You don’t grab a falling knife. But you don’t want to pass up a bargain. The coronavirus from China has revealed a host of potential bargains in the market’s minefield. Let things settle. Wait for a nothing day with the market closing slightly higher, and some (but not all) of the panic to go away. Then, assuming you still have some cash, pounce on some dividend stocks.
With the 30-year bond trading at 1.8%, and the 10-year at 1.2%, any stock offering regular income is a bargain. Look for companies with a track record of defending their dividends, and enough earnings to sustain them.
The Income Rack
AT&T (NYSE:T) is not one of my favorite companies. But it opened for trade Feb. 28 at about $35 per share. This means the 52-cent-per-share dividend now yields 5.82%. The telecom space is filled with fat dividends. Verizon (NYSE:VZ) yields 4.3% today. Vodafone (NYSE:VOD), which is still big internationally, yields 5.37%.
Just don’t reach too far for yield. If the business smells a bit off, a fat yield won’t change things. CenturyLink (NYSE:CTL), for instance, yields 7.84%, but it’s losing money. I have the same problem with the oil patch. Exxon Mobil (NYSE:XOM) is now yielding 6.56%, but it costs $14.7 billion to pay that out. Last year, it made just $14.3 billion.
There are bargains in tech stocks, like International Business Machines (NYSE:IBM). It’s offering a yield of 4.87% today. You won’t get that from your bank. Or consider Cisco Systems (NASDAQ:CSCO), now trading at under $40 per share with a yield of 3.6%.
Speaking of banks, do you know that Wells Fargo (NYSE:WFC) is yielding 4.62% as trading opens? It earns that back twice over. Truist Financial (NYSE:TFC), formerly Suntrust and BB&T, is now yielding 3.55%, and Regions Financial (NYSE:RF) is yielding 4.25%. You might also look at insurers such as Prudential Financial (NYSE:PRU), yielding 5.37%,
Over on the pharmacy aisle, CVS Health (NYSE:CVS) is yielding 3.35%, and Walgreens Boots Alliance (NASDAQ:WBA) is yielding 3.84%. Among retailers, Target (NYSE:TGT) now yields 2.39%.
Some of the best bargains are the data center real estate investment trusts. These are real estate companies whose warehouses are filled with servers and fiber cables, providing vital interconnects for the cloud internet. The market has favored them for years, but they’re now on sale at 10% off. Digital Realty Trust (NYSE:DLR) now offers a yield of 3.55%. CyrusOne (NASDAQ:CONE) yields 3.02%. Crown Castle International (NYSE:CCI), which rents cellphone towers, yields 3.23%.
I know there are people suggesting consumer staples are what you should buy. I find my WiFi connection more essential than ketchup, but Kraft Heinz (NASDAQ:KHC) is yielding 6.14% today. I feel safer with another Brazilian-controlled operation, Restaurant Brands International (NYSE:QSR). It owns Burger King, Popeye’s and Tom Horton’s. Its yield is just 3.37%.
Still, not bad.
When Is It Safe to Buy Dividend Stocks?
While the safest bets for now are going to be in stocks offering income in the form of dividends, you may want to know when the all clear has sounded before jumping in.
That all-clear will have been sounded when big-time cloud stocks come roaring back. These stocks have been beaten down terribly. I sold Amazon (NASDAQ:AMZN) just before the crash at almost $2,200 per share. They’re now at $1,858, but they won’t stay there long. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) may be bottoming at $1,300.
When Apple (NASDAQ:AAPL) starts looking good at $267 per share, or Microsoft (NASDAQ:MSFT) gets recommended at $155, it’s going to be time to buy. That’s because capital gains will again be in fashion. The danger is that by the time the cloud kings rise again, some of the income bargains may have been swept away.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in WFC, CVS, MSFT, AAPL, MSFT, AMZN, DLR, CSCO and QSR.
