Three great dividend stocks!
Football season is in full swing. Therefore, I thought I would put it through the uprights for you. Consequently, I want to highlight three great dividend stocks for your consideration.
Three great dividend stocks are one way to look at it. But, I want to kick in a little bit more. So each company’s stock represents three points for sure:
- Current dividend income
- Solid dividend growth potential
- Opportunity for capital appreciation in the share price
In the three great dividend stocks highlighted here, we will lean toward the first bullet point. That being higher current dividend income. But that’s alright. Who couldn’t use a little more passive income from dividends?
SOMETHING FOR EVERYONE
You may be new to dividend stock investing. So these three stocks can get you started with your first purchases. All investors get their start at some point. Two of these three great dividend stocks were among my first purchases when I started investing in dividend growth stocks about 15 years ago.
Maybe you have a larger and more mature dividend stock portfolio. Then, these three great dividend stocks might serve as core holdings. That is the approach I have been taking now that I have been dividend growth stock investing for a number of years. In addition, I love sitting back and collecting my cash dividends from three great dividend stocks.
THE BIG PICTURE
The broader U.S. stock market remains near record highs, but a little volatile lately. Inflation and interest rates are on the rise. This environment has created some better values in dividend stocks than we have seen in recent years.
Lower stock prices mean higher dividend yields. And, the greater potential for capital share price appreciation over the long run. Each stock has risks and challenges. So I will attempt to present a balanced view. Since I hold all three in my portfolio, I certainly like to keep an eye on them.
THREE GREAT DIVIDEND STOCKS
So let’s get on with it. Here are three great dividend stocks:
AbbVie, a pharmaceutical company was founded in 2013. The company was formed through a spin-off by Abbott Labs. As a result, the company has in excess of 100 years of history in the pharma sector as part of Abbott. Today, Abbvie targets specific and difficult to cure diseases. They also leverage their core R&D expertise to advance science.
Most noteworthy, the company is best known for its successful drug Humira. Due to Humira, Abbvie’s revenue has grown steadily over the past several years.
However, Humira now represents more than 50% of total revenues. Such high revenue concentration in a single product represents a significant business risk. Humira sales could drop in the future due to the loss of patent protection or competition from new drugs called biosimilars. Such factors could put the dividend at risk in the future.
- Recent dividend yield: 4.7%
- Last dividend increase: 35%
- 5 year compound annual dividend growth: 17.5%
- Consecutive years of dividend increases: 5
- Years owned by Tom @ Dividends Diversify: 3
Altria has been a market leader in the U.S. tobacco industry for decades. The company’s tobacco platform is complemented by Ste. Michelle Wine. In addition, they have a significant investment in Anheuser-Busch InBev – the world’s largest brewer.
Altria’s goal is to be the U.S. leader in authorized, non-combustible, reduced-risk products. Most noteworthy, to do this they have been concentrating on alternative product delivery platforms. Specifically, smokeless, E-Vapor and heated tobacco products.
The decline in smoking and the need to transition current and future customers to new products represents a significant business risk. If they are unable to do so, the dividend may be at risk in the long-term.
- Recent dividend yield: 5.1%
- Last dividend increase: 14.3%
- 5-year compound annual dividend growth: 10.3%
- Consecutive years of dividend increases: 49
- Years owned by Tom @ Dividends Diversify: 15
AT&T is a world leader in communications, media and entertainment, and technology. Their wireless and wired communications businesses are the largest share of the company’s revenue. The wired business has been in decline for years. In addition, wireless has become a more price sensitive commodity service. These trends have put downward pressure on revenues.
This has led the company to seek acquisitions. First, the acquisition of DirecTV. Most recently they acquired Time Warner. Both Time Warner and DirecTV acquisitions have been financed with large amounts of debt. This has significantly increased the company’s financial leverage. Higher debt and interest payments are risky if the business faces a downturn in the future. Or, if interest rates rise a large amount.
- Recent dividend yield: 6.5%
- Last dividend increase: 2.0%
- 5-year compound annual dividend growth: 2.1%
- Consecutive years of dividend increases: 34
- Years owned by Tom @ Dividends Diversify: 14
WRAP UP & PATH FORWARD
Both Altria and AT&T are among my personal top 10 largest holdings. I hold a slightly smaller position in Abbvie. Each company is also a member of the Dividends Deluxe model portfolio.
Equal weight positions in each stock will generate an average dividend yield of 5.4% and projected annual dividend growth of 4-6%. This is a powerful combination of current yield and dividend growth. These elements should lead to share price appreciation over the long term from these three top dividend stocks as long as they can minimize the business risks I have highlighted. Now that’s my kind of three-point field goal!
Are you ready to put three points on your money board? Do you currently own or plan to initiate a position in any of these three great dividend stocks?
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