[Editor’s note: “7 S&P 500 Dividend Stocks to Buy With Yields of at Least 3%” was previously published in June 2019. It has since been updated to include the most relevant information available.]
In June, I read an article about Target (NYSE:TGT) that couldn’t stop talking about the discount retailer’s healthy dividend yield, which was yielding 3.15% as of Friday’s close. While anything above 3% certainly can’t be ignored, it turns out that 134 S&P 500 stocks currently offer a dividend yield of 3% or higher.
So, the 3% yield isn’t nearly as unique as many investors believe. For some investors, that means it might be smarter to consider ETFs that focus on dividend yields as part of their stock-selection process.
There are two high-dividend ETFs that focus on the S&P 500.
The first is the Investco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD). It focuses on the 50 S&P 500 stocks that historically have provided high dividend yields and low volatility. The second is the SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA:SPYD), which owns 80 high dividend-yielding S&P 500 stocks.
Either of these could do the trick.
However, this is an article about individual stocks to buy, so I’m going to pick at least three S&P 500 dividend stocks from each of the two ETFs that are currently yielding 3% or more.
Ford’s got too a great deal of upside potential, including a move into electric vehicles that should see a good chunk of its fleet electrified by the end of 2022.
Yielding 6.3% and generating plenty of free cash flow, Ford stock is a great play for dividend investors.
In recent years, Altria’s become known more for its acquisitions outside the cigarette industry, than anything it’s done in its core business.
On June 3, Altria announced that it was buying 80% of a Swiss smokeless tobacco company, whose smokeless oral pouch On is already sold in the U.S. Paying $372 million for Burger Sohne, it’s adding another non-combustible product to the Altria portfolio.
In the past year, Altria’s paid almost $15 billion to buy a minority stake in e-cigarette maker Juul Labs and a 45% interest in Cronos Group (NASDAQ:CRON), one of Canada’s largest cannabis companies.
Altria’s doing everything it can to ensure that when the cigarette industry dies its ultimate death, these new areas of business will more than compensate for the loss of sales in its legacy business.
Altria’s another reliable generator of free cash flow virtually ensuring the long-term payment of its $3.20 a year dividend.
Kimco Realty (KIM)
One of the oldest REITs in the U.S., it owns more than 400 shopping centers across the country, providing more than 61 million square feet for potential tenants.
For those who might be worried about a REIT involved in the retail industry, Kimco’s made sure to get tenants that are changing with the times. Not to mention its shopping centers are located in major metro markets, with 77% of its revenue coming from grocery-anchored malls.
In addition, Kimco does a good job diversifying its tenants. It currently has 7,900 leases with 3,700 tenants with the top 12 tenants generating just 22% of its annualized base rent (ABR).
The area where investors should focus on is the work Kimco’s doing to redevelop some of its malls and shopping centers. In 2021 and beyond, it expects to invest up to $250 million annually to add additional retail and mixed-use redevelopments to existing properties.
As the markets begin to lose their luster, stocks like KIM will deliver nice dividends for its shareholders even if the capital appreciation isn’t always there.
Target was yielding 3.15% as of Friday’s close, making it the 124th highest yielding S&P 500 stock. Barely making it on to the list, I picked Target’s stock because it appears to be on a bit of a roll in 2019.
The discount retailer’s latest quarterly results were better-than-expected beating revenue estimates by $140 million and earnings by nine cents a share. However, it was the retailer’s same-store sales growth (+4.8%) and online revenue growth (+42%) that really stood out for investors.
Not only did online sales grow by 42% in the quarter, they now account for 7.1% of Target’s overall sales, 190 basis points higher than a year earlier. To be truly omnichannel, it’s got to get to double digits, something I expect it will do by the end of the fiscal year.
As a result of its Q1 2019 results, CEO Brian Cornell suggested that Target is “well positioned to deliver strong financial performance in 2019 and beyond.”
Target expects to earn $5.90 a share in 2019 with same-store sales growth in the low- to mid-single-digits.
The investments the company has made in its stores, e-commerce, and supply chain are starting to pay off. As long as the economy remains strong, Target stock could see $100 by the end of the year, making it a prime stock to buy.
Public Storage (PSA)
Public Storage (NYSE:PSA) was yielding 3.13% as of Friday’s close.
As the tariff wars continue to heat up, investors continue to seek out investments that aren’t going to be affected by tariffs on imported Chinese and Mexican goods. One area that stands out as a safe haven is the self-storage industry, an industry that benefits from America’s love affair with junk.
Public Storage’s business has always been an attractive one because it’s part self-storage facility and part real estate investment. PSA has 2,444 self-storage facilities in 38 states amounting to 164 million square feet of rentable space. It also owns 35% of European self-storage leader Shurgard, which owns 231 facilities offering 13 million square feet of rentable space.
If you look at its balance sheet from the quarter ended March 31, you’ll see that Public Storage’s real estate is valued on its books at $9.3 billion excluding accumulated depreciation. That’s just 1.6% higher than a year earlier.
There’s a reason for that.
The numbers on the balance sheet reflect the cost of the land and its buildings, not the market value they’d generate if they were sold. As the parking lot business, self-storage facilities are a great way to generate income from the real estate until the value becomes such that it’s worth more to a developer for apartments, offices, and mixed-use facilities.
To be paid 3.13% to wait for the real estate to mature is an outstanding deal.
Coty (NYSE:COTY) was yielding 4.9% as of Friday’s close.
The company is in the early stages of a turnaround that began by moving Pierre Laubies into the CEO job in November 2018, followed by the hiring of a new CFO in January 2019. The two executives will lead a conference call on July 1 that will cover the critical components of their turnaround plan.
As part of the plan, Coty will look to simplify its business to reduce the supply chain problems it’s experienced in the past year. Although revenues and earnings are down in 2019, Coty managed to generate free cash flow of $120.5 million in the first nine months of fiscal 2019, a considerable turnaround from the negative free cash flow of $129.8 million in the first nine months of 2018.
Slowly, the business is improving and aCoty stock, up 58% in 2019, reflects that. Despite the upturn, COTY is still a stock to buy.
General Mills (GIS)
General Mills, like many large packaged foods companies, has suffered in recent years from a move to more healthy alternatives. And while most of the big players have tried to adapt to the new order, they’ve got a ways to go before they’re back on top.
At General Mills, it took CEO Jeff Harmening’s promotion to the top job in June 2017 to get the ball rolling. But even he’ll admit the transformation isn’t nearly done.
“What I’m most proud of is… the change in culture… We’ve brought in a lot of people from outside of the organization who have added a lot of value in things like strategic revenue management and global sourcing and ecommerce, and a new chief marketing officer [Ivan Pollard, who came from Coca-Cola North America in July 2017, and is building a global marketing/media planning structure]. And we’ve blended [them] with our internal talent,” Harmening stated recently in an interview.
General Mills continues to invest in its e-commerce business, which could represent as much as 10% of its sales within five years.
As for acquisitions, its multi-billion purchase of Blue Buffalo pet foods has been a hit with both e-commerce and the mass retail channels.
As it continues to transform its business, shareholders should see GIS stock move even higher.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.