The markets are doing everything they can to crack into fresh all-time highs, and investors are rushing up the momentum mountain to capitalize on the bull run.
However, if the market has taught us anything over the past decade, it’s that a market can turn back from high levels at the drop of a hat, and with it go the momo stocks. That’s why it’s always wise to make sure you’re also targeting some high-yield, low-beta dividend stocks to buy.
Ignore the likes of Tesla Motors Inc (TSLA) and Facebook Inc (FB) right now. Some of the market’s best opportunities right now are actually boring, bargain dividend stocks that are delivering ample yield.
In the interests of seeking out a little investor protection — yes, even in the midst of a raging bull run — we’ll look at eight dividend stocks to buy that are offering nice yields and low valuations.
These are stocks that belong in any portfolio, in order of yield:
Bargain Dividend Stocks to Buy: Johnson & Johnson (JNJ)
Dividend Yield: 2.7%
Johnson & Johnson (JNJ) trades at 16.5 times FY2017 EPS, which you’ll see soon enough does not seem cheap compared to others on this list.
That does not look cheap compared to others on this list. However, when you consider the scale of its consumer business, and that competitor Procter & Gamble Co (PG) trades at 20 times forward earnings … well, JNJ stock looks a little cheaper.
Furthermore, Johnson & Johnson has a massive biopharmaceutical business that trades at the same attractive multiple, in an industry that is quite expensive, with stocks that often trade at 20 times forward earnings. So while JNJ is slightly more expensive than the others in this conversation, and its dividend of 2.7% is a little lower, you have to consider the industries in which the company operates.
You also have to consider that Johnson & Johnson should be announcing its 54th consecutive annual dividend increase sometime in the near future — so that’s a decent yield on a bulletproof payout.
Once you do that, you understand why JNJ actually made the cut as a bargain dividend stock.
Bargain Dividend Stocks to Buy: Exelon (EXC)
Dividend Yield: 3.6%
Exelon Corporation (EXC) is one of the country’s largest electric utility companies, and it is also one of the cheapest at just 13 times next year’s earnings. Meanwhile, its trailing P/E, which is roughly the same as its forward metric, is about 4 points lower than the sector average.
For the record, there is nothing particularly impressive or exciting about EXC. This is merely a defensive play against the market — one that sports a meager beta of just 0.21, which implies the stock is 21% as volatile as the broader market.
Exelon jaded investors with a big dividend cut from 52.5 cents per share quarterly in 2013 to 31 cents — a payout that has remained stagnant ever since. However, the company still yields 3.6%, and many investors believe a hike is finally on the way.
Bargain Dividend Stocks to Buy: Macy’s (M)
Dividend Yield: 3.6%
There may be not be a more iconic brand than Macy’s, Inc. (M). From its Thanksgiving parade to the world’s largest department store in Manhattan, Macy’s is a company that is built to last.
However, that does not mean it won’t face challenges.
Earlier this year, Macy’s announced layoffs and the closing of 36 stores following a pretty disappointing holiday season. That also followed a massive half-year slump that saw M shares plunge by more than half from July through the end of 2015.
However, Macy’s has bounced back aggressively in 2016, up nearly 20% — and despite that, it still yields 3.6% and trades at just 10 times next year’s earnings.
Bargain Dividend Stocks to Buy: Kohl’s (KSS)
Dividend Yield: 4.4%
Kohl’s Corporation (KSS), like Macy’s, has had a tough run as questions of store innovation, product assortment and continued pressure from e-commerce continue to pressure the stock. Over the past year, KSS has lost 40% of its stock value.
Yet despite expectations for flat sales growth this year and an anemic 1% improvement next year, KSS is expected to grow earnings in the mid-single digits by the end of 2017. Meanwhile, it trades at less than 9 times next year’s earnings, and it pays a dividend yield well north of 4% after upping its quarterly payout from 45 cents to 50 cents earlier this year.
Yes, Kohl’s has had its struggles. But it’s still a notable discount retailer that’s still trading at a discount and is expected to at least grow earnings. After its yearlong hemorrhaging, that makes KSS worth buying.
Bargain Dividend Stocks to Buy: BCE Inc. (BCE)
Dividend Yield: 4.6%
While BCE doesn’t offer the growth potential of AT&T, it still is expected to post mid-single-digit earnings growth over the next couple of years. And the company has shown a willingness to expand its business both vertically and horizontally over time.
BCE is a safe, secure holding that trades at less than 13 times next year’s earnings, and it currently yields 4.6%.
While it might not be as good as AT&T, take comfort in knowing that not much, if anything, is.
Bargain Dividend Stocks to Buy: China Mobile (CHL)
Dividend Yield: 4.6%
Another telecom that belongs on this list is China Mobile Ltd. (ADR) (CHL).
China Mobile is the king of China’s telecom market, which means it is by far the world’s largest wireless company with over 830 million total customers. While growth in China is slowing, CHL should achieve many years of expansion as it migrates 3G users are on 4G plans. Currently, just 250 million of its 820 million customers are 4G.
During its past two quarters, mobile data usage has surged 29% and 151%, and with CHL sporting a 16-month head start on its competitors with 4G, that should continue. Meanwhile, the company will benefit as capital expenditures decline and China Mobile wraps up its 4G rollout. The conversion of 3G to 4G creates a massive opportunity for long-term growth as customers consume more data, leading to consistent growth in the 5% to 10% range.
At just 13 times next year’s earnings, this outlook makes CHL too good of an opportunity to ignore — especially when there’s a 4.6% yield on offer.
Bargain Dividend Stocks to Buy: AT&T (T)
Dividend Yield: 5%
Typically, when the market turns lower, AT&T Inc. (T) is viewed as a great defensive play. But when the market goes higher, AT&T tends to struggle.
Ironically, T is up 12.6% this year, near 52-week highs amid a market that’s up 3%. The reason is because AT&T is now a growth company. After having acquired DirecTV and two telecom companies in Mexico, the company now has new opportunities in video and broadband internet technologically, as well as Mexico and Latin America regionally, to grow by double digits for many years to come, and to achieve rapid free cash flow growth.
So with AT&T, you’re getting a 5% dividend at 13 times forward earnings, as well as growth potential that plays in down markets (and apparently up markets now, too).
For that reason, AT&T might just be the single-best stock in the market right now, regardless of where the market is headed.
Bargain Dividend Stocks to Buy: HCP, Inc. (HCP)
Dividend Yield: 6.6%
HCP, Inc. (HCP) is a real estate investment trust with about 70 operating properties and more than 1,000 properties under lease. HCP’s properties are solely healthcare-related, like nursing homes, senior housing, life sciences and hospitals, all of which are rather stable businesses.
HCP has struggled of late, in large part because of performance issues with tenant HCR ManorCare, which has been suffering amid a government suit alleging that the company bilked Medicare.
Still, while HCP earnings are expected to contract this year, Wall Street believes they’ll tick back higher in 2017. And with the stock off 20% in the past year alone, plenty of negativity is already baked in.
HCP trades at roughly 12 times next year’s earnings, and at this point, it’s one of the more intriguing larger REITs on the market.
With a 6.5% yield and a history of consistent hikes to its quarterly payout, HCP is an attractive chance to take.
As of this writing, Brian Nichols was long CHL and T.