Best Dividend Stocks for 2019
Hello and welcome to MoneyByRamey.com. Our goal is to teach you the art of Financial Freedom, and we do that by deploying capital into various income producing vehicles. One of the absolute greatest ways that we put our capital to work for us is via investing in the best dividend stocks on the market.
You can read more about our dividend investing strategy, but in this article, we want to take you through some of our best and most foundational dividend stocks. All of these stocks will be dividend aristocrats, which means it has been paying steady and rising dividends for 25+ years.
Procter and Gamble ($PG)
Tagline: Touch Lives. Improving Lives.
Revenues: $65B (2017)
P&G is a monster in the world of dividend investing. Its roots date back to 1837, where it was begun as a consumer goods product company. Brother-in-laws William Procter and James Gamble took their respective skillsets – candlemaking and soapmaking – which was eventually turned into the business empire that exists today.
P&G makes some of the most iconic products known to the world over. It’s name brands include Tide, Bounty, Charmin, Old Spice, and Dawn just to name a few.
What I really enjoy about this company is that they manufacture a lot of the brand-name products that I already use on a daily basis. I feel like I am always finding new products manufactured by this powerhouse.
For instance, I was sick recently and went out to buy a humidifier. I picked up a Vicks model, and lo and behold, the manufacturer was P&G. It was a great day to be a dividend investor, as I am making a purchase and support my stock at the same time.
P&G is a dividend aristocrat; it has been increasing the dividend payment for 62 years. The currently payout is at $0.7172 per quarter, which comes out to $2.87/year. Through thick and thin, investors have been able to bank on this dividend payment.
Annual Dividend: $2.87
If you buy $10,000 worth of PG at $97.47, you will receive:
- $160.05/yr in dividends
- 102.6 shares
Keep in mind, with investing there is risk. With $66B in revenues in 2018, the stock has seen a decline in revenue growth since 2014, when revenues were $80.5B.
Here are some of the hurdles that P&G faces today and into the future:
- Decreasing Brand Loyalty. Consumers going away from higher price name brand goods in favor of cheaper store-brand or off-brand products.
- Decreasing Margins. This mainly comes from Amazon putting pressure on sales by requiring the company to lower margins to remain competitive on its platform.
The MoneyByRamey.com Outlook
In 2018, P&G increased prices to help offset declining sales. The ploy seems to have worked. The street loved the stock’s 2018 Q2 performance. Will consumers stick with name brands or continue to offbrands? Time will tell. I know for me, I love the quality I get from name brands, and the chance to own the company that makes those products is certainly a boon.
I’ll keep P&G on DRIP for many years to come.
Tagline: Taste the Feeling.
Founded: 1886 (Coke first on the marketplace)
Revenues: $35.41B (2017)
Coke is as another company with a long history of success. It’s roots date back to 1886, when pharmacist John Pemberton invented the product as a soda-fountain drink. The formula has been little changed since then, and now Coke is one of the most recognizable name brands the world over, often ranking in the top 3 list for most recognizable brand names the world over (1).
Coke’s main product is its soda brands. Most everyone alive knows of the Coca-Cola brand;
some of its most popular soda brands are Coke, Diet Coke, and Sprite, to name a few.
But Coke doesn’t stop there; it is diversifying into other product models which it believes will help offset the recent downward trend in soda sales. Some of the products that it is diversifying into:
- Dasani Water
- Simply Orange
- Costa Coffee
- Daily servings of Coke are estimated at 1.9B globally (2).
- Warren Buffett currently holds 400M shares of KO and states that he will never sell a share as long as he lives (3).
Coke is a leader in an increasing dividend payment. It is a dividend aristocrat and it has paid an increasing dividend for 56 years. The current payout is done quarterly with the current dividend at $.039/share which comes out to a $1.56/yr in annual dividend payment.
Annual Dividend: $1.56
If you buy $10,000 worth of KO at $48.70, you will receive:
- $320.33/yr in dividends
- 205.3 shares
Coke is not without its challenges. Though I believe the stock will continue to see solid gains in the years ahead, I have a few concerns which could adversely affect this stock.
- A Growing Health Movement – We are seeing a trend towards more organic and healthy foods, especially among millenials. The days are gone where a company can mass produce junk food and have it appeal to the general population. Considering Coke has very little nutritional value, its sales will continue to be hampered by this movement towards healthier food options.
- The Trend Away from Mega Companies – There is also another prevalent trend that we’re seeing in the markets, especially in the beer sector; a trend away from conglomerations into smaller entities. I could see a situation where the marketplace as a whole begins to shift away from Coke-produced products in favor of locally produced and sourced products.
The MoneyByRamey.com Outlook
I added this stock into my portfolio after doing some soul searching. At first, I chose Starbucks over Coke as I didn’t like the declining revenues at Coke. The entry in to SBUX has paid off nicely. However, I recently became enamored with Coke after its Costa acquisition.
I like the fact that Coke is beginning its foray into various vehicles to offset the trend away from soda. In 30 years, still see a Coke dominance in the soda market, but I see those markets being down significantly. Coke might become a holding company name of other stellar brands.
Considering this is the case, I am happy to own this stock as it continues its dominance with Coca-Cola and makes its foray into other, awesome brands and product types.
Tagline: Science. Applied to Life.
Revenues: $32B (2017)
Description (from the 10-K) (4): 3M is a diversified technology company with a global presence in the following businesses: Industrial; Safety and Graphics; Health Care; Electronics and Energy; and Consumer. 3M is among the leading manufacturers of products for many of the markets it serves. Most 3M products involve expertise in product development, manufacturing and marketing, and are subject to competition from products manufactured and sold by other technologically oriented companies.
The three Ms stand for Minnesota Mining and Manufacturing. They should stand for Mad Market Master as 3M is a dominant force in various industries. It is a conglomerate that owns many companies and product lines worldwide.
3M is a solid company with great products; through applying science principles to current and new products, the company is able to continue reinventing itself and stay on top of market trends.
Another great thing about 3M is that it produces so many products that we utilize on a daily basis. Brands like Scotch, Scotch-Brite, Filtrete, and Post-it are some of the well known 3M consumer brands.
But it doesn’t stop there. 3M makes all sorts of different products that we deal with on a daily basis. In fact, according to Investopedia (5), 3M makes 55,000 different products. That is truly a staggering number.
3M is another dividend aristocrat. It has been paying a growing dividend for 60 years. The current dividend is $1.36/quarter, which makes for an annual payout ratio of $5.44. Through the many years, 3M has been steady on both the payment of a dividend and increasing that payment year-over-year.
Annual Dividend: $5.44
If you buy $10,000 worth of MM at $199.16, you will receive:
- $78.33/yr in dividends
- 50.2 shares
3M does have a few hurdles as we look towards the future.
- Competition from Store-Brands – Many of 3M products are the best in class, however many of them are subjected to competition from generic brands. Items like Post-It Notes and Scotch tape are under continual margin pressure due to being a commodity product. Granted 3M makes the best products, but cost-conscious customer might buck those trends for knock-off brands.
- Inability to Grow Revenues – 3M has had revenues that have been hovering around the $30B mark for the past five years. While this is good that there hasn’t been much decline, the market loves to see increasing revenues as this means companies are growing. The stall out in revenues makes one ask the question, “has 3M met its maximum growth level?” Only the future will tell the truth.
- Political Instability – All companies are subjected to political risks, but 3M is very international, with 60% of its 92k employees being overseas. Being that the US/China relations have not been great in 2018 which will most likely continue into 2019, this could have a higher adverse effect on international companies such as 3M.
The MoneyByRamey.com Outlook
I love 3M. First off, the company is based in MN. Secondly, the company is based right in my backyard (it’s international HQ is a mile away from my house). While this information doesn’t create a reason to buy, it certainly adds to the affinity with this company in my mind. In a sense, it makes the company more real.
One of my criteria in buying stocks is looking to deploy capital in companies that manufacture or provide services that I use on a daily basis. 3M is one of those companies. Through Post-It Notes, Dry Erase boards, Scotch Tape, et al, I am helping to support one of the companies that I personally own. There is no better feeling for an investor.
Tagline: Your World. Delivered.
Founded: 1983 (as it stands now)
Revenues: $170.8B (2018)
Description: AT&T is a giant. When I first started to invest, I took notice of how massive this company actually is. It had $170.8B in total revenues in 2018, which puts it near the 20th spot for largest company in the world by revenues (6). Its employee count of 274k is massive.
While these figures do not mean much in and of themselves, I simply put them here to demonstrate the far reach that $T can have on the world. I love having a stake in a company with such worldwide reach.
The company is all about communications. What exactly does that mean? Here is an excerpt from the company’s annual financial statements: We are a leading provider of communications and digital entertainment services in the United States and the world. We offer our services and products to consumers in the U.S., Mexico and Latin America and to businesses and other providers of telecommunications services worldwide. We also own and operate three regional TV sports networks, and retain non-controlling interests in another regional sports network, a joint venture that aims to create media and digital brands and a network dedicated to game-related programming as well as internet interactive game playing. (7)
Some of its top product lines include:
AT&T – Communications
DirectTV – Satellite TV
Cricket Wireless – Communications (discount)
Through these divisions, the company looks to continue offering Mobile solutions to the world. It is currently leading the charge in implementing 5G technology throughout the world.
AT&T is a dividend aristocrat. It has been paying a steady, growing dividend for 34 years running. It’s current dividend is $.51/quarter, which comes out an annual dividend payout of $2.04. Though AT&T is ‘younger’ in terms of a dividend payment than these other companies on this list, it is still a solid streak of dividend payments.
Annual Dividend: $2.04
If you buy $10,000 worth of T at $30.00, you will receive:
- $680.00/yr in dividends
- 333.3 shares
AT&T is not without its detractors. While it is able to generate solid returns, the telecom space is highly competitive, and to most degrees, commoditized. Here are some issues that AT&T faces:
- Highly Commoditized Industry – Think communications industry – phone, cable, internet, etc. – in large part these services are commodities. Unless it is Google Fiber, most people have no issues in switching services providers so long as they can get a lower entry point. It is challenging for any company to be in this type of industry. AT&T no longer can depend on its monoploistic domination of the marketplace; it must compete with start ups and other entrants looking to get in on its turf.
- Large Debt Load – With the acquisition of Time Warner Cable, AT&T increased its reach into new customers by creating synergies by combining forces with the media giant. In doing so, it also increased its debt load to a staggering $180B. How and will it get this debt paid down? Will the syngergies come to fruition as AT&T hopes? Only time can tell.
The MoneyByRamey.com Outlook
Out of all these stocks, $T proves the highest in risk profile. It has a large debt load and it is questioned whether the company paid too much to acquire Time Warner. With that being said, with great risk comes great rewards.
$T has a great dividend yield around 7% and its shares are trading near 52 weeks lows. My biggest positive with $T is that it continues to have ample cash flow. Since cash flow is the ultimate determiner of a company’s earning power, it stands to reason that so long as cash flow remains high, debt can be paid while the dividend is preserved.
Overall, I feel comfortable with my current position in AT&T. I am not sure I would add any more at the moment, though the proposition remains lucrative at these price points. I’d like to see debt being paid down and see solid progress on the time warner acquisition being paid down before I feel comfortable deploying more capital into this company.
We are long PG, KO, MMM, and T.
(1) All the information above is not a recommendation for or against any investment vehicle or money management strategy. It should not be construed as advice and each individual that invests needs to take up any decision with the utmost care and diligence. Please seek the advice of a competent business professional before making any financial decision.
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