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4 Stocks HIKING Dividends to Buy for November

Investors looking for dividend stocks to secure a steady income amid heightened market volatility should bet on Johnson & Johnson (JNJ), The Coca Cola Company (KO), McDonald’s (MCD), and Target (TGT). In addition to sustaining their dividend payments even during the pandemic, these companies have recently increased their dividend payouts based on their cash-flow strength.

There is widespread uncertainty in the stock market caused by the upcoming presidential election, the second wave of the coronavirus, and the delay in passing a fiscal stimulus package. In such times, it may be better to invest in established companies with a strong dividend record.

While many companies either cut or suspended their dividends because of weak business amid the pandemic, some companies maintained or increased their dividends as their business model helped them thrive. The Vanguard Dividend Appreciation ETF (VIG), which represents the performance of stocks increasing dividends over time, has outperformed the S&P 500 by returning more than 50% since the market crash in mid-March.  

In addition to helping survive the market uncertainties, investing in stocks that can maintain or increase their dividends could ensure better returns than fixed-income investments in the current near-zero interest rate environment.

Johnson & Johnson, Inc. (JNJ), The Coca Cola Company (KO), McDonald’s Corporation (MCD), and Target Corporation (TGT) have not only been paying out steady dividends but have also increased their dividend payouts during the pandemic. This signals strength in their business model and the ability to generate steady cash flow.

Johnson & Johnson, Inc. (JNJ)

JNJ develops, manufactures, and markets healthcare products. The company has operations in the pharmaceutical, consumer, and healthcare devices segments. JNJ has gained 24.5% since hitting its year-to-date low in mid-March. The company has announced a $1.01 dividend per share for the fourth quarter, which is an increase of 6.3% from the earlier dividend amount.

The company’s dividend payout has a five-year CAGR of 6.3%. The current dividend yield is 2.92% while the four-year average dividend yield is 2.66% 

The company has been developing a vaccine for the coronavirus, which has entered Phase-3 trials. The company’s Ebola vaccine has recently received approval for marketing from the European Commission.

During the third quarter, the company’s worldwide sales improved by 1.7%. JNJ’s earnings per share also saw an increase of 101.5%.

JNJ is expected to witness revenue growth of 4.7% for the quarter ending December 2020, and 8.6% in 2021. The company’s EPS is estimated to grow 12.4% in 2021 and at a rate of 4.3% per annum over the next five years.

How does JNJ stack up for the POWR Ratings?

A for Peer Grade

B for Buy & Hold Grade

B for Overall POWR Rating

The stock is also ranked #11 out of 240 stocks in the Medical – Pharmaceutical industry.

The Coca Cola Company (KO)

KO is the world’s largest beverage company having more than 500 brands. The company has operations in more than 200 countries and owns brands including Coca-Cola, Zico coconut water, and Costa coffee. KO’s stock has gained 25.2% since its mid-March low. For the fourth quarter, the company has declared a dividend of $0.41 per share, which is an increase of 2.5%.

The company’s dividend payout has a five-year CAGR of 5.6%. The current dividend yield of the company is 3.42% while the four-year average dividend yield is 3.35%   

The company is working on leveraging e-commerce to boost sales, by adopting strategies such as increasing in-app visibility, investing in digital imagery, using digitally enabled fulfillment models. The company is also moving toward discontinuing around 200 brands to streamline its operations.

During the third quarter ended September, the company’s operating margin was 26.6% compared to 26.3% during the same period last year. The company’s operating income in Europe, the Middle East, and Africa grew 2% year-over-year.

KO is expected to witness revenue growth of 1% for the quarter ended March 2021, and 10.2% in 2021. The company’s EPS is estimated to grow 11.6% in 2021 and at a rate of 3.3% per annum over the next five years.

It’s no surprise that KO is rated a “Buy” in our POWR Ratings system, with a grade of “B” in Trade Grade and Peer Grade. In the 29-stock Beverages industry, it is ranked #3.

McDonald’s Corporation (MCD)

MCD operates and franchises fast-food joints across the world. It is the world’s largest restaurant chain in terms of revenues. MCD’s stock has gained 44.6% since its mid-March low. For the fourth quarter, the company has declared a dividend of $1.29 per share, which is an increase of 2.5% from the third quarter dividend per share.

The company’s dividend payout has a five-year CAGR of 7.6%. The current yield is 2.4% while the four-year average dividend yield is 2.49%

The company is working on improving its offerings at its restaurants. The company has recently released a new breakfast McCafe bakery lineup. MCD has also collaborated with J Balvin to release a limited-edition merchandise collection.

During the third quarter ended September 2020, the company’s US QTD comparative sales rose 4.6%. MCD is expected to witness revenue growth of 2% for the fiscal quarter ending December 2020, and 13.8% in 2021. The company’s EPS is estimated to grow 39.4% in 2021 and at a rate of 4.9% per annum over the next five years.

It’s no surprise that MCD is rated a “Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Peer Grade, and Industry Rank. In the 49-stock Restaurants industry, it is ranked #3.

Target Corporation (TGT)

TGT operates a chain of general merchandise stores across the United States and Canada. The company’s selection of products includes clothing, consumables, home products, and seasonal merchandise. TGT’s stock has gained 53.5% since hitting mid-March lows.

For the fourth quarter, the company has declared a dividend of $0.68 per share, which is an increase of 3%. The company’s dividend payout has a five-year CAGR of 6.5%. The current dividend yield of the company is 1.75% while the four-year average dividend yield is 3.28%.

The company has recently entered into a partnership with Shipt to provide same-day deliveries to customers. TGT has announced a cash tender offer which would help it raise money for the purchase of debt securities.

During the second quarter, the company’s comparable sales grew 24.3%, as compared to the same period last year. The company also gained approximately $5 billion in market share in the first half of the year.

TGT is expected to witness revenue growth of 10.8% for the fiscal quarter ending October 2020, and 13% in 2021. The company’s EPS is estimated to grow 12.8% in 2021 and at a rate of 7.5% per annum over the next five years. 

TGT’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” in Trade Grade and Industry Rank. In the 18-stock Grocery/Big Box Retailers industry, it is ranked #6. 

(Note that TGT is one of 5 stocks in the Reitmeister Total Return portfolio. Learn more here.)

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TGT shares were trading at $155.81 per share on Thursday afternoon, up $0.60 (+0.39%). Year-to-date, TGT has gained 23.47%, versus a 4.92% rise in the benchmark S&P 500 index during the same period.



About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.

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