Barron’s is out with its “10 Best Dividend Stocks” picks, all of which have hefty yields and nice prices.
Using FactSet data, Barron’s has identified 10 companies with above-market yields, below-market price/earnings ratios, and other favorable payout- and earnings-related characteristics that could reward shareholders in multiple ways in coming years.
“All have dividends that seem safe and are likely to grow. Plus, shareholders stand a good chance of realizing capital gains,” Barron's reported.
Ranked by yield, from a high of 4.3% to a low of 2.4%, they are:
- Verizon Communications (VZ)
- MetLife (MET)
- AbbVie (ABBV)
- Dow Chemical (DOW)
- Qualcomm (QCOM)
- Cisco Systems (CSCO)
- Target (TGT)
- Carnival (CCL)
- JPMorgan Chase (JPM)
- U.S. Bancorp (USB)
But Savita Subramanian, head of U.S. equity and quantitative strategy at BofA Merrill Lynch Global Research, cautioned investors to pay attention not just to yield, but also to dividend payout ratios: the percentage of a company’s earnings paid out in dividends.
“When interest rates back up, companies with high payout ratios tend to get hit harder because they can’t raise their dividends to remain competitive with interest rates,” she told Barron's.
However, while dividend yields appear to bolster the case for buying such stocks now, other metrics tell a different story, The Wall Street Journal has warned.
“Investors who expect bond yields to stay low and dividends to stay (relatively) high are buying stocks not because they are a bargain, but because they look better than bonds. The dividend bolsters the case that there is no alternative to shares,” WSJ.com’s James Mackintosh explains.
Low bond yields are sending mixed messages to investors.”First, that the outlook for the world economy is grim, meaning they should expect lower returns on all assets in the future. Second, that government bonds are unappealing, so they should invest in riskier assets instead,” he explains.
“If these provide an accurate outlook for growth and inflation, we won’t be having much of either for the next couple of generations. Dividends look more and more attractive,” he said.
(Newsmax wire services contributed to this report).
© 2021 Newsmax Finance. All rights reserved.