The Top Dividend Stocks of 2013?

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

In the current economic times of record low interest rates and in many cases checking accounts yielding 0%, investors are left wondering where we can simply park our money and not fall victim to the dreaded I-word (inflation). High-quality dividend paying stocks seem at this time to be the best option, as two year treasury bonds yield essentially nothing nominally and negative real returns while an average S&P 500 stock yields approximately 2%. 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 to 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, as “the golden arches” are ubiquitous--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 and decades 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 quarters’ consensus estimates, but that has created a buying opportunity. With the stock trading not far above its $83.31 52-week low, McDonald’s is now yielding an attractive 3.5% dividend yield, and with a low 54% 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.

Fellow fast food giant Yum! Brands (NYSE: YUM) serves as a nice stock to diversify with one’s McDonald’s holding to take away company specific risk, and it is no slouch in size. 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 November 29, 2012 and a market capitalization exceeding $30 billion, investors can feel comfortable that the company will continue to withstand the current economic recession. Add in the fact that the company sports a nice 2% dividend yield and with a very low 34% payout ratio, look for that dividend to continue to be raised.

Consumer and personal products giant Procter & Gamble (NYSE: PG) is another great company, much like McDonald’s, which will benefit from the rising middle glass. With a number of well-known products such as Tide detergent, Head & Shoulders shampoo, Duracell batteries, and Crest toothpaste, Procter has immense brand value along with being a great beneficiary of economies of scale as it churns well over $80 billion in annual revenue.  Perhaps most enticing is the company’s sizable 3.3% dividend yield and its fantastic history of annually raising the dividend for almost 60 years (it has been paying a dividend since 1893!). In addition, with a relatively small 61% payout ratio, look for the dividend increases to continue along with a growing share price as the company continues to gush out immense profits.

 

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 owns shares of The Procter & Gamble Company. The Motley Fool owns shares of McDonald's. Motley Fool newsletter services recommend McDonald's 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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