Are these Dividend Stocks Perfect for your Portfolio?
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As most investors see that fixed-income investments and savings accounts yield next to nothing (not to mention the considerable loss when factoring in inflation), many of us are left asking where we can find a decent return on our hard-earned money? High-quality dividend paying stocks seem at this time to be the best option as the average company in the S&P 500 is yielding approximately 2%, approximately double the highest one-year Certificate of Deposit rate one can find here. Below is a list of what I feel are high-quality companies that not only have great yields, but prospects that look appealing as well.
General Electric (NYSE: GE) has the unique distinction of being the only remaining Dow stock from when it was originally conceived with just 12 stocks (now it is 30) made back on May 26, 1896. That means for over 115 years, GE has shown the necessary consistency and excellence required to be a part of the exclusive group, and been able to shown resilience when it looked as though it was out for the count numerous times (most notably during the 2008-2009 crash). The Industrial giant has since recovered nicely in the past three and a half years and now is yielding a very respectable 3.4%. Moreover, with just a 52% payout ratio, investors can confidently assume that the dividend is not only safe, but likely to continue being raised in the near future.
Verizon Communcations (NYSE: VZ) and AT&T (NYSE: T) are two wireless telecom behemoths that each boast well over 100 million subscribers. They are two high-quality dividend companies that I believe are worth considering in your portfolio. Both companies continue to churn higher profits as more customers each day are turning to smartphones and paying for the lucrative data packages that each of these companies offer. VZ currently offers a 4.6% dividend and T a 4.9% dividend which are both substantially higher than the average S&P 500 company as noted above and have ample FCF to continue paying these great dividends. I’d simply split a position between these two companies to eliminate specific company risk, while getting nearly identical yields.
Healthcare heavyweight Johnson & Johnson (NYSE: JNJ) is a company that has been around since 1886 and simply built itself into a first-rate corporation. Being only one out of four companies left with the coveted AAA credit rating allows JNJ access to some of the cheapest debt and of course serves as a big competitive advantage along with its extensive supply chain and economies of scale. The company yields an impressive 3.7% and with a payout ratio at just 62% look for JNJ to continue raising the dividend as management just did this past quarter.
As always, respectful comments and questions are always welcome on the message board below and please know any viewpoints are simply just the opinion of the blogger. I always strongly recommend every investor do follow-up research and due diligence for the sake of their financial health.
Prohomes owns shares of AT&T; and Verizon Communications. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson. 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.