Friday, May 29, 2020
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Top 5 Dividend Stocks for 2020

This post comes from one of my investing friends, Ramey. He is the owner of MoneyByRamey.com, where he writes about investing and personal finance. He has written two books on investing that can be found here.

Top 5 Dividend Stocks for 2020

In my quest for financial freedom, I am on the lookout for solid dividend-paying stocks that will be around for the long term. I have been able to build up a dividend portfolio that currently yields over $6,600 of dividend income per year

Now, this has not been an easy accomplishment and it has been very challenging to execute, but by building out some various tools, I have been able to identify undervalued dividend stocks that are ripe for investing.  

Today, I wanted to bring you a list of the top 5 dividend stocks that I’m looking at for the year 2020. 

Should I Keep Investing?

Some of you might be asking yourself that on a daily basis. 

As I write this, the world is consumed by a global pandemic brought about by the virus, COVID19. I currently live in the USA, where we are experiencing an unprecedented change in the way that we live our daily life. It’s the same in much of the world at large.

Many employees are now required to work from home when possible in order to practice social distance. The NBA has suspended its season along with the NHL, NASCAR, and virtually every other major sports organization.  

During these challenging times of uncertainty, many individuals do not know how things are going to work out. As a dividend investor, I desire uncertainty because it allows me to ‘buy when others are fearful’ and get rock bottom deals.  

Now, that doesn’t mean I wish tragedy on others. Rather, I hope for the best but I’m ready with capital when markets present opportunities.  

During these troubling times, I’m still deploying capital into the market when I’m finding good deals:

By doing so, I continue to see my passive income through dividends rise! Now we’ll get into 5 stocks that are set to perform well in 2020 and beyond.

The Clorox Company ($CLX)

The very first company that comes up on my dividend stocks for 2020 list is the Clorox Company. 

I recently added a position to my own dividend portfolio with a purchase in late 2019, right before COVID19 ended up making its way out of China into a global pandemic. Pretty good timing.  

But for me, it’s not about trying to ‘time the markets’. We all get lucky on a trade once in a while. Rather I’m looking for when values present themselves and if my dividend criteria are met, then I’m more likely to invest my capital.  

Here are a few reasons why I like The Clorox Company: 

  • Their products have increased in use during the coronavirus pandemic. Since there will be a new normal in the world at large, companies like Clorox could see a boom for years to come.  
  • Solid cash flow over the past few years. This easily covers the dividend and will help propel the company into the future and beyond.  

Source: https://www.marketwatch.com/investing/stock/CLX/financials/cash-flow

3M ($MMM)

3M is an excellent company that I have owned for quite some time. Not only is this stock listed on my Best Dividend Stocks list, it’s also right in my home state of MN.  

While the affinity of having them in my backyard is not enough in and of itself to invest in the company, it does add another layer of realizing that I’m an owner in each and every one of the companies that I’m invested in. That mindset is what great investing is all about.  

Here are three reasons why I like 3M: 

  • I use their products on a daily basis. Items like post-it notes, scotch tape, sponges, filters, etc. are considered consumer staples that every person and household needs.  
  • 3M has an influence on the current pandemic. They make all sorts of items that we don’t usually use like respirators and masks which are vitally important during these current times.  
  • 3M also has a great balance sheet with a low payout ratio. During the ‘black swan’ market event like we’re currently seeing, companies with strong balance sheets are the ones that will come out better once things return to normal.  

Source: https://finviz.com/quote.ashx?t=mmm&ty=c&ta=1&p=d

Coke ($KO)

Coke is one of the great companies of all time. Not only is it in the top three most recognized brand names in the world, but it also operates with some solid cash flows that it has used to maintain a growing dividend for 57 years.  

There has been some concern at Coke over the flatlining of revenues. Some investors believe that this is a sign of the healthier eating trends taking hold. They wonder whether or not this company can survive in the era of organic foods.  

I’m convinced that it can. So is Warren Buffett, who currently holds 400,000,000 shares and has stated he has no plans on selling any of them.  

Here are three reasons why I like Coke: 

  • Coke makes a “forever product”. This means that no matter how the world changes, their product will be here to stay.  
  • The company also sports a great balance sheet with low debt/equity and room to grow.
  • Coke has a Dividend King status. This means it has been paying a dividend for 50+ years. Not too shabby.  

Here is the current forward dividend income calculation as provided by the MoneyByRamey.com Dividend Calculator.

AT&T ($T)

AT&T is a telecommunications company that has gotten a bad rap over the years. Many investors do not like the business model of telecommunications companies in general. They believe the sector has become commoditized with no clear differentiation in competitors.  

But I see something different. I see a behemoth with steady income through cellular service that is growing into more of a content powerhouse. With over 170m customers, that is a company that can do some big things if they get it right.  

Here are three reasons why I like AT&T: 

  • AT&T sports a huge customer base of nearly 170M direct-to-consumer customer relationships. That is a huge amount of individuals to capitalize on. I’m personally one of those customers as I like to use the products of companies I own wherever possible.  
  • AT&T has made it clear that it is looking to build its content base. It is making inroads to improve HBOGo and deliver more to the people. That can be a great boost for the companies operations moving forward. 
  • The thing that really makes me proud to own AT&T is the amazing cash flow it generates year-over-year. It’s truly astounding and is a good showcase of a solid business model.

Source: https://www.marketwatch.com/investing/stock/T/financials/cash-flow

Johnson and Johnson ($JNJ)

Johnson and Johnson has existed since the late 1800s and is a staple company in the world economy. It manufactures products we use on an everyday basis – Band-Aid, Listerine, Tylenol, Baby Powder, to name a few.  

The umbrella of great products produced by JNJ are considered consumer staples and can be a great choice for dividend investors.  

Shares of Johnson and Johnson have been trading down in the past few months due to issues the company has been facing around the Asbestos lawsuits. Though there is much uncertainty around these, there are strong reports that the company will get by just fine.  

Here are three reasons why I like Johnson & Johnson: 

  • I use their products on a daily basis. There is power in the consumer staples market. 
  • JNJ has a great balance sheet. In fact, it is one of the few remaining companies with a AAA debt rating, which is greater than the US government.  
  • JNJ has a solid payout ratio of 52.24%. This means a lot of its cash flow is going back into the business, which is excellent for investors to see.  

Here is the current forward dividend income calculation as provided by the MoneyByRamey.com Dividend Calculator.

Dividend Stocks Summary

So there you have it – five excellent dividend stocks that you should consider owning in your portfolio today. Though there is much uncertainty, I am optimistic that we will all find a way to live post COVID-19. 

Do you own any of these dividend stocks? Comment your thoughts below!

Matt Ramey
Matt Rameyhttps://www.moneybyramey.com/
Ramey is the owner of MoneyByRamey.com. My sincere goal is to help teach you the art of becoming Financially Free by building up active income, passive income, and utilizing money in the best way possible.

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