Although some folks on Wall Street may deny it, I believe there’s overwhelming evidence of a disconnect between investment market valuations and the real economy. Still, that doesn’t mean you can’t profit from the irrational enthusiasm. Better to go with the train than against it. However, at some point, the ride will likely end. When it does, you’ll be glad to have owned dividend stocks.
Sure, these investments aren’t as sexy as the growth names that have generated wild headlines and even wilder performance metrics. However, the mania is reminiscent of the late 1990s/early 2000s dot-com bubble. At the time, merely mentioning the word “internet” aroused intense buyer sentiment. However, the fundamentals came around and rudely ended the party. The same can happen here, which is why you should consider dividend stocks.
With scheduled payouts along with the possibility of capital gains, dividend stocks provide some measure of confidence in this uncertainty. As well, companies that pay dividends tend to be fiscally stable – after all, the passive income must come from somewhere. Therefore, should volatility impact the broader markets, these organizations usually mitigate the storm better than growth firms.
As you dive deeper into the details of this novel coronavirus-driven crisis, the case for dividends only gets stronger. With Congress deadlocked on another round of coronavirus relief, millions of Americans face a bleak future. For instance, eviction moratoriums have expired in several areas, possibly forcing countless shell-shocked households onto the streets.
Also, the expiration of the federal program designed to bolster state unemployment checks – the so-called “plus up” – puts millions of others in dire straits. For our elected officials, saving the American people should be a no-brainer. But because we’re going to play politics until everyone dies, here are nine dividend stocks to consider:
- NextEra Energy (NYSE:NEE)
- Home Depot (NYSE:HD)
- Walmart (NYSE:WMT)
- Johnson & Johnson (NYSE:JNJ)
- Newmont Corporation (NYSE:NEM)
- Verizon Communications (NYSE:VZ)
- IBM (NYSE:IBM)
- Olin Corporation (NYSE:OLN)
- Altria Group (NYSE:MO)
Each company represents an investment sector or subcategory that I believe is pertinent to our new normal. That doesn’t guarantee anything, of course. However, it should provide a little extra kick in terms of reliability and possible growth.
NextEra Energy (NEE)
Usually, when I wrote about dividend stocks to buy, I’d often rely on the deep wells of big oil firms like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX). And a part of me still likes these names because let’s face reality – oil will be relevant for decades, if not centuries to come.
However, the world has changed and that brings opportunity for NextEra Energy. A specialist in clean and renewable energy sources, NEE stock has enjoyed a strong support base, especially among futurists. Still, a major event was needed to bring the message to the masses, including the old guard.
Indirectly, the coronavirus may have succeeded in doing just that. For instance, the oil price war between Saudi Arabia and Russia caused prices to drop temporarily below zero. That kind of extreme volatility indicated that we need true energy independence, bolstering the case for NEE stock.
As well, the impact of climate change is becoming too pronounced to ignore. Such incidents crystallize the need for clean energy sources, making NextEra Energy one of the most compelling dividend stocks.
Home Depot (HD)
Let’s just be brutally honest with ourselves: 2020 sucks. But you know what would suck more? A world without Home Depot. In the pre-pandemic days, we take Home Depot for granted. Sure, HD is one of the better dividend stocks to buy. But this wasn’t a life-or-death business.
Literally, this narrative has changed. While they were in stock, Home Depot provided the N95 masks and other protective equipment or material that the government initially said didn’t work for the public, but were eventually caught out as liars.
But the bullish thesis for HD stock doesn’t revolve exclusively on protective equipment. Rather, Home Depot is the go-to retailer for all kinds of products that make our lives a little less prone to Murphy’s law.
As if we didn’t need more bad news this year, we’re facing a record hurricane season, along with strange phenomenon. This is probably a good sign as any to protect your portfolio with HD stock.
Given the economic turmoil that the American people are suffering from, dividend stocks to buy in the consumer discretionary are difficult to come by. The best answer I can provide is a big-box retailer like Walmart. With a broad portfolio of goods and services, WMT stock is not an exclusively discretionary investment.
But here’s the thing – most of the exclusive offerings likely face big risks down the line. That’s one of the reasons why I’m not recommending something like Macy’s (NYSE:M).
Again, with Walmart’s mixture of necessities and wants, along with everyday low prices, WMT stock should be able to weather the storm. Plus, if a miracle happens, Walmart will benefit due to increased consumption.
To be fair, poor U.S.-China relations present a risk to Walmart. However, it’s a risk to almost everyone in the retail sector. As an indispensable source of commerce, WMT should win out in the end.
Johnson & Johnson (JNJ)
Clearly, this is the year of biotech firms. So many unknowns have taken off due to the desperate need of a vaccine for the novel coronavirus. On the other end of the scale, established dividend stocks in the healthcare space have not nearly enjoyed the same sentiment. Still, for Johnson & Johnson, this pandemic may turn out to be a net positive.
You’ll recall that during the old normal, multiple controversies and scandals plagued Johnson & Johnson. Not surprisingly, JNJ stock incurred wild trading. Today, arguably few people care about the damage done to the brand. Everyone is now focused on the Covid-19 pandemic, specifically how we can cope in this trial.
Interestingly, Johnson & Johnson has a chance to make amends. The company is making significant progress in its Covid-19 vaccine candidate. More importantly, Johnson & Johnson has the credibility and scale to see through the entire vaccination process: research and development, testing, manufacturing and distribution.
In addition, the blue chip’s multiple revenue channels should give investors confidence in JNJ stock.
Newmont Corporation (NEM)
In the materials sector, you have a couple of viable options. Prior to settling on Newmont Corporation, I was thinking about adding Sociedad Quimica y Minera de Chile (NYSE:SQM). Thanks to the phenomenal rise of electric vehicles, lithium mining will be a big business.
At the same time, lithium can be a volatile market. I’m not suggesting that gold isn’t. However, it’s more fleshed out than lithium, providing extra confidence toward NEM stock. And confidence is exactly what you want in your dividend stocks, especially in a time like this.
Further, I believe gold is due for a paradigm-shifting bull market. If the U.S. economy goes into disarray, we will see a ripple effect across the world. Additionally, the 2020 election is a pivotal one. Of course, President Trump isn’t exactly what you would call a great leader. However, career politician Joe Biden is out of touch with his own party and with reality.
In a situation like this, there’s no better comfort than gold. That’s why you should look into NEM stock.
Verizon Communications (VZ)
As we turn the pages on our calendars – at least, for those of us who have such things – it’s becoming harder to have an optimistic attitude. Admittedly, there’s some plausible deniability at play, particularly if you’re working in a white-collar job. But if underprivileged workers continue to get axed, only the elite will be able to enjoy life in America.
Therefore, in this environment, the concept of cost-cutting doesn’t favor Verizon Communications. Still, the telecom giant is really a crucial investment among dividend stocks. Without access to internet and wireless services, you’re dead in the water in this job market. Don’t be surprised to see consumers throw everything out the window except their Verizon internet and wireless subscriptions.
Also, VZ stock is a better alternative for conservative investors than AT&T (NYSE:T) is. Verizon has a much lower debt load than its rival and also sports superior liquidity ratios.
Personally, I like AT&T for its entertainment synergies. Nevertheless, if you’re big on stability, VZ stock will let you sleep a little easier at night.
Historically, one of the most boring dividend stocks to buy has been technology icon IBM. Prior to the pandemic, though, “Big Blue” made waves, presenting a more interesting case to prospective buyers. Then the coronavirus happened and the usual suspects in the tech space received most of the accolades.
But you may want to take this moment as a contrarian opportunity to buy IBM stock at a discount. After bouncing off its March doldrums of this year, shares have gone nowhere. In contrast, several tech-based growth stocks have soared off investor sentiment from youth-centric platforms like Robinhood.
I’m not taking anything away from those competitors. However, IBM stock is interesting in that its underlying question answering artificial intelligence platform Watson has been put to great use because of the coronavirus disruption.
Further, Watson is an excellent marketing pitch to potential government clients. We’ve all seen reports about how displaced workers placed in some cases thousands of calls to state unemployment offices, only to get the run around. With Watson, some of that bottleneck may be resolved without having to rely on infection-prone human operators.
Olin Corporation (OLN)
Ordinarily, Olin Corporation would fit into the chemicals or materials sector. However, OLN stock is an excellent, underappreciated investment in the defense space. And by defense, I’m talking about the personal protection variety.
With the intrusion of a foreign virus has come an expected response: fear. For many, it’s the fear of the unknown. For others, it’s the fear of others. So, it didn’t surprise me in the least that Americans – who already own more guns than you can wag a liberal finger at – decided to stock up on more firearms.
Because of this extraordinary demand, though, firearms-related dividend stocks have skyrocketed. But that’s not the case with OLN stock. After marching out of this year’s lows, Olin shares have trudged along in a sideways consolidation pattern.
This pattern should expire soon, leading to a defined trajectory one way or another. My bet is that shares will pick up noticeably. With the Winchester brand of ammunition under its belt, Olin is very relevant in a cynical way.
Altria Group (MO)
The vice industry is a controversial one no matter what the market environment. However, as dividend stocks, they tend to be very generous. That’s the case with Altria Group, which usually sports a high yield. But with smoking rates on the decline, isn’t MO stock a risky bet?
It is. Additionally, medical doctors advise that this is a perfect time to quit the habit. Some evidence suggests that smokers and vapers may be at higher risk for Covid-19. However, this crisis is also a very stressful period. This has resulted in people stockpiling vice products. For instance, the pandemic has inspired first-time users to buy and smoke cannabis.
And let’s not forget that quitting is extremely hard in the best of circumstances. Further, it’s unlikely that the tobacco industry will ever go away. At the end of the day, adults make adult choices. For millions, cigarettes and smokeless alternatives are coping mechanisms. So long as we’re in this pandemic and even beyond it, MO stock has a surprisingly robust upside pathway.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long gold, AT&T and Altria.