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7 of the Best Dividend Stocks for Passive Income

Some investors don’t focus on dividends, but over many years, dividend stocks can be great wealth generators. For this reason, many investors do focus…

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This article was originally published by Investor Place

Some investors don’t focus on dividends, but over many years, dividend stocks can be great wealth generators. For this reason, many investors do focus on these stocks. 

In particular, many investors take advantage of the income that dividends provide. Not to mention that many high-quality dividends happen to come from high-quality companies, giving dividend stock investors great long-term holdings.

While it’s true that there are some red flags with certain income situations, as well as value traps, many of these stocks are worth following. Several of these dividend stocks are even worth investing in. Let’s look at seven such stocks now. 

  • Realty Income (NYSE:O)
  • McDonald’s (NYSE:MCD)
  • Verizon (NYSE:VZ)
  • Federal Realty (NYSE:FRT)
  • Target (NYSE:TGT)
  • Lowe’s (NYSE:LOW)
  • Johnson & Johnson (NYSE:JNJ)

Dividend Stocks to Buy: Realty Income (O)

Source: Shutterstock

Known as The Monthly Dividend Company, Realty Income is a high-quality business that investors simply need to keep an eye on. That’s particularly true if they’re on the hunt for quality dividend stocks. 

Shares of Realty Income were hammered during the coronavirus correction in March 2020. The stock ultimately fell more than 50% from peak to trough. However, we’ve seen a number of other stocks, sectors and even the overall market march back to new highs. At the very least, we’ve seen these assets climb back to their pre-coronavirus highs.

Not Realty Income though. It’s like investors fell out of love with real estate investment trusts (REITs) once the pandemic hit. At first, the selling made sense, even if there was panic and the dip was overdone. That’s as investors feared that swaths of tenants couldn’t (or wouldn’t) pay their rents. 

That fear has been overstated, as O stock has kept on trucking. When we look at the dividend, the consistency shines through. 

Realty Income has paid a monthly dividend for 615 consecutive months (51 years) and has raised that dividend for 96 consecutive quarters (24 years). For income investors, this is a must-own stock, particularly with its 4% dividend yield. 

McDonald’s (MCD)

image of McDonald's (MCD) golden arches on a pole indicating a drive-through area with the sky at dusk in the backgroundSource: CHALERMPHON SRISANG / Shutterstock.com

When it comes to dividend stocks, McDonald’s is no slouch either. In September, the company gave a solid 7% boost to its payout, bringing the yield to about 2.3%. While that’s not a huge yield, it’s notable in this low-rate environment. Further, it’s also notable for a stock that continues to perform. 

McDonald’s stock is up more than 14% so far this year. So much for boring, huh? That’s particularly true with the stock recently hitting an all-time high during the recent market correction

More impressive than the 7% increase to the dividend is the consistency in which management has handled it. From the company after the most recent raise: “McDonald’s has a strong history of returning capital to its shareholders and has raised its dividend for 45 consecutive years since paying its first dividend in 1976.” 

When we invest in dividend stocks, we also want to invest in solid companies. When looking at the forecasts, the future looks bright for McDonald’s.

Analysts expect almost 20% revenue growth this year, alongside 50% earnings growth. In 2022, consensus expectations call for roughly 10% revenue and earnings growth.

Dividend Stocks to Buy: Verizon (VZ)

a Verizon (VZ) storefront buildingSource: Tada Images / Shutterstock.com

With its near-5% dividend yield, Verizon is one of the dividend stocks investors should have their eye on. This is particularly true after we got a couple of key developments. 

First, the stock has been dragged lower over the past few weeks. I’m not sure if that’s because of the price action in AT&T (NYSE:T), but it likely doesn’t help. That selloff gave investors a low to measure against at $50.86. Now bulls can be long against that level, looking for some type of rebound in the ensuing weeks and months.

If the stock breaks this level, investors can consider exiting the position, for a limited-risk setup. 

But after the company reported earnings, things are looking pretty good. On Oct. 20, Verizon not only beat on its third-quarter earnings expectations, but also raised its guidance. That should give investors a confidence boost and give them the green light to stay long. 

With a juicy dividend, recent selloff and strong quarterly results, I like Verizon.

Federal Realty (FRT)

Circling back to the REITs, Federal Realty is another stock investors should focus on. Like Realty though, this name remains below its 2020 highs. This is one of the few high-quality stocks that hasn’t fully recovered from the coronavirus selloff. 

Early in the selloff, dividend investors saw the stock’s dividend yield swell to more than 5%. For Federal Realty, that’s a huge rarity. In fact, before the coronavirus selloff, it hadn’t happened since the Great Recession more than 10 years ago. 

That yield has since dipped down to 3.5%, but accumulating the stock with a yield at or above this figure should still be considered a victory by income investors. In fact, between 2011 and 2019, Federal Realty’s yield only temporarily jumped above 3.5% once, in 2018. 

In August, the company raised its dividend for the 54th consecutive year. That’s “the longest record of consecutive annual dividend increases in the REIT sector.”

Dividend Stocks to Buy: Target (TGT)

A Target (TGT) store during duskSource: Target

We’ve seen a really nice rebound in Target stock following a much-needed pullback. Shares have been on fire this year, up 43% despite the recent correction. Over the past year the stock is up 44%. In the past 3 years, those gains swell to more than 200%. 

While some investors may bemoan the stock’s paltry 1.45% dividend yield, let’s try to keep in mind just how well the stock has performed. I’ll take a sub-2% dividend yield for a 200% gain in three years for the underlying asset any day of the week. 

With the holidays quickly approaching, Target stock may be just getting started with its recent rally. For the year, analysts are looking for almost 12% revenue growth and almost 40% earnings growth. 

When it comes to the dividend, the yield may be lacking but the consistency is not. In 2019 and 2020, Target increased the dividend payout by about 3% each year. Then in June, management dropped an unexpected bombshell: A 32% increase to the payout

“With the increase announced today, 2021 is on track to be the 50th consecutive year in which Target has increased its annual dividend.”

Welcome to the club, Target. 

Lowe’s (LOW)

the front of a Lowe's storeSource: Helen89 / Shutterstock.com

Looking for another retailer with a huge increase in the dividend this year? Lowe’s. 

In May, Lowe’s gave a 33% boost to its dividend. The company has increased its dividend for more than 25 consecutive years and has “paid a cash dividend every quarter since going public in 1961.” That’s 60 years of consistency

Also like Target, the dividend yield sits at just 1.42%. However, long-term bulls aren’t disappointed. Not only did they get a big boost in the payout this year, but the stock has been a real stud over the last few years. 

Lowe’s stock is up 125% over the last 3 years and 28.3% over the last 12 months. So far this year, the stock is up about 40%.

There’s only so much complaining an investor can do when the stock is rolling like this. Plus it helps that the housing market remains incredibly strong, leading to solid growth for Lowe’s. 

Dividend Stocks to Buy: Johnson & Johnson (JNJ)

A photo of a store shelf filled with Johnson and Johnson's (JNJ) Tylenol boxes.Source: Niloo / Shutterstock.com

There are a lot of companies we could go with for the last spot on this list, but why not end with Johnson & Johnson? 

I like that the stock is rallying after reporting better-than-expected third-quarter earnings. While the company did come up a bit short on revenue, investors were willing to look past it. That’s likely on account that management guided to better-than-expected earnings and revenue for next quarter and the full-year. 

Not to mention, J&J continues to ride momentum from its single dose Covid-19 vaccine, which the company is now applying for full Food and Drug Administration approval. It already got the nod from the FDA for an additional booster shot

Despite a recent pullback in the stock price, this behemoth still sports a market capitalization of $433 billion and dishes out a 2.6% dividend yield. As it pertains to that payout, it’s one investors can definitely count on. 

In April, the company delivered a 5% increase to its dividend, its 59th consecutive year of doing so. That came a year after its 6.3% dividend increase in April 2020. At the time, uncertainty was sky high due to the Covid-19 outbreak, yet J&J management made sure to come out and make an incredible move to boost investor confidence. 

Bulls will look forward to year 60 in April 2022. 

On the date of publication, Bret Kenwell held a long position in O. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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Author: Bret Kenwell

Economics

Waning Term Premiums And The Riddle Of Surging Inflation

Waning Term Premiums And The Riddle Of Surging Inflation

By Ven Ram, Bloomberg macro commentator and reporter

If you asked your bank manager…

Waning Term Premiums And The Riddle Of Surging Inflation

By Ven Ram, Bloomberg macro commentator and reporter

If you asked your bank manager for a loan, the rate you will be offered will vary proportionally with not only how much you borrow, but also how long you borrow for. That, of course, is a no-brainer since the longer the bank is willing to lend to an individual, the greater the risk of something going wrong. Mainly, they encompass credit and inflation risks, and in the case of institutional investments, liquidity as well.

Yet, in the market for Treasuries and several other major developed markets, investors have recently become indifferent to the risk surrounding the longevity of their loans to governments. In other words, they are essentially saying, there is no more inflation risk in lending to Uncle Sam over, say, 10 years than there is when lending for a far shorter period. That is a massive irony against a backdrop where inflation is Le probleme du jour.

Shrinking term premiums is one major reason why Treasury long-dated yields have fallen after the brisk first quarter that, back then, resembled a juggernaut on the move. (The issue isn’t peculiar to the U.S. by any stretch: investors are willing to loan the U.K. for a 30-year period for well less than 1%, but will readily settle for even less — at around 50 basis points — if the Chancellor of the Exchequer will agree to keep the sum in his state’s coffers for 50 years, thank you. Sure, there are reasons such as demand for ultra-long debt from pension funds, but that’s a discussion for another day.)

Why is it that investors couldn’t seem to care less about earning a decent term premium?

A combination of liquidity, declining natural rates of interest and unbridled expansion of balance sheets — and that’s not an exhaustive list — have got us to where we are now. Getting out of it, though, isn’t going to be easy. Getting into quicksand takes a trice, but last I checked no one had found a way yet to come out of it in one swift ascent.

Tyler Durden
Thu, 12/09/2021 – 08:20

Author: Tyler Durden

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Economics

3 Growth Stocks to Buy Before The End of the Year

Recently, the market has experienced increased volatility, with a major factor being the Federal Reserve’s hawkish pivot. The Fed seems to be more focused…

Recently, the market has experienced increased volatility, with a major factor being the Federal Reserve’s hawkish pivot. The Fed seems to be more focused on combating inflation, and the market is now expecting at least two rate hikes next year. As a result, the yield on the two-year Treasury Note has moved up from 0.15% in June to 0.65%. Rising short-term rates are a headwind for growth stocks, which perform their best in environments where rates are declining. 

So, it’s not surprising that growth stocks led the market to the downside last week. A good example is the ARK Innovation ETF (NYSEARCA:ARKK) which is down more than 19% in just the past month. In contrast, the S&P 500 and Nasdaq are down 0.64% and 2.25%, respectively. 

However, I believe this pullback in growth stocks offers investors an opportunity.  The rise in short-term rates may soon be over, as forward-looking inflation measures are moderating at a rapid pace. Further, after the recent steep pullback, many growth stocks have reached more attractive valuation levels. Therefore, investors should consider buying the dip in these three top growth stocks:

Growth Stocks to Buy: Alphabet (GOOGL)

A photo of someone typing on a computer whose browser is open to Alphabet's Google search page.Source: Castleski / Shutterstock.com

Alphabet recently became the third-most-valuable company in the world with a market capitalization of over $1.9 trillion. The company’s primary source of revenue and income remains Search which is very profitable and maintains a dominant market share. Over the years, GOOGL has expanded into other areas like Google Cloud, Android, Chrome, Google Docs, YouTube, and its venture bets like autonomous driving venture Waymo. 

GOOGL stock was initially an underperformer during the pandemic as ad spending decreased. Further, ads from travel companies were put on hold, and those comprise a meaningful chunk of revenue. However, ad rates and ad spending are now well above pre-pandemic levels as the economy reopens and gradually normalizes. 

The company’s momentum is evident in its results for Q3. Revenue increased by 41% to $65.1 billion, while operating income increased by 32% to $21 billion. For the full year, analysts project EPS growth of 85% and 39% revenue growth. Not surprisingly, GOOGL’s stock is up more than 60% year to date and the company has shown impressive relative strength during this period of market stress. 

GOOGL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a “Buy” in our proprietary rating system. B-rated stocks have posted an average annual performance of 19.7% which compares favorably to the S&P 500’s annual return of 7.1%. To see more information about GOOGL’s POWR Ratings, click here.

Workday (WDAY)

A close-up view of a Workday (WDAY) sign in Pleasanton, California.Source: Sundry Photography / Shutterstock.com

Workday provides enterprise cloud applications with offerings that include financial management applications, cloud spending management solutions, and Workday applications for planning. YTD, WDAY’s stock is up 17%, and that number surges to almost 500% since its IPO in 2013.

Cloud and enterprise software stocks have been among the best performers of the last decade. It’s not surprising when considering that companies are increasing spending on their IT systems, software and cloud systems at a strong rate which is expected to continue over the next decade.

For investors, these companies are fantastic, because they tend to have high margins and recurring revenue. Once companies choose a software or cloud provider, they are unlikely to change often given the cost and complexity of changing systems. Further, once companies have people on their platforms, they are able to unlock more opportunities for monetization. 

Despite the stock’s recent underperformance, the business continues to gain momentum. Its last earnings report showed a 20% increase in revenue to $1.3 billion with over 90% of revenue coming from recurring subscriptions. It also made a new milestone in terms of EPS going from a loss of 10 cents per share last year to a profit of 17 cents per share this year’s Q3.

WDAY has an overall B rating, which equates to a “Buy” in our POWR Rating system. The POWR Ratings also evaluate stocks by various components to give more insight. In terms of its component grades, the stock has an A grade for Growth and a B grade for Sentiment and Quality. Click here to see the complete POWR Ratings for WDAY. 

Growth Stocks to Buy: Expedia (EXPE)

building facade with expedia (EXPE) group logoSource: VDB Photos / Shutterstock.com

Expedia is an online travel company that operates through multiple segments. Some of its most well-known brands include Expedia, Vrbo, Hotels.com, Orbitz, Travelocity and Wotif. In addition, it offers a range of travel and non-travel verticals, including corporate travel management, airlines, travel agents, online retailers, and financial institutions.

EXPE’s business took a big hit during the pandemic for obvious reasons. However, travel volumes are increasing and during the Thanksgiving holiday were at 90% of 2019 levels. It’s very possible that the recent rise in coronavirus cases and the emergence of the omicron strain could have a short-term impact. However, in the longer-term, vaccination rates and effective therapeutics are signs that the pandemic is close to an end.

The company’s recent earnings report also confirms the recovery in travel. The company topped expectations with revenue increasing by 97% to $3 billion. In total, it had $553 million in net income, a big turnaround from last year’s $31 million loss.  For Q4, analysts are projecting $2.3 billion, a 148%increase and a big jump in EPS to $6.89 per share.

EXPE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, which equates to a “Neutral” rating in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

EXPE has a B grade for Growth and Quality which isn’t surprising considering its Q3 results and status as one of the top online travel companies. To see EXPE’s complete POWR Ratings, click here.

On the date of publication, Jaimini Desai did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Jaimini Desai has been a financial writer and reporter for nearly a decade. He has helped countless investors take profitable rides on some of the hottest growth trends. His previous experience includes writing for Investopedia, Seeking Alpha, and MT Newswires. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters.

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Author: Jaimini Desai

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Economics

US Economy Remains On Track For Strong Rebound in Q4

With the end of the year in sight, the US economy continues to show signs of a sharp pickup in growth in the fourth quarter, based on several nowcasts….

With the end of the year in sight, the US economy continues to show signs of a sharp pickup in growth in the fourth quarter, based on several nowcasts.

The US Bureau of Economic Analysis is expected to report in late-January that output rose 5.4% (annualized real rate) in Q4, via the median of several nowcasts compiled by CapitalSpectator.com. The estimate marks a dramatic upside reversal from the slowdown in Q3 that cut growth to a modest 2.1%.

Although roughly a third of the fourth quarter’s economic data has not yet been published, the available numbers to date suggest that the final quarter of 2021 will deliver upbeat news for the US. The fact that recent nowcast revisions have been relatively steady at the 5%-plus level strengthens the outlook that output has accelerated. Today’s revised median 5.6% nowcast is up from 5.0% in the Nov. 16 update.

Recent survey data aligns with the firmer expectations for Q4 economic activity. “The US economy continues to run hot,” observed Chris Williamson, chief business economist at IHS Markit, on Nov. 23, citing the consultancy’s US Composite Output Index, a GDP proxy. “Despite a slower rate of expansion of business activity in November, growth remains above the survey’s long-run pre-pandemic average as companies continue to focus on boosting capacity to meet rising demand.”

Supply-chain and worker-shortage issues continue to create headwinds, but a rebound in economic activity overall appears increasingly likely when the government publishes its initial Q4 GDP estimate next month.

The main question is whether the rebound proves fleeting? Looking ahead to 2022 suggests that economic activity could slow in the new year due to potential blowback from the omicron variant of the coronavirus, higher inflation and other factors.

Goldman Sachs, an investment bank, recently cut its forecast for US growth in the new year. “While many questions remain unanswered, we now think a moderate downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely,” says Joseph Briggs, an economist at the firm.

This week’s update of the UCLA Anderson Forecast has also trimmed the outlook for early next year, revising its Q1 2022 growth estimate down substantially to a 2.6% gain from the 4.2% predicted in September. The key assumption: the omicron variant “might be disruptive, while acknowledging that its effects cannot be predicted.”

Perhaps, but the good news is that economic momentum looks set to deliver a strong tailwind going into 2022.  


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The US Business Cycle Risk Report


Author: James Picerno

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