Author: Craig Adeyanju
Estimated read time: 3 minutes
Publication date: 3rd Jan 2020 21:17 GMT+1
It may sound cliché but investing in dividend paying stocks is one of few ways to generate income that’s almost entirely passive. That becomes even truer for stocks in the blue-chip class. Blue chip stocks are those whose underlying businesses are entrenched and have stood the test of time. These companies typically have robust cash flow and financials. Here’s a look at a few dividend stocks that fit these criteria, all of which you should consider buying for 2020.
Biopharmaceutical company AbbVie Inc. (NYSE: ABBV) currently pays a quarterly dividend of $1.18 per share, which currently yields an impressive 5.25%. Data shows that ABBV’s dividend yield is better than 90% of its industry and 95.5% of the S&P 500. Its dividend growth rate in the last half decade also beats 87.5% of its peers and 83.7% of the S&P 500.
AbbVie dividend profile. Source: Finscrenner
Despite a patent cliff threatening revenue from rheumatoid arthritis drug Humira, which is also the world’s bestselling drug, ABBV has continued to raise its dividends. If you factor the time when the drug maker was still a part of Abbott Laboratories (NYSE: ABT), the 2019 hike makes it the 47th consecutive year of dividend increase at the company. AbbVie spun off Abbott in 2013.
To alleviate the effect of the decelerating Humira sales outside the U.S. as well as the impending 2023 patent expiration in the U.S., AbbVie has been diversifying its product base. The company is in the process of completing the acquisition of competitor Allergan Plc (NYSE: AGN), the maker of wrinkle remover Botox. The efforts to diversify is already paying off, with Humira accounting for about 60.9% of ABBV’s revenue in 2018, a lower contribution compared to the 65.1% that the drug contributed to the topline in 2017. And yes, the company’s revenue increased over the two years as well.
Source: Mike Mozart/Flickr
Department store Macy’s Inc. (NYSE: M) embodies what it means to be a victim of disruption. Brick and mortar stores are going out of fashion, thanks to the growth of online retailing, spearheaded by e-commerce giant Amazon.com Inc. (NADAQ: AMZN). Yet, Macy’s business model is based on getting people to go shop at physical stores. As a result, the retail chain has had to deal with sales loss. It revenue has ped roughly 9.5% in the last five years to $25.45 billion. Its net income is also down a disturbing 36.83% over the same period.
However, the company has been adjusting to the realities of e-commerce in recent years. Its Buy Online Ship to Store (BOSS) and Vendor Direct programs, coupled with elevated online user experience, have been boosting its online sales. It’s has also been remodeling and tweak its in-store experience by rolling out Story shops at its stores. Story, a type of retail store that Macy’s acquired in 2018, curate items around a theme. The goals is to take shopping experience merchandise discovery up a notch.
These improvements make Macy’s 9% dividend yield all the more attractive. While the high yield here is because Macy’s stock has been a falling knife, having fell about 45% over the past year, the stock looks attractively priced. M stock currently trades 5.3 times it’s trailing twelve months earnings. In comparison, its competitor Kohl’s Corp. (NYSE: KSS) has a trailing PE ratio of 11.8. And the average PE for the department store industry is 13.82.
To keep up with the best dividend stocks for your watchlist, you should check out the Finscreener Best Dividend Stock screener. It’s our that allows investors to look for dividend paying stocks.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.com. The observations he makes are his own and are not intended as investment or trading advice.
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