5 Dividend Stocks That Should Serve Investors Well
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the, Federal Reserve continues its highly questionable policy of ultra-low interest rates for the foreseeable future causing checking accounts and most other fixed income investments to yield right near 0%, investors are hard pressed to find any meaningful rate of return to stay ahead of inflation. High-quality dividend-paying stocks seem to be the best option, as two year treasury bonds yield next to nothing, while an average S&P 500 stock yields approximately 2.0%. Below are a few well-run dividend-paying companies that investors may want to put on their radar to protect their investment capital and possibly keep them ahead of inflation. Again, these are just investment ideas and should only be looked as a start in your extensive investment research.
Fast food giant and world-renowned company McDonald’s (NYSE: MCD) is undoubtedly a name you’ve heard of, and with good reason: the company operates over 33,000 restaurants in 119 countries. With over $27 billion in revenue and a market capitalization near $90 billion, McDonald’s is simply a juggernaut and should continue to be a beneficiary of the global growth story happening predominately in the “BRIC” (Brazil, Russia, India, and China) countries in the years to come. Of course, those countries have not been spared the current economic carnage, and that has caused the company to miss the past two quarter’s consensus analyst’s estimates; but that has created a buying opportunity.
McDonald’s is now yielding an attractive 3.5% dividend yield; and with a low 51% payout ratio, look for the dividend to not only be safe, but be raised in the near future. Add in the fact that the company has a comparatively and historically low 16x forward and trailing P/E, and I think MCD should serve investors well for the long-term while one can wait and happily collect the nice 3.5% dividend. With the stock trading right near its 52-week low at $85.92, now might be the time to buy some shares in the golden-arches.
Fellow fast food giant YUM! Brands (NYSE: YUM) serves as a nice stock to diversify with one’s McDonald’s holding. Operating three very well-known restaurants (KFC, Pizza Hut, and Taco Bell) that in total comprised an even more impressive 38,000 restaurants as of Oct. 9, and a market capitalization exceeding $31 billion, investors can feel comfortable that the company will continue to withstand the current economic depression. Add in the fact that the company sports a nice 2% dividend yield and a very low 34% payout ratio, and investors should look for that dividend to continue to be raised.
Telecom giants Verizon (NYSE: VZ), Vodafone (NASDAQ: VOD), and AT&T (NYSE: T) are also worth considering, as they are comparatively strong companies in a rather stable industry. All three sport dividend yields far above the Fortune 500 2% average, ranging from 4.6% with Verizon to over 7% with Vodafone. The three companies also have very strong revenue bases, with AT&T leading the way at over $127 billion the past twelve months. Lastly, all three sport strong free-cash-flows, ensuring that their dividends are not only relatively safe, but likely to continue to be hiked in the coming years. I’d look to split a position three ways between these great dividend-payers as I like to take out company specific risk and have a diversified dividend stream.
I’d like to also say I appreciate you reading my thoughts and reiterate that these are just the views of the blogger and should not serve as a substitute for any professional financial advice or counsel in general. Respectful comments and questions are always welcome below on the comment board.
Wiseinvestors has no positions in the stocks mentioned above. The Motley Fool owns shares of McDonald's. Motley Fool newsletter services recommend McDonald's, AT&T;, Vodafone Group Plc (ADR), Vodafone Group Plc (ADR), and Yum! Brands. 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.