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Put 3 Dividend Stocks on the Board

By Tom 24 Comments

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Three great dividend stocks!

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 (ABBV)

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.

Dividend Metrics:

  • 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

Altria (NYSE: MO) 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.

Dividend Metrics:

  • 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 (T)

AT&T is a world leader in communications, media and entertainment, and technology.  Their wireless and wired communications businesses are the largest shares 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.  

Dividend Metrics:

  • 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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Disclosure & Disclaimer

This article, or any of the articles referenced here, is not intended to be investment advice specific to your situation. I am not a licensed investment adviser, and I am not providing you with individual investment advice. The only purpose of this site is information & entertainment. We are not liable for any losses suffered by any party because of information published on this blog. See this site’s Disclaimer and Privacy tab for more information.

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Reader Interactions

Comments

  1. Miguel (The Rich Miser) says

    October 25, 2018 at 10:14 am

    Hi Tom,

    I’m with you on AbbVie, since I think pharma should do well in a world with a growing (and aging) population (though the Humira situation does give me some pause).

    For Altria, I’m still reluctant to invest in a tobacco company. I agree with you as to AT&T, though I’ve never particularly loved them when I’ve been their customer.

    Cheers,
    Miguel

    Reply
    • Tom says

      October 25, 2018 at 11:21 am

      Thanks for your thoughts on each company Miguel. Both AbbVie and AT&T have taken a pretty good beating recently in the stock market and are starting to look like better values. Tom

      Reply
  2. Caroline says

    October 25, 2018 at 11:36 am

    I don’t own any of those stocks but I am heavily invested in Canadian stock right now (because of the tax benefits). I need to re-balance my portfolio so may add a few US stocks soon (hopefully the FX gets better for me too).
    Thanks for the info Tom.
    Caroline

    Reply
    • Tom says

      October 25, 2018 at 12:06 pm

      You bet Caroline. Good luck with the upcoming purchases. Starting to see some better values with all the volatility. Tom

      Reply
  3. Simple Money Man says

    October 25, 2018 at 1:06 pm

    I’ve had T for a while and it pays a nice dividend. I’ve been a wireless customer for many years too and always have had a good experience with folks there. Do you have a favorite football team by the way? I’m a Ravens fan and their performance has been up and down so far but there’s still plenty of football left to play. 🙂

    Reply
    • Tom says

      October 25, 2018 at 4:01 pm

      Sorry to admit, but I’m a life long Bears fan SMM. We haven’t been good in a while, but things are starting to look up a little. Couldn’t believe the Ravens kicker missed that extra point that would have tied the game last week! Tom

      Reply
  4. DivvyDad says

    October 25, 2018 at 3:34 pm

    All nice choices, and I’m not saying that just because I happen to own all three of them. I’ve owned ABBV since the beginning as I received shares as part of the Abbott spin-off.

    Collectively, ABBV, MO, and T hold positions in my Top 10 based on portfolio weight – #2, 6, and 9 respectively.

    Given that ABBV is overweight for me right now, I haven’t added but it is extremely tempting as they have moved below $80/share. I’m also pretty well positioned on MO right now after a couple of purchases back in the low $50’s. Of these three, I have been most recently tempted to add to my T position with them getting down around $30/share.

    Enjoyed the football analogy too, thanks Tom!

    Reply
    • Tom says

      October 25, 2018 at 4:03 pm

      With ABBV and T being beaten down here recently DD, I totally agree that they are looking tempting given their current yields. I’m well position in MO too Love it, but probably wouldn’t add more. Again, tempting. Tom

      Reply
  5. Passivecanadianincome says

    October 25, 2018 at 7:25 pm

    nice trio Tom

    was just looking at abbvie last night. seems like a great buy. no usd atm or id be a buyer.

    cheers man

    Reply
    • Tom says

      October 26, 2018 at 7:12 am

      Thanks Rob. ABBV has dropped a lot recently. Too bad for the USD. Seems to keep you and many other Canadians on the sidelines when it comes to US stocks. Tom

      Reply
  6. Helen says

    October 25, 2018 at 9:39 pm

    Hi Tom, scoring a field goal sounds great. Yeah, the market has been volatile lately. It looks there is always some market concerns: the trade war, rising interest rate, etc. In the long run, stock market is still a good place to invest. Thanks a lot for sharing the information of the 3 stocks.

    Reply
    • Tom says

      October 26, 2018 at 7:14 am

      You are welcome Helen. Yes. There are a lot of issues the stock market is trying to figure out right now creating volatility we have not seen in a while. Tom

      Reply
  7. Mr. Robot says

    October 26, 2018 at 8:14 am

    Excellent suggestions Tom, well except MO but thats just a personal preference 🙂

    For me I scoped up 3 shares of Abbvie yesterday (and some TXN) during their significant drop. I have some more capital left but am seriously doubting where to put it.

    Abbv is currently my largest holding, but this price is very enticing. I’m also looking at T, TXN, ED but also IBM which took a massive beating.

    I’m having difficulties making a decision, probably due to some sleep deprivation on my end.

    Reply
    • Tom says

      October 26, 2018 at 9:41 am

      Looks like a lot of good options Mr. R. There are a lot of good dividend stock opportunities starting to surface in this market. I hope you can get some sleep buddy! Tom

      Reply
      • Mr. Robot says

        October 26, 2018 at 1:31 pm

        I hope the same Tom 🙂

        After another 6% drop In IRM I decided to add their. Maybe I can pull some additional capital in to expand my T. Below $30 I believe it’s an awesome buy.

        Reply
        • Tom says

          October 26, 2018 at 7:48 pm

          Mr. R. I don’t own it, but IRM is another quality company. Enjoy those newly found dividends. Tom

          Reply
  8. Dividend Daze says

    October 26, 2018 at 10:56 am

    I own 2/3 so not too bad. I really like ABBV and have added a lot to that position over the course of this year. Their share price hasn’t been the best and has been dropping drastically recently. Might not be a bad place for an entry point or lower the cost basis. Currently sitting at about $80 a share.

    Reply
    • Tom says

      October 26, 2018 at 11:00 am

      Hi Daze, And a really healthy dividend yield for ABBV. I have out of town visitors this weekend, otherwise I think I would be taking a hard look at putting some cash to work next week. I haven’t bought much this year and have been letting my dividends accumulate in cash waiting for better prices. Tom

      Reply
  9. Jordan@MoneyMaaster.com says

    October 26, 2018 at 1:23 pm

    Nice post Tom! I basically gave up my interest in football a couple years ago. I used to watch strictly for the fantasy/betting, but I don’t even have time for that anymore. I’ll stick to hockey & Soccer:)

    It seems everyone is so hot on Abbvie right now. I Swear every second person is posting about adding to it. Reminds me of Realty Income(O) back in the day.

    Good luck!

    Reply
    • Tom says

      October 26, 2018 at 4:40 pm

      Yes Jordan. And I missed my opportunity on O when it fell below 50 earlier this year. Thanks for the kind words. Hope you and the family are doing well. Tom

      Reply
  10. Engineering Dividends says

    October 26, 2018 at 8:43 pm

    A good group of stocks, Tom. I own ABBV and MO, but not T.
    I’ve added to ABBV recently and it’s moving up the ranks in my portfolio. MO is the smallest position I have, mainly because its so new, but it’s one I can see adding to over time. T hasn’t been on my radar as I prefer faster growth in the stock price and the dividend. However, if one is looking for current income, I can see the benefits of owning T.
    I think you put this one right down the middle of the uprights…. put a 3 up on the board.

    Reply
    • Tom says

      October 27, 2018 at 7:29 am

      Thanks ED. Your thought process sounds pretty solid for each of the stocks in the group. And of course I would not have expected it to be any other way. Tom

      Reply
  11. GYM says

    October 27, 2018 at 4:58 am

    Nice list, and I like that you share how long you’ve owned these three stocks. I have been very happy with my Altria (MO).

    My husband just read to me again “if you owned Altria in 1965 and invested $10,000, it would be worth $1.2 million now”

    (the numbers were similar but I can’t remember how much it actually was. There is a calculator for it on their site though I believe lol!!)

    Reply
    • Tom says

      October 27, 2018 at 7:26 am

      This clearly indicates to me you used good judgement in the selection of a husband. 🙂

      Reply

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Welcome to Dividends Diversify! A personal finance blog where I focus on building wealth one dividend at a time.

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