Even though I’ve discussed several dividend stocks to buy over the years, I’m not much for passive income. Don’t get me wrong: like any other rational person, I’ll take a payout any day. But when it comes to dividend stocks, they’re not my most favorite investment vehicle.
For one thing, I tend to swing for the fences. While some dividend stocks to buy have strong upside potential, the companies that provide reliable payouts tend to be boring. However, some recent events suggest that I may need an attitude adjustment.
Primarily, Wall Street is getting very bullish off yet-to-materialize catalysts, such as a resolution to the U.S.-China trade war. Apparently, most investors have forgotten that we’ve endured several head-fakes during this journey that has encompassed more than a year and a half. While a trade deal is possible, so is another setback. Either way, I like the idea of protection with dividend stocks to buy.
Second, not all fundamentals are supportive of extreme positive sentiment in the markets. For example, baby boomers are facing a retirement crisis, with an alarming number having not saved for their golden years. The money to take care of senior citizens has to come from somewhere, pressuring an already strained system.
Plus, we have an ongoing student debt crisis, leaving both ends of the adult demographic spectrum in dire straits. Thus, in many ways, the explosive market sentiment makes no sense. To give yourself a balance of upside potential and protection, take a look at these nine dividend stocks to buy:
Dollar General (DG)
Dividend Yield: 0.8%
Shortly after Dollar General (NYSE:DG) released its earnings results for its second quarter of fiscal 2020, DG stock took off. Since then, shares have held steady, usually above the $155 technical support line.
I’m not surprised. In addition to beating out expectations for earnings per share, same-store sales increased faster than analysts anticipated. And that’s one of the great mysteries of the markets: if the economy is doing so well, how come more people are shopping at Dollar General, thereby driving up DG stock?
The answer is that not everything is what it seems. Typically, conservative investors go by the adage, “don’t fight the tape.” In this case, I wouldn’t fight the same-store sales. Although DG isn’t among the highest-yielding dividend stocks to buy, it can help support your portfolio in lean years.
Dividend Yield: 1.2%
One of the arguments that I raise about recession-resistant stocks to buy is that companies levered toward the broader entertainment industry have excellent potential. Essentially, we can all use a pick-me-up, especially during troubled times. And that’s why I’m bullish on Disney (NYSE:DIS) and DIS stock for 2020.
As you know, the Magic Kingdom made headlines late last year when it announced their streaming service called Disney+. They grabbed more front covers when it announced pricing: a ridiculously low $7 a month. Even if it’s only temporary, at the very least, it’s an attention-grabber for DIS stock.
Not only that, Disney has an almost unassailable content empire. In mid-November, I took the plunge on Disney+ and so far, I’m impressed. It just needs a little more content geared toward adults, which would make it a true streaming superpower.
Papa John’s Int’l (PZZA)
Dividend Yield: 1.5%
To this day, I’m very confused what happened with former Papa John’s (NASDAQ:PZZA) CEO John Schnatter. Out of nowhere, Schnatter uttered a racial slur that you absolutely cannot say in the workplace, irrespective of context. Because of this controversy and the ensuing drama, PZZA stock absorbed serious volatility.
However, shares are on a comeback trail and I think it’s time to consider Papa John’s as a potentially viable candidate for dividend stocks to buy. For one thing, Schnatter is out of the company so management can effectively rebrand the organization. And it’s doing exactly that, bringing in top-level executives to bring fresh energy to Papa John’s.
While rival Domino’s Pizza (NYSE:DPZ) may evidently taste better, I believe PZZA stock offers a better investment opportunity. Typically, it’s easier for an equity to move back toward prior highs than to set new ones. In other words, Papa John’s has a realistically higher ceiling.
Johnson & Johnson (JNJ)
Dividend Yield: 2.8%
Speaking of ugly controversies among dividend stocks to buy, we have embattled pharmaceutical company Johnson & Johnson (NYSE:JNJ). In some ways, JNJ stock is a corporate tragedy. An iconic and trusted American brand, Johnson & Johnson made shocking headlines when it allegedly knowingly sold talcum powder tainted with asbestos.
Adding to the woes for JNJ stock, the underlying company is also embroiled in the ongoing opioid crisis. To finally put this contentious issue to rest, the pharmaceutical offered a $4 billion litigation settlement. While shares have been choppy throughout this year, in the long run, this may be the best decision.
With the settlement out of the way, analysts have a more predictable pathway for JNJ stock. Further, pharmaceutical controversies have a tendency of fading with time, which would obviously benefit Johnson & Johnson.
American Electric Power Company (AEP)
Dividend Yield: 3.1%
American Electric Power Company (NYSE:AEP) reflects the stereotypical image of dividend stocks to buy: they’re stable, reliable and boring. But they’re also incredibly relevant and AEP stock is primed to become even more so. With developed societies everywhere embracing concepts such as the Internet of Things and the broader digitalization movement, American Electric Power enjoys ample revenue-making opportunities.
Plus, boring and reliable are desirable attributes in the current market environment. Although the major indices have moved higher to record-breaking levels off positive trade war developments, we honestly don’t know what we’re going to get. If either side breaks away from negotiations, we could then see an opposite effect. In that case, I like the protection that AEP stock provides.
General Mills (GIS)
Dividend Yield: 3.7%
I imagine when most people think about dividend stocks to buy, they’re thinking about companies like General Mills (NYSE:GIS). A specialist in snack foods and breakfast cereals, General Mills is a stalwart in the broader food industry. However, it has also grown somewhat irrelevant with the latest dieting and health food trends, pressuring GIS stock.
Call me a skeptic, but I have trouble digesting American dieting statistics. Supposedly, we’re one of the healthiest societies due to our avoidance of sugary beverages and processed foods. Yet we’re consistently getting heavier, leading many experts to claim that we’re suffering from unprecedented obesity.
Because of this clash of fundamentals, I see a case for GIS stock returning to prominence. Therefore, don’t overlook this company when researching dividend stocks to buy.
Dividend Yield: 4%
With the push for and development of alternative energy vehicles, Chevron (NYSE:CVX) seems like an increasingly irrelevant name among dividend stocks to buy. For example, with electric vehicles and hydrogen fuel cells becoming an everyday reality, CVX stock is fighting against “Father Time.”
But in the case of EVs, I realized that our electrical infrastructure cannot accommodate them for some time. We’ve all seen the images and footage from the most recent California wildfires. Even without the extra surge in demand, our utility companies have trouble ensuring properly working equipment. I’m not sure how adding millions of EVs to the grid will help this cause.
Second, hydrogen fuel cells also have similar infrastructural problems. Economically, implementing hydrogen refueling stations beyond a few handful doesn’t make sense. What does make sense? CVX stock.
Dividend Yield: 4.1%
When I want to get my daily fill of racism, I go to Verizon (NYSE:VZ)-owned Yahoo. In the comments section, you can enjoy a constant barrage of unmitigated vitriol and hatred. Even better, this is probably a true reflection of many parts of America. Under the cloak of anonymity is where we find out how people really feel.
Now, why would I mention such a horrible thing in relation to VZ stock? Simply, I think the Yahoo brand may be riding a possible comeback.
First, Yahoo got a rebranding just a few months ago. If Verizon wasn’t interested in doing anything with the site, I don’t see why they should expend the effort. Second, Yahoo provides an outlet for angry people. And that’s going to be a huge deal when the 2020 elections roll around.
Therefore, I think VZ stock may benefit from a surprising Yahoo resurgence. If not, you can always bank on the real reason to buy shares: it’s one of the more stable and generous dividend stocks to buy. Plus, the 5G rollout makes VZ a compelling opportunity.
Altria Group (MO)
Dividend Yield: 7.2%
Understandably, Altria Group (NYSE:MO) isn’t everyone’s favorite company right now. Due to the vaping crisis that has swept the nation, Altria is public enemy number one in some circles. Yet as one of the highest-yielding dividend stocks, MO stock is a risky but compelling name.
Primarily, the explosion of vaping-related illnesses and deaths that initially sank MO stock is now fading into the rear-view mirror. In late October, I said the math looked bright for Altria because these incidence rates have declined growth-wise. As of Nov. 15, we have 2,172 illnesses and 43 deaths.
About a month prior, we had 33 deaths, which represents a 30% increase in fatalities. But in the one-month comparison between mid-September to mid-October, the fatality rate jumped more than 312%.
Subsequently, MO stock has been rallying since early October. Though cynical, I believe this is a genuine turnaround.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.