The market has managed to back itself away from imminent danger, bouncing back from a relatively serious stumble from a couple of weeks ago. It's too soon to say stocks will be able to remain out of trouble, though. Aside from a lethargic time of year, the wrong headline could still easily up-end it all.
Or, perhaps the market will continue to climb.
In an uncertain environment like the one we find ourselves in now, sometimes the right strategic move is to simplify. Step into reliable cash cows, accumulate cash from dividends, and wait for a more opportune time to make risky bets.
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The $64,000 question is, of course, which dividend stocks? They certainly aren't all built the same.
Here's a run-down of 10 different dividend stocks to buy, from a variety of industries. Investors won't necessarily need all of them to create a more defensive-minded portfolio, though considering more than one might not be a bad idea either.
Dividend Stocks to Buy: Microsoft (MSFT)
Dividend Yield: 1.4%
The 1.4% yield on shares of software giant Microsoft (NASDAQ:MSFT) stock isn't exactly jaw-dropping. But this name is a healthy combination of income of well-shielded growth that could resist marketwide weakness should trouble arise.
The key is the ongoing shift in the company's business model. Rather than sell software via a one-time purchase (and hope that customer chooses Microsoft again when it comes time for an upgrade), Microsoft is increasingly looking to "rent" access to wares for a nominal monthly fee. The end result is reliable recurring revenue driven by everything from its Azure cloud-management platform to its office-productivity suites to games played on its Xbox franchise.
The company is a bit cryptic when it comes to explaining how much of its business is repeat business, but of last quarter's $30.6 billion in revenue, "commercial cloud" products like Azure, Office 365 and LinkedIn - which are subscription-based - generated $9.6 billion in sales.
Dividend Yield: 5.5%
Drugmaker AbbVie (NYSE:ABBV) has been a tough name to own of late. Shares are down 33% from their early 2018 peak, mostly in response to patent woes. The primary U.S. patent on its Humira - which accounts for more than half of its sales - has expired, which threatens a huge chunk of its business.
That generic threat (in the U.S. anyway) won't materialize until 2023, however. That's when the recently approved biosimilar Hyrimoz, from Novartis (NYSE:NVS) subsidiary Sandoz will become available.
That clearly puts a countdown timer on ABBV stock and its capacity to pay a dividend, and other Humira-related patents are scheduled to expire in the meantime. It's mostly incorrect to say that Humira sales are on the verge of collapse, though. In turn, the company shouldn't have any trouble supporting its current dividend for the foreseeable future.
The yield? A very attractive 5.5%.
Waste Management (WM)
Dividend Yield: 1.8%
When most investors look for dividend stocks to buy, they first and foremost consider utilities, banks and real estate investment trusts, and for good reason. These types of companies are well suited to drive reliable, recurring revenue that's relatively easy to pass along to shareholders.
There's an oft-overlooked area, however, that's even more recession-proof than utility companies are. In good times and bad, humans are always going to produce garbage … as in literal trash.
Enter Waste Management (NYSE:WM) - a company that hasn't failed to grow its top line in any quarter since the beginning of 2016, and has never been in any serious dire straits. Income has grown about as consistently, even if never at breakneck speeds.
It's anything but sexy, and the present yield of 1.9% isn't exactly thrilling. Given its defensive nature on top of reinvesting the regular income it offers though, WM stock has averaged an annual return of nearly 19% over the course of the past ten years.
Exxon Mobil (XOM)
Dividend Yield: 4.6%
The good news is, the trouble crude oil prices and energy stocks were in back in 2014 and 2015 is in the past. The bad news is, crude prices are stabilizing (more or less) at values that allow all energy companies to thrive.
It's a scenario that actually plays into the hand that a huge name like Exxon Mobil (NYSE:XOM) is holding. It has the size and scale smaller players don't, allowing it to acquire opportunities as they arise while simultaneously allowing it safely hunker down when oil prices slide lower.
Factor in the stock's dividend yield of 4.6%, and what you're left with is a healthy name that's not locked into the broad market's up and downs.
Texas Instruments (TXN)
Dividend Yield: 2.7%
Any name in the semiconductor business can be viewed as a liability in the wrong environment. If there's any worthy exception to that line of thinking, though, it's Texas Instruments (NASDAQ:TXN).
Its advantage? It doesn't make the CPUs and GPUs and other high-performance tech that consumer and corporations have to have when times are good, but are shunned when times are bad. Rather, Texas Instruments makes a wide variety of simple and complex technological solutions, many of which you utilize every day without even realizing it, and most of which you've never heard of.
That's not to suggest Texas Instruments is bulletproof, because it isn't. Its business still ebbs and flows. Those ebbs and flows aren't sea-sickening though, and the edge is taken off of any big swing by its respectable current yield of 2.7%.
Kraft Heinz (KHC)
Dividend Yield: 5.3%
Kraft Heinz (NASDAQ:KHC) shares are down a stunning 66% for the past year, with most of that rout stemming from accounting issues that delayed the company's full-year filing until just last Friday. The stock's jump in response barely made a dent in the stock's long-term demise.
Analysts still aren't exactly impressed either. Though closing the internal probe of accounting concerns and bringing in a new CEO to lead a rebuilding effort is a step in the right direction, Credit Suisse's Robert Moskow still has "concerns about business distractions and the investment we think the company will need to make in management talent, brand-building, and product innovation as it tries to pivot to topline growth." Stifel's Christopher Growe isn't a fan either.
Investors looking for reliable income won't find many better dividend stocks to buy, however. Thanks to its long-term pullback, KHC now yields a solid 5.3%, and is still earning more than enough to pay its dividend.
It's also earning enough to finally stop lowering its dividend, which is something of a victory in and of itself.
Verizon Communications (VZ)
Dividend Yield: 4.2%
No good list of dividend stocks to buy can afford to not name at least one telecom play. Verizon Communications (NYSE:VZ) gets the nod this time around, sporting a yield of 4.2%.
Wall Street isn't a huge fan, for the record. Its consensus rating is somewhere between a "buy" and a "hold" thanks to a slew of downgrades since the latter part of last year, and the average price target of $59.64 is only about three points better than the stock's present price. The overarching theme from the pros is simply not enough bank for the bucks Verizon is being forced to spend not to get ahead, but just hold its place relative to its competitors.
Verizon does have an advantage though. While in retrospect its acquisition of Yahoo (and the melding of it with AOL) was ill-advised, rival AT&T (NYSE:T) finds itself now bogged down by its video entertainment ambitions, while Sprint (NYSE:S) and T-Mobile US (NASDAQ:TMUS) have essentially conceded defeat as standalone entities.
In short, Verizon remains the best-of-breed in a business that isn't ever going to go away.
Altria Group (MO)
Dividend Yield: 6.1%
The smoking cessation movement has been gaining traction in the United States for years. Yet, it would be wrong to say Americans are giving up vices. The decline of the cigarette market has of course been offset by vaping and even a growing interest in hookas - yes, hookas - as alternative forms of self-indulgence. Meanwhile, the nation is increasingly embracing and legalizing cannabis.
Altria Group (NYSE:MO) hasn't overlooked this consumer shift. It now owns a significant piece of marijuana play Cronos Group (NASDAQ:CRON), and though it has actually backed out of the vaping business for the time being, in April the company got the FDA's green light to sell so-called IQOS devices. It's a hybrid of e-cigs and traditional cigarettes.
Altria's dividend is going to remain protected for the foreseeable future, and with its current yield of 6.1% the stock gives income investors a lot to like.
U.S. Bancorp (USB)
Dividend Yield: 2.8%
Large banks have struggled of late, along with their stocks.
Most of that weakness has been merited. Aside from the occasional (albeit temporary) inversions of the yield curve that threaten the profitability of lending activities, most of the mega-banks appear to have trouble managing their sheer size when business isn't exactly booming.
Not so with smaller, regional banks like U.S. Bancorp (NYSE:USB). By avoiding the more volatile pieces of the banking market like mezzanine loans to shaky corporations or an investment-banking business that has to underwrite wobbly startups, U.S. Bancorp actually finds itself better positioned for lethargic future than many of its peers. Reliability counts.
At the bank stock's current price, its dividend yield is a solid 2.8%.
Ford Motor (F)
Dividend Yield: 6.1%
Finally, add carmaker Ford Motor (NYSE:F) to your list of dividend stocks to buy if you're looking for reliable income in the near future. Its current yield is an incredible 6.1%.
In retrospect, the doubters were technically right. Though predicted years too early, the company did hit the headwind shareholders expected it to. This year's top line is projected to slide a little lower, while next year's should be flat.
Nevertheless, Ford never imploded the way the stock's multiyear, 50% drubbing suggested was in the cards. The company's still making a ton of money, and still passing a bunch of it along to investors. Namely, it's earned $1.30 per share last year, but only paid 59 cents worth of dividends. There's more than a little wiggle room.
Better yet, now that Ford is (finally) regrouping and rethinking the future of mobility, a rekindled wave of demand for its next-generation vehicles could already be brewing.
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