Dividend stocks are always in fashion. Income investors find that dividend stocks can be a replacement for low-yielding Treasury bonds and other bond options. But dividend stocks can also play a role in the growth investor’s portfolio. Dividend stocks by nature tend to lag behind the broader market. This is due to the nature of the companies that issue dividends. In many cases, these are mature companies who have the liquidity to not only use profits for growth but also to reward shareholders.
However, in a bull market dividend stocks can also provide a significant amount of growth. This can provide investors of all styles with a nice total return. For those that are new to dividend stocks, it’s important to know what to look for in a dividend stock. Yield is important, but it’s not everything.
What you’re looking for is a company that has a proven history of not only issuing dividends but ideally increasing the amount of those dividends on an annual basis.
In this presentation, we’ll highlight eight dividend stocks in various sectors that are the best to buy. And for most of these stocks, they’re a good buy today and well into the future.
Quick Links
- Walmart
- Lowes
- Southern Company
- AT&T
- Coca-Cola
- AbbVie
- Ventas
- Royal Dutch Shell
#1 - Walmart (NYSE:WMT)
Walmart (NYSE:WMT) - It wasn’t long ago that investors were writing the eulogy for Walmart (NYSE:WMT). The suspicion was that Amazon (NASDAQ:AMZN) which continues to dominate the e-commerce space, was going to move in Walmart’s grocery sector. This would take away a significant lever Walmart had available to fend off the e-commerce giant. However, Walmart like Target (NYSE:TGT), has become one of the best examples of the “new retail”. The company has proven to be nimble enough to embrace an omnichannel model that is allowing the company to not only survive, but thrive.
In 2019, WMT stock rose by over 30%. If the company reports positive earnings for the fourth quarter, it should be well on its way to another solid year. And that’s good news for dividend investors. Lowe’s has raised its dividend every year for the last 45 years and there’s no reason to think that will change in 2020. It has a dividend yield of 1.8%, which compares favorably to two of its chief rivals Target at 2.1% and Costco (NASDAQ:COST) at 0.8%.
About Walmart
Walmart Inc engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands; membership-only warehouse clubs; ecommerce websites, such as walmart.com.mx, walmart.ca, flipkart.com, PhonePe and other sites; and mobile commerce applications.
Read More - Current Price
- $69.79
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $71.60 (2.6% Upside)
#2 - Lowes (NYSE:LOW)
Lowe’s (LOW) -You can argue that for the home building sector, Home Depot (NYSE:HD) is a better stock, and I couldn’t put up much of an argument. But as a pure dividend stock, I’ll give Lowe’s (NYSE:LOW) the nod. One of the catalysts for the company is the housing market that is starting to heat up. With interest rates likely to stay at their current levels, prospective buyers seem to be warming up to the idea that now is the time to get in on historically low rates. And with consumer confidence remaining high as well as low unemployment, this is a trend that is likely to remain in place throughout 2020.
Lowe’s does have some work to do in terms of its e-commerce operation. But that shouldn’t be an issue to the security and growth of its dividend. The company has increased its annual dividend for over 50 years, in many cases raising it at double-digit rates. All of this is to say, you can rely on the company’s dividend. And you may even get some growth.
About Lowe's Companies
Lowe's Companies, Inc, together with its subsidiaries, operates as a home improvement retailer in the United States. The company offers a line of products for construction, maintenance, repair, remodeling, and decorating. It also provides home improvement products, such as appliances, seasonal and outdoor living, lawn and garden, lumber, kitchens and bath, tools, paint, millwork, hardware, flooring, rough plumbing, building materials, décor, and electrical.
Read More - Current Price
- $238.88
- Consensus Rating
- Hold
- Ratings Breakdown
- 12 Buy Ratings, 14 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $250.04 (4.7% Upside)
#3 - Southern Company (NYSE:SO)
Southern Company (SO) - When considering dividend stocks, utilities are always a solid choice. Utilities are highly regulated and they frequently operate as monopolies in certain regions. This lack of competition is bad for consumers, but great for investors who rely on consistent revenue to support a dividend.
But not all utilities provide the maximum benefit for investors. Size doesn’t always matter. But in the case of Southern Company (NYSE:SO), it matters a lot. The company is one of the largest utilities in the country. And it’s diversified in both electric and natural gas so it has reliable revenue that is less affected by the volatility of the commodities market.
Southern has not cut its dividend in over 70 years and it currently has a dividend yield of around 3.5%. If there’s any concern about SO stock at the moment, it’s that it may be a little expensive. But a larger concern may be that the company is currently investing in new infrastructure that will likely keep any dividend growth muted since the company will deploy the cash for other purposes.
About Southern
The Southern Company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity. The company also develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects and sells electricity in the wholesale market; and distributes natural gas in Illinois, Georgia, Virginia, and Tennessee, as well as provides gas marketing services, gas distribution operations, and gas pipeline investments operations.
Read More - Current Price
- $82.18
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $76.50 (6.9% Downside)
#4 - AT&T (NYSE:T)
AT&T (T) - You can’t have a discussion about investing in 2020 without talking about 5G. But honestly, that’s not the reason to consider AT&T (NYSE:T) as a great dividend stock. AT&T has a massive dividend yield of over 5.5%. The company can support the dividend because it has a wireless subscriber base of over 150 million consumers.
Wireless communications make up the bulk of AT&T’s revenue and earnings. And while that isn’t changing, it may be getting supplemented now that it is entering the streaming space now that it has completed its merger with Time-Warner. Some analysts are concerned that AT&T may be late to the streaming game and others point to DirecTV as a dying business model. But neither of those issues should affect the company’s ability to generate free cash flow. This means AT&T should be able to pay down the debt from these acquisitions while still providing and increasing its dividend, which the company has done for 35 years.
About AT&T
AT&T Inc provides telecommunications and technology services worldwide. The company operates through two segments, Communications and Latin America. The Communications segment offers wireless voice and data communications services; and sells handsets, wireless data cards, wireless computing devices, carrying cases/protective covers, and wireless chargers through its own company-owned stores, agents, and third-party retail stores.
Read More - Current Price
- $19.01
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $22.33 (17.5% Upside)
#5 - Coca-Cola (NYSE:KO)
Coca-Cola (KO) When it comes to a tried-and-true dividend stock, it’s hard to beat Coca-Cola (NYSE:KO). And investors can use the argument, if it’s a good enough for Warren Buffett, it’s good enough for you. But is the stock too safe? The potential anchor to the stock has been that soft drinks, particularly of the sugary kind that Coca-Cola is known for, have fallen out of favor. Part of it is due to concerns over childhood obesity and some is because of the changing tastes of consumers who are demanding optionality in every aspect of their life. But Coca-Cola is navigating this pivot well. First, they’ve invested in other brands. This strategy is providing an effective hedge against potential revenue losses to the flagship brands.
And the company just released its own energy drink, Coke Energy, in January and the company is looking to get into the caffeinated seltzer and flavored water arena. Analysts are becoming bullish on the company in advance of its earnings which the company reports on January 30.
About Coca-Cola
The Coca-Cola Company, a beverage company, manufactures, markets, and sells various nonalcoholic beverages worldwide. The company provides sparkling soft drinks, sparkling flavors; water, sports, coffee, and tea; juice, value-added dairy, and plant-based beverages; and other beverages. It also offers beverage concentrates and syrups, as well as fountain syrups to fountain retailers, such as restaurants and convenience stores.
Read More - Current Price
- $67.05
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $70.20 (4.7% Upside)
#6 - AbbVie (NYSE:ABBV)
AbbVie (ABBV) - Pharmaceutical company AbbVie (NYSE:ABBV) has been an exceptional stock for growth and income since it became a separate entity from Abbott Labs in 2013. The company has increased its dividend by an average of nearly 25% per year. In fact, AbbVie has increased its dividend in each of the last 45 years. This is music to investors’ ears, particularly when you consider the stock has a juicy 5.65% dividend yield.
If there’s any concern about the future growth of the stock, it stems from the expiring patent on their best-selling drug Humira. The patent for Humira expired in 2018 and the U.S. patent will expire in 2023. But the good news is that in 2019, international sales did not decline as much as investors feared. And in 2019, the market research firm EvalutePharma was projecting Humira sales to remain over $15 billion in 2024. And with many other drugs in the company’s pipeline, the company is projecting $35 billion in additional revenue on top of what it may get from Humira. Pharmaceutical stocks can be volatile. But not when they have a pipeline like what investors get from AbbVie.
About AbbVie
AbbVie Inc discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company offers Humira, an injection for autoimmune and intestinal Behçet's diseases, and pyoderma gangrenosum; Skyrizi to treat moderate to severe plaque psoriasis, psoriatic disease, and Crohn's disease; Rinvoq to treat rheumatoid and psoriatic arthritis, ankylosing spondylitis, atopic dermatitis, axial spondyloarthropathy, ulcerative colitis, and Crohn's disease; Imbruvica for the treatment of adult patients with blood cancers; Epkinly to treat lymphoma; Elahere to treat cancer; and Venclexta/Venclyxto to treat blood cancers.
Read More - Current Price
- $185.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $188.71 (1.9% Upside)
#7 - Ventas (NYSE:VTR)
Ventas (VTR) - One sector that investors look to for attractive dividends are real estate investment trusts (REITs). REITs lease out residential and commercial space to consumers and businesses. By law, REITs are required to pay out at least 90% of their profits in the form of a dividend. In one sense, this makes them similar to utility stocks. And like utility stocks, not all REITs are the same. Ventas (NYSE:VTR) for example covers the healthcare sector. That includes hospitals, medical centers, and senior living facilities.
Ventas is positioned for the inevitable aging of the baby boom generation. The company misread the market in 2019 as supply exceeded demand in the senior housing space. However, this appears to be a temporary bump in the road. Ventas may have a balance sheet that has more leverage than its peers, but for investors who are willing to ride out potential short-term volatility, Ventas looks like a solid dividend stock for years to come.
About Ventas
Ventas Inc (NYSE: VTR) is a leading S&P 500 real estate investment trust focused on delivering strong, sustainable shareholder returns by enabling exceptional environments that benefit a large and growing aging population. The Company's growth is fueled by its senior housing communities, which provide valuable services to residents and enable them to thrive in supported environments.
Read More - Current Price
- $53.76
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $51.92 (3.4% Downside)
#8 - Royal Dutch Shell (NYSE:RDS.A)
Royal Dutch Shell (RDS) - The issue of climate change will remain a hot topic in the run-up to the 2020 Presidential Election. The common-sense reality is that whoever wins the White House, the country is still going to be reliant on traditional carbon fuels for some time. Even as the economic argument for renewables (like solar and wind) begins to win the day, there is an infrastructure that has to be built. That will keep demand steady.
Enter Royal Dutch Shell (NYSE:RDS.A) is one of the giants in this space and brings a substantial 6.2% dividend yield to the table. Shell is not only well-positioned for the energy demands of today, but they are making strategic investments to position themselves for where the energy sector may be headed. This includes buying into solar farms and electric charging stations. In fact, Shell plans to spend as much as $3 billion annually over the next five years. All of which makes a compelling case for the company and its dividend.
About Royal Dutch Shell
Royal Dutch Shell plc operates as an energy and petrochemical company worldwide. The company operates through Integrated Gas, Upstream, Oil Products, Chemicals segments. It explores for and extracts crude oil, natural gas, and natural gas liquids; markets and transports oil and gas; produces gas-to-liquids fuels and other products; and operates upstream and midstream infrastructure necessary to deliver gas to market.
Read More - Current Price
- $51.04
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
With the stock market continuing to challenge, or exceed, previous records, it can be difficult to pay attention to dividend stocks. But their stability offers benefits that provide growth in any market. First, a solid, regular dividend points to a company that is financially healthy.
Second, when a company builds a history of paying and increasing, its dividend, it will go to great lengths to continue to do so. Many companies that have cut their dividend or stopped issuing them altogether have fallen out of favor with investors and have never recovered.
Finally, in a bull market such as the one investors continue to enjoy, dividend stocks can provide an attractive level of growth that lets investors double-dip, particularly with stocks that allow them to reinvest their dividends.
The companies that we’ve listed in this presentation have a long history of issuing dividends and merit consideration in every investor’s portfolio.
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