4 Dividend Stocks to Combat the Fed Rate Hike

4 Dividend Stocks to Combat the Fed Rate HikeIt’s official: we have a rate hike. It’s small, but will affect millions of investors. What should you do? Tether yourself to profits with these four sturdy dividend stocks!

Add to the rate hike continued weakness in the oil patch as prices head lower, plus a sustained lull in overseas growth markets like China and Brazil, and we’re knee-deep in a general bout of nerves as the market tries to digest it all.

Adding fuel to those smoldering fires was the 75% dividend cut announced recently by Kinder Morgan (KMI), historically one of the steadiest dividend payers in investors’ portfolios.

If dividend investors truly begin to wonder about the strength and stability of their income portfolios, the markets are in much bigger trouble than previously imagined.

Luckily, as we head in to the New Year, there are a number of dividend players with the stability of an oak tree that you can add to your portfolio.

Look to the stocks with annual raise consistency, sufficient cash flow to pay shareholders, and, just as important, business models in industries with staying power.

Here are four dividend stocks to look at for 2016 that fit the bill quite nicely…


[youtube http://www.youtube.com/watch?v=LJy_q5tlM8w?feature=oembed&w=1080&h=608]

https://www.youtube.com/watch?v=LJy_q5tlM8wBoeing (BA)

Aerospace industry giant Boeing (BA) is flying high. After booking 166 net orders for commercial jets in its third quarter, BA’s backlog grew to over $425 billion.

The good news showed up in its Q3 (September 30) financials, with revenue of $25.8 billion and earnings of $1.59 per share. Both numbers outstripped analyst estimates of $24.22 billion and $1.37 per share, respectively.

At the same time, BA raised its revenue guidance from $95 billion to $97 billion for the full year ending December 31.

With the prediction that the airline market will grow to $5.6 billion over the next 20 years, BA’s future is bright.

The company’s dividend growth over the past five years has taken its payouts from $0.42 per share quarterly to 91 cents per share (dividend yield: 2.57%).

With a payout ratio of only 44% and free cash flow (2014) of right over $5 billion, look for BA’s dividend to continue rising in 2016 and beyond.

4 Dividend Stocks to Combat the Fed Rate HikeKimberly-Clark (KMB)

For those baby boomers now aging gracefully and watching their children have children, one truism comes clearly into focus: You can never have enough diapers, baby ointment, and tissues.

Those are merely three of the products manufactured and sold by Kimberly-Clark (KMB) through its personal care and consumer tissue segments.

Kimberly-Clark is one of the more venerable names in the consumer products industry. While growth levels for the sector aren’t off the charts, what makes those in the sector successful is their branding and customer loyalty.

While brands like Huggies, Pull-Ups, DryNights, and KMB rule the baby world, Kleenex and Cottonelle products are the standard for the adult world. Throw in adult care brands like Depends and feminine care products known throughout the world, and you have a company that will continue to find ways to thrive and survive.

With its 42-year record of annual dividend increases, KMB is as good for your portfolio as it is for your health. Today’s 88 cents per share payout (dividend yield: 2.89%) is a nice (if not spectacular) 5% compound growth rate from 2012. With a payout ratio of 61%, KMB has room to continue growing.

As with most of the sector, explosive growth is not in the cards for KMB. However, the company did note in its Q3 report an expected increase in organic growth for the full (2015) year. They also guided analysts towards the higher end of expected EPS—up to $5.70-$5.80 per share compared to previous guidance of $5.65-$5.80 per share.

Investors looking for stability in dividends for 2016 will find them in KMB.

4 Dividend Stocks to Combat the Fed Rate HikeJohnson & Johnson (JNJ)

If you’re tired of hearing about the wonders of Johnson & Johnson’s (JNJ) ability to pay dividends on a quarterly basis, in addition to raising them every year for over 4 decades, you’re either a long-time holder or deliberately ignoring every investing tenet.

As we’ve pointed out before (both here and here), JNJ is the premier pharmaceutical, medical device, and consumer product company in the world. It’s built one of the biggest moats around its business through sheer scale, with over $75 billion in annual revenues and barely under $300 billion in market capitalization.

With a who’s who of products, $30 billion in cash war chest, $16 billion in free cash flow, and a 49% payout ratio, JNJ can easily head into its fifth decade of annual growth.

Today’s 75 cents per share payout (dividend yield: 2.96%) is part of its 6.6% compound annual increase since 2012.

Don’t expect that growth rate to shrink anytime soon. If JNJ isn’t part of your core dividend portfolio now, make it one before 2016, and hold on for the next 50 years…

4 Dividend Stocks to Combat the Fed Rate HikeVanguard High Dividend Yield ETF (VYM)

Surprise! An ETF play that makes the cut for your 2016 income portfolio.

Why? As David Fabian at Fabian Capital Management said, Vanguard High Dividend Yield ETF (VYM) is “the S&P 500 of dividend stocks.”

Fabian means that in a good way. Among VYM’s top holdings are ExxonMobil (XOM), Microsoft (MSFT), Wells Fargo (WFC), and General Electric (GE), which are all solid dividend plays on their own.

What makes VYM particularly attractive is its extremely low expense ratio of 0.10%, or $1 per $1,000 invested. For your money, you get the benefit of diversification in over 400 stocks.

VYM carries a 30-day SEC yield of over 3%, and pays out a steady quarterly dividend that’s grown 9.1% since 2012.

With its powerhouse lineup of dividend stocks, VYM is an outstanding holding to start your 2016 income investing.

Marc Bastow is long MSFT, JNJ and XOM.

This post originally appeared in mainstreetinvestor.com

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