buy Consolidated Aerospace Manufacturing, a supplier of Boeing.

So far, all these acquisitions have not helped the bottom line. However, the fact that Stanley is consolidating industries in a downturn will lead to cost cuts. And that creates an opportunity for the company to turn future revenue into bigger profits.

Unfortunately, the coronavirus did not allow investors to see what the company could do with a better trade environment. But the company has paid a dividend for 143 consecutive years and has increased its dividend for 52 years. If you’re willing to wait the stock out, you should be set up for a nice reward.

About Stanley Black & Decker
Stanley Black & Decker, Inc engages in the provision of power and hand tools, and related accessories, products, services and equipment for oil & gas and infrastructure applications, commercial electronic security and monitoring systems, healthcare solutions, and mechanical access solutions. It operates through the following three segments: Tools and Storage, Industrial, and Security.Read More 

Current Price: $186.40
Consensus Rating: Buy
Ratings Breakdown: 9 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $218.10 (17.0% Upside)


#5 - Walmart (NYSE:WMT)

Walmart logo

Walmart (WMT)

Years of Consecutive Dividend Growth: 45 Years (Dividend Aristocrat)

It’s a lot of work to keep pace with Amazon (AMZN). But Walmart (NYSE:WMT) has not only managed to hang with Amazon, they are thriving. Walmart has not only built out their e-commerce business and is embracing the omnichannel model that allows consumers to get what they want when they want it.

Before the coronavirus outbreak, the “new retail” model was becoming essential. Now it will be absolutely critical. Consumers are going to return, but it won’t be the same. Whenever our nation goes through a crisis like this, the world we go back to is changed in a fundamental way. As many consumers realize that they really can get much of what they need without visiting the stores, retailers who don’t allow them to do that will certainly get left behind.

Walmart is already ahead of that curve. And with 45 years of consecutive dividend growth they can provide shareholders with one thing Amazon can’t, a regular dividend payment no matter which way the market goes.

About Walmart
Walmart, Inc engages in retail and wholesale business. The Company offers an assortment of merchandise and services at everyday low prices. It operates through the following business segments: Walmart U.S., Walmart International, and Sam's Club. The Walmart U.S. segment operates as a merchandiser of consumer products, operating under the Walmart, Wal-Mart, and Walmart Neighborhood Market brands, as well as walmart.com and other eCommerce brands.Read More 

Current Price: $146.61
Consensus Rating: Buy
Ratings Breakdown: 17 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $171.09 (16.7% Upside)


#6 - 3M (NYSE:MMM)

3M logo

3M (MMM)

Years of Consecutive Dividend Growth: 61 Years (Dividend King)

3M (NYSE:MMM) shows why it’s important to understand why dividends matter to a stock’s total return. As the market was on its record bull run, some dividend stocks started to deliver eye-popping returns. Unfortunately, the recent market crash has some investors disillusioned as these stocks look to be returning to the mean.

But the mean for 3M has been pretty good. Investors who have been invested in the stock for the last 10 years have been rewarded with a total return of over 120%. If you exclude dividends, the return is still pretty nifty at over 10%, but it looks more pedestrian.

3M is a dividend king having delivered over 60 consecutive years of dividend increases. The company has been in a very public dispute with the Trump administration over the production of masks during the coronavirus pandemic. And, while analysts are glad to see that the company is still keeping their factories running, there is concern about earnings and revenue for 2020.

But that’s a concern for virtually any manufacturer right now. In time, the economy will get on solid footing. And when it does, it will be stocks like 3M that will be well-positioned to win the day.

About 3M
3M Co is a technology company, which manufactures industrial, safety and consumer products. It operates through the following segments: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. The Safety and Industrial segment consists of personal safety, industrial adhesives and tapes, abrasives, closure and masking systems, electrical markets, automotive aftermarket, and roofing granules.Read More 

Current Price: $181.43
Consensus Rating: Hold
Ratings Breakdown: 2 Buy Ratings, 7 Hold Ratings, 4 Sell Ratings.
Consensus Price Target: $195.58 (7.8% Upside)


#7 - AT&T (NYSE:T)

AT&T logo

AT&T (T)

Years of Consecutive Dividend Growth: 35 Years (Dividend Aristocrat)

AT&T (NYSE:T) is a stock that can be overlooked if you stay focused on the headwinds. The company is launching a streaming service at a time when that sector is beginning to look saturated. The long-awaited arrival of 5G appears that it will take a little while longer. The company’s investment in DirecTV now looks like more of an anchor than a catalyst.

But AT&T is first and foremost a wireless carrier. And that’s where it makes the majority of its money. The payments it receives from its customers subscriptions is reliable. And many customers will find other ways to save on their budget before allowing their wireless bill to go unpaid.

It’s also why the company has been able to pay out 35 years of increasing dividends. And because it enjoys a virtual duopoly with Verizon (VZ) in the wireless sector, the company’s dividend is among the most secure in the industry.

About AT&T
AT&T, Inc is a holding company, which engages in the provision of telecommunications media and technology service. It operates through the following segments: Communications, WarnerMedia, and Latin America. The Communications segment provides services to businesses and consumers located in the U.S., or in U.S.Read More 

Current Price: $26.13
Consensus Rating: Hold
Ratings Breakdown: 8 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $30.42 (16.4% Upside)

 

Dividends matter. Companies with a solid history of paying, and potentially increasing, its dividend show financial strength. And once a company commits to paying a dividend, it will usually prioritize that dividend even in difficult financial times.

In this difficult economy, many solid companies have to suspend dividends based on circumstances that could not have been foreseen. That makes the financial strength of the companies that are not only continuing to offer dividends, but increase them even more important.

As you can see from this presentation, dividend investing does not mean investing with some of the big tech companies. You won’t be chasing the hot penny stock, or looking to discover the next unicorn stock. In fact many of these businesses are stable, and could be considered boring.

But when the market gets crazy, boring doesn’t look so bad. And the ability of these stocks to put cash in your pocket should not be overlooked.

Top Ten Brokerages You Can Trust

There are more than 500 brokerages and research houses that hire analysts to issue ratings and recommendations. Collectively, these brokerages and their analysts publish approximately 250,000 ratings each year. Every trading day, there are nearly 700 reports and recommendations that are released to the public. To say that it's difficult to separate the signal from the noise when interpreting this data would be an understatement.

MarketBeat has developed a system to track each brokerage and research house's stock recommendations and score them based on their past performance. If Goldman Sachs predicted that Apple's stock price would hit $150.00 on a specific date, how accurate were they? If Bank of America issued a "strong-buy" rating on a stock, how did that stock perform compared to the broader market over the following twelve months? This tracking system has been applied to the 1,000,000+ ratings that MarketBeat has tracked during the last ten years to identify which brokerages you can really trust (and which you can safely ignore).

This slide show lists the 10 brokerages who have issued the most accurate analyst recommendations over the past several years, as measured by the performance of their "buy" ratings and the accuracy of their price targets.

View the "Top Ten Brokerages You Can Trust" Here.





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