If you like dividends, you should like these 3 stocks
Looking for a little more income from your investment portfolio? This may not be a bad idea given the current economic environment. As the global economy comes out of a bad patch caused by the contagion of the coronavirus, inflation is rising sharply in some regions. And while we don’t know what the future holds, it certainly looks like several growth-oriented companies have become a bit riskier as an investment than they were a few months ago.
With that in mind, here’s a look at three great all-season dividend stocks that should be able to weather any economic headwinds on the horizon. In no particular order …
1. JPMorgan Chase & Co.
Dividend yield: 2.2%
JPMorgan Chase‘s (NYSE: JPM) the current 2.2% return is healthy, but hardly turns heads. Investors looking for income could certainly find names with bigger payouts right now.
But there is one important detail that is not evident in the performance alone. This is the rate at which the company lift up its dividend. Over the past 10 years, JPMorgan’s quarterly payout has increased from $ 0.25 to $ 0.90 per share, with annualized growth of 13.7%. It’s enormous.
Be aware that this diverse name in banking and finance has cut its dividend quite significantly in the wake of the subprime mortgage meltdown, and certainly could do so again if the company found itself in similar circumstances. After all, about half of its income is ultimately tied to interest rates.
Even with increasing inflationary pressures, however, a replenishment of these unusual foundations is unlikely. Then, interest rates retreated from above-average highs, squeezing loan margins as well as raising the costs of bad loans. Today, on the other hand, rates are near record lows and are about to rise in a way that makes lending more profitable. A recession dampens demand for loans, but shouldn’t kill that demand outright unless economic weakness becomes cataclysmic. Meanwhile, the other half of JPMorgan’s business comes from things like asset management, credit cards, investment banking, and even consumer banking. These businesses are pretty resilient even if they don’t exactly thrive in a sluggish environment.
2. Hewlett Packard Enterprise
Dividend yield: 3.1%
Would it surprise you to know that this tech company Hewlett Packard Enterprise (NYSE: HPE) is a dividend-paying share? Well it is, and a good one too. Sure, you can find higher returns, but they’re not easy to find in the tech industry.
This company is, of course, the business-oriented and enterprise-oriented half of the 2016 division of what was previously known as Hewlett Packard, with the other half focused on separating consumers. Then, in 2017, Hewlett Packard Enterprise separated its services business and merged with Computer Sciences Corp., further shrinking its portfolio.
These are smart gestures. A closer focus on the primary customer of each organization ultimately produced greater success than was achieved as a larger and broader business.
It wasn’t always easy to see, okay. Revenue and profits have been just as likely to fall as they have risen since the business as we know it today took shape. The point is, even after adjusting for one-time non-operating expenses, Hewlett Packard Enterprise has never really struggled to make its quarterly dividend payment. The current annualized payout of $ 0.48 per share is only a fraction of the $ 1.88 (pennies) per share the company expects to report on a non-GAAP earnings basis for the year. current exercise.
Hewlett Packard Enterprise may not be a major growth machine, but surprisingly enough, it is evolving into a picture of constant progress as the cloud and edge computing markets mature.
3. The Coca-Cola Company
Dividend yield: 3%
Finally, add Coca Cola (NYSE: KO) to your shortlist of dividend-paying stocks to consider adding to your portfolio.
Like most other consumer-focused companies, Coca-Cola has been crippled by the coronavirus pandemic. Its challenges were more logistical in nature than related to a lack of demand. The final impact, however, is the same. Last year’s revenue fell 11%, crushing profits to a similar degree.
Yes, the beverage giant will emerge from the crisis caused by the pandemic. As another Fool writer Parkev Tatevosian points out, Coca-Cola is likely to gain lost market share as the world reopens, as consumers are more likely to drink a Coke outside of their homes than they are. ‘inside.
This is not necessarily the main reason to enter this trade when the return is at a respectable 3%, however. More convincing is the fact that the noise – and the impact – of the pandemic has obscured the benefit of the measures taken by Coca-Cola since 2014, and significantly since 2017. Simply put, Coke has taken a step back from it. to the bottling business by reselling bottling operations to franchisees so that it can focus more on licensing. This decreases revenue, but since franchising and licensing are (much) higher margin activities, the end result is larger overall profits.
This new improved tax profile was just starting to emerge in 2020 when COVID-19 destroyed it. With the end of the pandemic in sight, investors might be surprised at how well-suited Coca-Cola is to fund dividend payments.
Then, of course, there’s the fact that Coke hasn’t failed to raise his dividend for 59 straight years now, placing him near the top of longevity honors among all the dividend aristocrats.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.