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Barron's: 8 Durable Dividend Stocks for Uncertain Times

Barron's: 8 Durable Dividend Stocks for Uncertain Times

By    |   Friday, 15 May 2020 01:40 PM

The average investor is battling enough stress and uncertainty amid the seemingly endless coronavirus lockdown chaos, not to mention trying to make savvy investment decisions to guarantee a reliable dividend payout.

To be sure, Barron's recently explained that income investors have endured plenty of turmoil in recent weeks as companies across many sectors seek to stay afloat during the coronavirus pandemic.

About 50 companies in the S&P 500 index have cut or suspended their dividends so far in 2020, the financial publication said.

However, Barron's recently scoured two established exchange-traded funds that look for companies with reliable dividend growth—the Vanguard Dividend Appreciation (ticker: VIG) and the WisdomTree US Quality Dividend Growth (DGRW).

Barron’s selected eight stocks from among the top holdings of the two funds, eschewing any securities with dividend yields below 2%—their solid payout growth notwithstanding. "That precluded high-profile stocks such as Apple (AAPL), which yields 1.1%; Microsoft (MSFT), 1.1%; and Costco Wholesale (COST), 0.9%, among others," Barron;s said.

Barron's said these stocks should have what it takes to sustain, if not grow, their dividends in these tough times.

  1. Verizon Communications (VZ)   
  2. Procter & Gamble (PG) 
  3. Johnson & Johnson (JNJ)     
  4. Comcast (CMCSA)          
  5. Merck (MRK)    
  6. McDonald's (MCD) 
  7. PepsiCo (PEP)   
  8. Medtronic (MDT)    

On the other hand, Goldman Sachs’s dividend is most at risk in Morgan Stanley’s worst-case look at whether big banks are likely to slash payouts as regulators around the world push lenders to preserve capital during the unfolding COVID-19 crisis, Bloomberg reported.

Goldman doesn’t have “much wiggle room to absorb a doubling of credit losses that we estimate in our bear case,” analysts led by Betsy Graseck wrote in a note, as the bank’s “regulatory capital is pretty much sitting on top of its required minimums” under new rules set to take effect in October 2020.

Elsewhere, O’Shares ETFs chairman and “Shark Tank” investor Kevin O’Leary recently said that if you’re worried about dividend cuts, it’s "time to use actively managed ETFs."

The latest bout of market volatility could be the best reason yet for investors to consider backing the strategy, O’Leary told CNBC.

“It’s actually doing its work very well because in the case of OUSA,” the O’Shares FTSE U.S. Quality Dividend ETF, “that’s 130-plus of the S&P, but the highest-quality balance sheets, which generally speaking are higher and more unlikely to cut dividends,” O’Leary said.

“So, if you’re using OUSA as a dividend play, which many people are doing right now with [a] north of 3% dividend yield, it’s a very good place to hide in the weeds,” he said.

OUSA, O’Shares’ oldest ETF, says it invests in stocks that “meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds.” It is down 12.5% year to date.

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Income investors have endured plenty of turmoil in recent weeks as companies across many sectors seek to stay afloat during the coronavirus pandemic.
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Friday, 15 May 2020 01:40 PM
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