5 Unsteady Dividend Stocks That Will Win Longer Term

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dividend stocks - 5 Unsteady Dividend Stocks That Will Win Longer Term

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The last few weeks haven’t exactly been that great for investors. Thanks to a variety of factors, volatility has returned with a vengeance and we’ve actually seen some big intraday price swings and declines. In fact, the S&P 500 is barely positive on the year and is more than 6% below its peak reached at the end of January. And that decline has hit all matter of equities.

This includes some pretty great dividend stocks.

There are now plenty of dividend stocks that have wonderful long-term futures that have only been blurred by the recent downturn and volatility. There’s nothing wrong with them, their cash flows or other important dividend-related metrics. It’s simply a case of overall market volatility hitting hem hard. For patient investors, snagging up shares of these stocks now and collecting their dividends makes a ton of sense.

With that, here are five recently unsteady dividend stocks with great futures.

Dividend Stocks That Will Win Longer Term: 3M Co (MMM)

3M MMM stock

Dividend Yield: 2.5%

After being one of the Dow’s biggest gainers last year, global industrial giant 3M Co (NYSE:MMM) has turned into a real loser in 2018. Shares of the former Minnesota Metals & Mining are down over $30 per share since hitting their peak back in January. However, that drop could be exactly what investors need to start buying 3M in spades.

Despite the recent trade war issues, 3M’s global focus and mega-sized product catalog are exactly what investors want over the long haul. This allows its profit from a variety of regions and sectors — no matter who/what is doing well. This broad net has allowed 3M to continue to reap higher cash flows. Last year, free cash flows came in at $6.2 billion.

With the strengthening global economy and 3M’s focus on higher-margined products in healthcare and industrial applications, there’s no reason why the firm couldn’t continue to deliver on similar free cash flows. And its management is counting on that fact.

3M has long been one of the best dividend stocks, but with a 16% jump in its payout this year and its drop in price, shares now yield a 2.5% — a mark not seen in years.

For investors, 3M’s long-term is certainly rosy, while the price is right in the near term.

Dividend Stocks That Will Win Longer Term: UPS (UPS)

ups stock

Dividend Yield: 3.3%

Rising online sales have been a boon for logistics giant United Parcel Service, Inc. (NYSE:UPS). Except there is one problem — there have been too many online packages. UPS has continued to suffer as the lumpiness of online ordering has hurt margins and its bottom lines And that lumpiness has actually caused major customers like Amazon.com, Inc. (NASDAQ:AMZN) to consider other delivery options.

As a result, UPS stock has plunged in a big way.

But the outlook is still pretty good for UPS and the recent dip could offer a big buying opportunity.

For starters, rising online sales is still benefiting the firm, and while it can’t squeeze Amazon on pricing, it can for smaller firms. That should help its bottom line overall and reduce the damage. Secondly, rising business shipping — thanks to the growing economy — is also helping. Add in a dose of tech spending and UPS’s outlook is much brighter. Analysts expect the firm to earn 7.29% more in earnings per share next year based on these trends.

With a forward P/E of just 15 and a 3.3% dividend yield, UPS is priced for perfection after the drop.

Dividend Stocks That Will Win Longer Term: Realty Income (O)

REITs

Dividend Yield: 5.1%

The Federal Reserve is providing some big-time opportunities among dividend stocks as well. Thanks to its continued pace of interest rate hikes, high yielding securities like REITs have suffered greatly. Often for no reason other than investors leaving, for now, higher-yielding bonds. The cash flows and dividend potential are still there.

And having the most potential could be dividend stocks superstar Realty Income Corp (NYSE:O).

O owns a staggering 5,100-plus freestanding retail properties across the entire U.S.  This includes everything from convenience stores and restaurants to movie theaters, and automotive parts/services centers. The best part is that these properties are triple-net leased. That pushes much of the property maintenance and tax costs onto the renters rather than Realty Income. This produces crazy high margins and cash flows for O.

That has benefited its investors as the firm has increased its dividend for the last 82 straight quarters.

With its share price dropping, O now yields an absolutely delicious 5.1%. its yield hasn’t been that high in nearly a decade and its financial/cash flow picture has only gotten stronger.

Dividend Stocks That Will Win Longer Term: Southern (SO)

Southern Company SO

Dividend Yield: 5.2%

Like REITs, other dividend stocks have suffered thanks to the Fed. This includes top-notch utilities like mega-giant Southern Co. (NYSE:SO). Shares of SO have sunk about 13% since its peak at the end of 2017. Investors have been worried about the prospects of traditional utilities as energy prices and electricity demand have started to fall. Add in the lowered rates and you can see how SO has been abandoned.

But Southern is more than just a provider of electricity.

A few years ago, Southern purchased pipeline and gas supplier AGL Resources for a cool $12 billion including debt. That’s turned out to be a smart move for SO investors. Aside from expanding its focus and customer base, it gave Southern plenty of intrastate pipelines that produce steady cash flows. As natural gas continues to get the nod from customers and other utilities, SO stands to profit no matter what the stock market and Fed is doing.

This has shown up in the firm’s continued dividend growth since the AGL buyout. Southern recently upped its payout by another 4% — its 17th straight annual increase. SO now yields 5.2%.

Aaron Levitt is an investment journalist living in Ohio. With nearly two decades of experience, his work appears in several high-profile publications in both print and on the web. Also likes a good Reuben sandwich. Follow his picks and pans on Twitter at @AaronLevitt.

For investors looking for a top-notch utility, the recent downturn has made Southern very attractive.

Dividend Stocks That Will Win Longer Term: International Business Machines (IBM)

Dividend Stocks That Will Win Longer Term No. 5: International Business Machines (IBM)

Dividend Yield: 3.8%

The tech surge seemed to pass sector stalwart International Business Machines (NYSE:IBM) right on by. As investors favored fast movers, dinosaurs like IBM has been left in the dust. In fact, things have been so bad at IBM, market pundits have continued to joke about the firm’s multi-year declining revenues. So needless to say, its share price has suffered even before the recent downturn.

But IBM investors today may have the last laugh.

The revenue drought may be over as IBM managed to report higher revenues in the fourth quarter of 2017. Revenues jumped 4% year over year as the firm finally started to see growth at its mainframe/server businesses, though IBM has cautioned that boost will not continue. Meanwhile, mobile, analytics and cloud solutions have finally started to pull their weight at the firm. This is great news for long-suffering shareholders and shows the firm’s turnaround is finally starting to pay benefits. It continued this week, as Q1 revenues were up 5% YOY, and while that is largely thanks to a one-time tax benefit, IBM does seem to be righting the ship.

With IBM finally starting to get cooking, its dividend picture is looking better as well. IBM’s free cash flows came in at $6.8 billion, while it only paid out $1.7 billion in dividends. That leaves plenty of room to keep the dividend going and growing.

With a yield of 3.8%, IBM represents one of best dividend stocks in tech and the opportunity for future gains is there.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/5-unsteady-dividend-stocks-will-win-longer-term/.

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