Decent dividend yields—a high annual yield can be deceptive because it’s hard to sustain. But the yield should be substantially higher than benchmark dividend sources such as the S&P 500 (recently 1.37%) and the 10-year US Treasury bond yield (recently 1.5%).
Dividend growth—to stay ahead of inflation, I look for increased payouts over many years.
Catalysts for the next decade that can generate strong earnings growth.
Attractive valuations relative to the stock’s own long-term history using measurements such as price-to-earnings ratio (P/E).
MY FAVORITE DIVIDEND-PAYERS NOW
Adding one or more of the following stocks to your portfolio can increase stability and improve your income and chances for solid returns…
AbbVie (ABBV). This giant drug company has increased its dividend payouts for 49 consecutive years. Its stock price has been hurt by the impending patent expiration of its blockbuster drug Humira, but investors are underestimating the potential of its recent acquisition, Allergan (maker of Botox), and a strong pipeline of new immunological drugs. Warren Buffett scooped up about $1.8 billion worth of AbbVie stock late last year. Recent yield: 4.5%.
Aflac (AFL). You’ve seen the lighthearted TV ads with the quacking duck, but the company is a global juggernaut, underwriting supplemental health and life insurance policies for more than 50 million people. AFLAC has made a big bet on pet insurance, which should pay off in the next decade because cats and dogs are increasingly seen as family members that need health-care protection, too. Recent yield: 2.4%.
Consolidated Water Co. (CWCO) operates seawater-desalination and water-treatment plants in the Caribbean, Indonesia and the US to produce up to 70 million gallons of water daily. The company, which is expanding into more global markets, will benefit from the chronic shortage of drinkable water. By 2025, half of the world’s population is expected to be living in water-stressed areas. Recent yield: 2.9%.
M&T Bank Corp (MTB). This mid-Atlantic regional bank, founded in the 1850s, now has more than 1,100 branches in 12 states stretching from Maine to West Virginia. The February 2021 acquisition of Connecticut-based People’s United Financial makes M&T the 11th largest bank in the country with more than $200 billion in assets. Recent yield: 2.8%.
Omnicom Group (OMC), the world’s second-largest advertising agency, has paid uninterrupted dividends since it was formed in 1986. It is benefiting from the massive shift from analog advertising, such as print, TV and billboards, to digital advertising and marketing. Omnicom’s Fortune 500 clients increasingly need to reach consumers through e-mail, social media and other digital means. Recent yield: 3.3%.
PepsiCo (PEP). Twenty-three of the company’s brands including Doritos, Lay’s and Quaker Oats garner more than $1 billion in revenues a year. During the pandemic, PepsiCo added to its burgeoning energy-drink empire with the acquisition of Rockstar Energy Beverages. It also has partnered with the alternative meat company Beyond Meat to create plant-based protein snacks. PepsiCo raised its quarterly dividend by 5% in 2021, making 49 straight years with an increase. Recent yield: 2.9%.
Phillip Morris International (PM). Many investors shun companies involved in manufacturing cigarettes. But for those who don’t mind, this leading international tobacco company, which was spun off the US company Altria in 2008 to protect its assets from federal and civil lawsuits, sells more than 130 different brands abroad including Marlboro and Parliament. About onequarter of the company’s total revenue now comes from reduced-risk, smokefree tobacco products such as IQOS, which heats tobacco to create a vapor instead of burning it, reducing the release of harmful chemicals. Sales of heated tobacco products were up about 40% in Europe in the first quarter of 2021 year over year. Recent yield: 4.9%.
Public Storage (PSA) is the undisputed market leader in self-storage facilities, operating more than 150 million square feet of space in 38 states. The long-term need for self-storage accelerated during the pandemic as millions of people relocated or downsized their possessions to accommodate working at home. Performance should continue to be especially strong in West Coast markets where zoning laws and high-priced land restrict new supply of storage facilities. Recent yield: 2.7%.
Texas Instruments (TXN) is a world leader in “dumb tech.” The 91-year-old company manufactures 80,000 different types of basic analog semiconductor chips, which are designed to control simple processes such as on-off power management and sound and thermal control in consumer electronics and automotive and industrial products. It’s not as exciting as the sophisticated digital semiconductors such as processors made by Intel, but it is immensely profitable. Texas Instruments churns out tens of billions of chips annually. That number is likely to increase because analog chips are key components in the massive array of new electronic devices ranging from door locks to high-tech clothing. Recent yield: 2.3%.
Tyson Foods (TSN) produces onefifth of all the beef, pork and chicken in the US, including popular store brands such as Jimmy Dean and Hillshire Farm. Tyson has two major catalysts for growth in the next decade—a plantbased chicken line made from pea protein called Raised & Rooted that currently sells in 10,000 US grocery stores…and burgeoning international sales that make up less than 20% of the company’s annual revenue. Tyson recently received approval from the Chinese government to sell chicken and pork to mainland China, where meat production has been hurt by bird and swine flus. Recent yield: 2.3%.