4 Dividend Stocks to Make you Say "Oh Yeah"
Pey is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The other day I found a few minutes of spare time to log into my online bank account and check on my cash reserves. $0.42 of interest for the month of July. Really? Ouch. So much for calling that an "investment."
In these modern times of record low interest rates and checking accounts -- oftentimes yielding somewhere around 0% -- investors are left wondering where money can be parked while not falling victim to that dirty word: inflation. High-quality dividend paying stocks seem to be an excellent option as two-year treasury bonds yield a paltry 0.26% while the average S&P 500 stock yields nearly eight times this much.
Here are a number of high-quality, great dividend paying companies that I believe will serve investors well for the long term and keep them ahead of inflation:
Mega toy maker Hasbro (NASDAQ: HAS) makes everything from Nerf footballs to Parker Brothers board games (which include Jenga and Monopoly, two of this Fool’s favorite board games). Since its founding in 1923, the company has become a giant with over $4 billion in trailing 12 month revenue and a market capitalization approaching $5 billion.
One would think that the company would be a bit overpriced as it sits not too far from its recent highs, but looking deeper at the numbers paints a different picture. The stock yields a very attractive 3.9% dividend yield while trading for a reasonable 12x forward P/E ratio. Moreover, the company has a great track record of not only maintaining its dividend, but raising it regularly, and with just a current 48% payout ratio, investors can reasonably expect dividend raises to continue in the future. I recommend Hasbro at current valuations.
But if you're feeling adventurous, looking into Hasbro's main competitor, Mattel (NASDAQ: MAT), might not be a bad idea. Mattel is a massive company with over $6 billion in revenue over the past 12 months with a market capitalization north of $12 billion. While I’m not as bullish on Mattel as it pays a lower 3.5% dividend yield, trades at higher valuations, and has a rather unstable dividend track record, the company did churn better returns on assets and returns on equity against Hasbro along with richer profit margins. Nevertheless, I think splitting a position between the two should serve investors well in taking out the company-specific risk while still offering a 3.7% average dividend yield.
Another favorite, personal products giant Kimberly-Clark (NYSE: KMB), has a diversified revenue base full of many well-known products, including Kleenex facial wipes and Huggies diapers. The company’s history dates back 140 years to 1872 and since that time has grown into a juggernaut with over $21 billion in trailing 12 month revenue and a market capitalization over $32 billion. Even as the company trades near its all-time high of $88.25, KMB sports a very nice 3.5% dividend yield and fair 15x forward P/E ratio.
The company has enviable returns on assets and returns on equity of 9.35% and 32.55%, respectively, and a very consistent dividend track record showing regular boosts in payments -- always great news. In addition, with just a 63% payout ratio, look for the trend to continue, making Kimberly-Clark a great long-term buy.
If looking to diversify a position, fellow behemoth Procter & Gamble (NYSE: PG) is a great choice. Besides benefiting from great economies of scale -- the company generated over $83 billion in revenue the past 12 months -- the stock sports a nearly identical 3.4% dividend yield. Moreover, with just a 58% payout ratio, investors can continue to expect PG's dividend to not only be stable, but continue to grow as management has graciously accomplished over the last few decades.
What I've honestly found while keeping tabs on my brokerage account, with an average dividend yield north of 3%, is that it's much more exciting than looking into how much my bank accounts offered me over the last quarter. Do yourself a favor and diversify into dividend-paying stocks, as these investments will most likely provide a much better return on investment than treasuries or bank account yields. Look for payout ratios lower than 65% for stable dividends and reap the benefits of a much higher return on investment.
Best of luck out there!
Fool Pey Shadzi owns shares of Kimberly Clark Corp and Hasbro Inc. He's also a huge fan of playing with toilet paper and toys, though not necessarily in that order. The Motley Fool owns shares of Hasbro and Mattel. Motley Fool newsletter services recommend Hasbro, Kimberly-Clark, Mattel, and The Procter & Gamble Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.