Dividend stocks have soared over the past three years, as investors seek yield in an environment of nearly zero interest rates.
The Dow Jones Select Dividend Index has outperformed the Dow Jones Stock Market Index by more than three percentage points a year during that period.
After this move, many market experts argue that dividend stocks are overvalued. But some solid investment opportunities still exist among dividend stocks, especially ones with an overseas presence, according to The Wall Street Journal.
Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.
One positive factor is that companies are increasing their dividends. Companies have boosted them by 16 percent in total so far this year, and Howard Silverblatt, senior analyst at S&P, tells The Journal. And he expects this trend to continue.
The paper recommends big companies with strong balance sheets. In terms of industries it favors playing defense — services and consumer staples.
Money managers in the United States and Europe are particularly high on pharmaceutical companies, big energy and telecommunications companies.
Among the companies they mention in The Journal story are Johnson & Johnson (JNJ), AT&T (T), Verizon Communications (VZ), France's Total (TOT), Anglo-Dutch Royal Dutch Shell (RDSA) and McDonald's (MCD).
As for McDonald’s, “[it] remains resilient despite an increasingly challenging environment for restaurant operators,” Morningstar analyst R.J. Hottovy writes in a report.
While the company’s profit margins might shrink somewhat, “we are optimistic that it is capable of generating superior returns on invested capital over an extended horizon,” he says.
Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.
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