Unless you’ve been living under a rock, you know the markets haven’t been sailing smoothly lately. A variety of issues — from the trade war to the government shutdown — have made investors nervous. And with those nerves have come plenty of volatility and big swings. For investors — especially those near retirement — the volatility can cause plenty of restless nights. But there is a way to get over the malaise.
And that’s dividend stocks.
The steady stream of payments from dividend stocks can act as some ballast in the rough seas. After all, if you’re already getting a 3 to 4% return in cash, market swings may not matter as much. Moreover, reinvested dividends can provide an extra boost when the markets return to gains once again. All in all, dividend stocks can be a portfolios best friend in markets like these. The question is which dividend stocks to buy.
High yield isn’t everything. It takes a certain combination of payout growth and current yield that makes a dividend stock great. And with that, here are five dividend stocks that are perfect for the market’s current situation.
Dividend Stocks To Buy: Simon Property Group (SPG)
Dividend Yield: 4.46%
If you read the headlines, traditional brick & mortar retail is dying a quick death. However, that simply isn’t the case. Retail in non-prime areas is suffering. Those malls, power centers and shopping plazas in high-income, growing areas are thriving. And one of the best dividend stocks of the all hones in on these areas.
Simon Property Group (NYSE:SPG) is one of the largest mall operators around — with hundreds of properties across North America, Europe, and Asia. After a spinout a few years ago — before online shopping really took off — Simon became focused strictly on A or Prime retail space. Because of that focus, occupancy is a high 95% and SPG has continued to see record sales/cash flows from its tenants. Last quarter alone, its tenants saw a big 4.5% increase in their retail sales per square foot.
This has translated in a big jump for the dividend stock’s cash flows and net income.
For investors in SPG stock, its meant a long history of dividend payouts and increases. Since the recession, SPG has managed to increase its dividend by over 230%. And with the continue record results and focus on upper-income areas, those increases will continue.
With a current yield of 4.45%, Simon Property could be a wonderful dividend stock to help surf the tide of market volatility.
Dividend Stocks To Buy: Union Pacific Corporation (UNP)
Dividend Yield: 2.0%
Monopolies are great for investors. And one of few legal monopolies left in the world happens to be the railroads. That’s great news for dividend stocks in the sector like Union Pacific Corporation (NYSE:UNP).
UNP happens to have the largest rail networks in the U.S. But perhaps, more importantly, that rail network connects all the major West Coast and Gulf Coast ports to eastern gateways as well as connects to Canada’s rail system and is the only railroad serving all six major Mexico gateways. It literally covers all of North America. That’s a great place to be as other railroads need to pay UNP to use its system. Even better has been the fact that the economy has improved.
Because of this, volumes across the board have continued to rise at the railroad. And with some moves to reduce waste, improve reliability and lower taxes, UNP saw a whopping 29% increase to its per-share net income for the full year 2018. Naturally, these continued profits have resulted in a strong set of dividend increases and rich buyback program.
And while investors may get nervous because UNP is an economic play, the dividend stocks low payout ratio of 41% provides plenty of cushion for its payout.
Dividend Stocks To Buy: Apple (AAPL)
Dividend Yield: 1.89%
A lot of ink has been spilled on the state of Apple (NASDAQ:AAPL), slowing iPhone sales and perhaps the lack of recent innovation at the company. And those are all valid concerns. But looking at Apple through a different lens may be helpful. The reality is, AAPL may not be a “growth stock” anymore and that’s alright for income seekers.
Apple still sells a lot of products, but the real driver last quarter was its strong services and cloud product portfolio. Like many former tech darlings — think Cisco (NASDAQ:CSCO) — Apple is shifting its resources to the cloud. And so far, the results have been impressive. During its latest results, Tim Cook mentioned that cloud services revenue was up 40% year-over-year and the number of Apple Pay transactions more than doubled to 1.8 billion. This very important and shows that even though iPhone growth has slowed, Apple can still keep the cash flows coming as users start using apps like Apple Music, Apple Pay and iCloud.
And speaking of that cash, Apple still managed to end the quarter with more than $245 billion on its balance sheet. That’s a staggering amount of money and provides plenty of runway for Apple to develop new gear, pay dividends and even buy opportunities through M&A.
With a P/E of under 13 and 1.89%, Apple is cheap and now represents a big value. Looking at it like as you would dividend stocks, there’s a lot to like.
Dividend Stocks To Buy: Medtronic (MDT)
Dividend Yield: 2.31%
One of the best places to find dividend stocks is the healthcare sector. Demand tends to be steady in all sorts of market environments and that allows many healthcare firms to be strong dividend payers. And you can’t get much strong that Medtronic (NYSE:MDT). MDT has now been paying a steady and increasing dividend for over 40 years.
Since producing a wearable pacemaker back in the 1950s, Medtronic has become a juggernaut in the field and now offers a variety of medical appliances that hospitals need every day. This includes some very high-tech solutions to well everyday items. As a result, sales at MDT continue to be robust. The medical-device firm managed to pull in just under $30 billion in total sales last year. Increasingly, it’s been turning those sales into higher profits as it devotes more time to higher-margined, higher-tech devices. New A.I. diabetes monitors and pain stimulation devices are now on the menu.
For investors, all of these sales and better margins have continued to help the firm’s dividend growth and buyback programs. Over the last five years, the focus on higher-margined goods has allowed MDT to see annual dividend growth of 12%. Medtronic has a current yield of 2.31%.
With healthcare demand only increasing and a huge portfolio of must-have devices, Medtronic investors stand to profit over the long haul and during the current market meltdown.
Dividend Stocks To Buy: United Technologies Corporation (UTX)
Dividend Yield: 2.49%
What global slowdown? That’s exactly what investors in United Technologies Corporation (NYSE:UTX) are asking themselves after the firm’s last results. The results were splendid and showed plenty of growth. All in all, UTX managed to pull in more than $66 billion in total sales and see a huge 29% jump in its full-year profits.
Driving that has been United Technologies new forays into the “connected aerospace” sector and Industrial Internet of Things (IIoT). With software now joining traditional jet engines, margins at the firm have continued to jump. That’s resulted in a big boost to profitability and 5% increase to its dividend.
But the story at UTX isn’t just about last quarter. It’s about the future. And that’s because the firm is planning on separating into three different stocks. One will cover the fast-growing aerospace market, the other two with cover Otis Elevators/infrastructure products and heating, cooling and building automation.
For those investors looking for dividend stocks, this is great news. One stock will have a smaller yield, but potentially faster dividend growth, while the other two will larger initial yields and steadier profits. Buying UTX today gets you a whole portfolio’s worth of dividend investing styles tomorrow. Meanwhile, you’re paid to wait with UTX’s current 2.49% yield and great profit profile.
Disclosure: At the time of writing, Aaron Levitt did not hold a position in any of the stocks mentioned.