Flowers are starting to bloom. The sound of lawn mowers is beginning to fill the air. And the weather is getting warmer. That means it’s time to start hearing about how we should “sell in May and go away.” But that old adage continues to be a load of baloney. The truth is, the calendar has little to do with the actual outcome for the markets. Fundamentals matter more. And the right now, the fundamental picture is bullish with a side of caution.
Which means dividend stocks could be the best plays of the summer.
Thanks to their steady payouts, dividends stocks are naturally less volatile than their non-paying peers. Moreover, if the old market adage holds true this summer, getting a 2% to 4% return in cash is better than no return at all. The combination of these two factors can make dividend stocks some of the best places to park your money as the spring sets in and the weather heats up.
But which dividend stocks? Here are five top-notch stocks to buy that should provide a whole summer full of gains.
Dividend Stocks to Buy: Iron Mountain Inc (IRM)
Dividend Yield: 6.8%
Data. From companies to individuals, we make a ton of it these days. And storing it, in both physical and digital forms, happens to be one of the best dividend stocks around in Iron Mountain (NYSE:IRM).
IRM is the largest records storage provider in the world and operates more than 1,400 facilities around the world. This is more 85 million square feet of space dedicated to document storage. This includes its irreplaceable wholly owned salt caverns used for critical document storage to smaller safe-like facilities. Key customers include nearly everyone in the Fortune 1000 as well as various government organizations. With retention rates as high as 98%, IRM is able to pull in some hefty cash flows from the “rent” it charges these customers.
Even better is that Iron Mountain has continued to adapt with the times.
While physical document storage is still required, today’s digital age requires a different set of storage. To that end, IRM has begun to offer cloud and digital hard drive access for its clients. In fact, the firm has now moved into the top ten in terms of capacity. Given its leadership position in storage, it’s easy for firms to make the pivot into these digital offerings from IRM and growth remains brisk. Even better is that these digital storage offerings often come with heftier margins for Iron Mountain.
All of this has done wonders for IRM’s dividend which currently stands at 6.8%.
General Mills (GIS)
Dividend Yield: 3. 8%
There’s power in a bowl of Cheerios … well, at least enough for those investors looking at dividend stocks. Packaged food manufacturer General Mills (NYSE:GIS) has used brands like Totino’s, Lucky Charms and Yoplait to power its dividend for decades. In fact, it managed to raise that dividend annually for the last 15 years straight. And it looks like GIS will keep the streak going throughout the summer and far into the future.
Thanks to a smart turnaround plan, GIS has regained its mojo in a big way.
First, the firm has used its top brands to add extensions into new products. Secondly, General Mills has leaned heavily on organic/natural brands for additional growth. Blue Buffalo pet food, Annie’s organic and Cascadian Farm are now leading drivers at the food firm. Finally, if couldn’t develop its own, General Mills has been a smart acquirer of smaller and scalable food brands in key niche markets. A hefty dose of price increases for these premium products has hurt either.
All of this has helped boost the firm’s bottom line. Adjusted EPS for the most recent quarter jumped by more than 6% in constant currency, while free cash flows have surged. With these continued improvements, GIS has upped its guidance for the rest for the year and management has pledged to reward shareholders.
Given its recent wins and steadfast nature, GIS could be one of the best dividend stocks to buy for summer.
Tractor Supply Company (TSCO)
Dividend Yield: 1.2%
It’s no secret that retail is a bloodbath these days, as online shopping and kingpins like Amazon (NASDAQ:AMZN) have hurt smaller competitors. But there are plenty of retailers operating in strong niches immune from Amazon’s wraith. To find one of the best examples, head west into big sky country.
Tractor Supply Company (NASDAQ:TSCO) operates more than 1,700 stores serving farmers and more rural Americans. The beauty is that many of TSCO’s offerings aren’t the sort of thing you log into Amazon.com to buy. Farm gates, barbed wire and tractor attachments aren’t easily shippable and often, customers need these items today. Because of this, Tractor Supply continues to see a steady and rising base of sales. Last year, TSCO pulled in more than $7.9 billion in revenues.
That profitable niche has made TSCO one heck of a dividend stock as well. Since 2010, Tractor Supply has managed to grow its dividend payout by a staggering 757%.
And that growth will continue. TSCO plans on opening more stores to meet the needs of rural customers. Meanwhile, its newly acquired PetSense brand of stores has quickly seen plenty of growth. Like Tractor Supply, PetSense focuses on the rural marketplace- a niche that is often ignored from other major pet retailers. Together, the two stores form an interesting and Amazon-proof play.
A play that will pay plenty of dividends going forward.
Microchip Technology Inc (MCHP)
Dividend Yield: 1.5%
Technology is everywhere these days, from your car and phone to even your toaster. And most modern tech, no matter how complex, is built on the backbone of semiconductors. Microchip Technology (NASDAQ:MCHP) has been building those chips and paying a dividend for years.
MCHP produces a host of analog and microcontroller semiconductors. These are the boring building blocks of the modern world. But boring is beautiful when it comes to dividends and cash flows. Microchip sells a ton of these to a variety of end-users. And it continues to sell more as the world modernizes. Last quarter, revenues jumped 18.1% sequentially and 41.5% from the year-ago period. This was another record quarter for the firm. Meanwhile, profits continue to rise as well.
Part of that comes from MCHP’s continued pivots into more advanced semiconductors. These include new automotive power, battery/green technologies and networking chips. The extra boosts here plus the firm’s steady cash flows from its analog business has continued to make it a dividend champion.
MCHP has been paying a dividend since 2003 and with its latest increase, Microchip has raised its dividend 58 times by a total of 1,725%
At the end, when it comes to dividend stocks, MCHP has the goods to keep the payouts rolling.
Invesco High Yield Equity Dividend Achiever ETF (PEY)
Dividend Yield: 3.8%
Perhaps the best way to score some great dividend stocks is to own them all. A great to do that is through the Invesco High Yield Equity Dividend Achievers ETF (NYSE:PEY).
PEY tracks the NASDAQ US Dividend Achievers 50 Index. This index holds fifty U.S. stocks that have not only high initial yields, but also show consistent growth in their dividend payouts. This eliminates those stocks that have high yields because of problems. You get both a good yield today and income that grows tomorrow. Top holdings include stalwarts like Dominion Energy (NYSE:D) and Quamcomm (NASDAQ:QCOM). The combination of stocks produces a decent 3.8% dividend yield. An added bonus for retirees is that PEY pays its dividend monthly.
Even better is that PEY has been a top performer among other ETFs tracking dividend stocks.
PEY has managed to best the more popular iShares Select Dividend ETF (NYSE:DVY) and its underlying index — the Dow Jones US Select Dividend Index — by about two basis points over the last decade.
In the end, those investors looking to load up on dividend stocks for the summer, PEY could be a great all-in-one solution. Expenses for the ETF run at just 0.54% or $54 per $10,000 invested.
At the time of writing, Aaron Levitt was long AMZN.