This is a tough market. So why is it worth considering some of the best dividend-paying stocks at a time when the market is at its high?
Well, for starters, it’s very difficult in a super-low interest rate environment to generate a rate of return greater than inflation. Some stocks offer this in the form of dividends.
And for a market already at its high with earnings growth taking a break, dividend income just may be the only return you can get with equities. And it’s available at a far lesser risk than hoping for capital gains.
Best Dividend-Paying Stocks Where Everyone Else is No-Growth
Previously in these pages, we’ve considered Kinder Morgan, Inc. (NYSE/KMI), which will continue to trade off oil prices and natural gas to a lesser extent.
This security is now yielding over 5.5% and management has a clearly stated goal to increase its annual dividend a minimum of 10% per year until the end of this decade.
With a strong pipeline and storage business, the current environment is opportune with this position. It’s more appropriate for an investor with a medium- to long-term time horizon, who can either use the company’s dividends as income or for dividend reinvestment in new shares.
I still like PepsiCo, Inc. (NYSE/PEP) and Johnson & Johnson (NYSE/JNJ) for long-term portfolios. Both these stocks are proven wealth creators offering both consistency and recession-resistant businesses.
PepsiCo’s growth driver remains its snack business while Johnson & Johnson has pharmaceuticals.
Brands Delivering the Goods Like No Other
Also worthy of consideration on major price retrenchments is Nike, Inc. (NYSE/NKE) once again. This stock offers a lower yield than the companies mentioned above but is very good at delivering on its promises.
Nike is a global brand that continues to execute well. This stock might not be on the top of every investor’s picks. But that’s a mistake because this dividend payer still boasts an outstanding track record of wealth creation.
V.F. Corporation (NYSE/VFC) just delivered another solid quarter. The maker of “Wrangler” jeans, “The North Face” outdoor clothing, and “VANS’ footwear (among many brands) just increased its full-year outlook on a second-quarter sales gain of five percent, with comparable earnings per share growth of 11%.
In a no-growth world, these are solid numbers for a mature enterprise. Sales and earnings estimates for this company’s 2016 calendar year are ticking higher.
Finally, there’s The Walt Disney Company (NYSE/DIS), which continues to defy the marketplace, generating both capital gains and income for investors on a flat year for the broader market.
For a number of quarters now, Disney has been producing very good financial growth at its theme parks and hotels. Studio entertainment has been solid as well, with media networks in mature, slow-growth mode.
The company reports its next set of financials shortly. This will be an important catalyst for the stock.
Disney’s dividend isn’t the largest among Dow Jones Industrials, but as it’s proved over the last five years, the stock has been an institutional favorite. (See “Two Best Dividend-Paying Stocks for June 2015.”)
This is a tough market where real business growth is difficult to achieve. The above-mentioned companies are mostly existing winners and I think they’ll continue to be based on their own fundamentals and business plans.