For some investors, dividend stocks are about as sexy as watching dust collect on books in a library. There is no doubt that they have strong histories of profits; they just do not generate the kind of overnight millionaire returns that some investors look for. But what has been concerning recently is that many in the investment community have begun to question the value of dividend stocks as the Federal Reserve has rumored plans to raise interest rates in the near future. With the increased interest rates, credit lines may become more costly, which could significantly impact the sales revenue of many products that are sensitive to rate hikes.
Dividend stocks have a strong history of profits.
However, the reality is that, despite the concern, the equities markets are still near peak highs. Many companies are delivering dividends over 2 percent, which is the current stock market average. So investors are still raking in yields – they're just becoming slightly more difficult to find.
That is why many investors are looking for the top of the class among dividend stocks – ones that can resist the storm. Listed below are several dividend stocks that investors are, or should be, considering now:
One of the biggest names in the auto sector for decades, GM has a significant advantage in expendable capital over smaller auto manufacturers like Tesla. A Morningstar report noted that it still generates an enormous amount of cash flow over its competitors. Furthermore, according to Yahoo Finance, with a payout ratio at 22 percent, it is clear that there is potential to expand its dividends in the future.
As the industry leader in trucks, on top of its strong presence in the car class, GM has very strong fundamentals. Strangely though, its stock price is not reflecting these strong fundamentals, so it is trading at a relative bargain considering that its dividend payments yield 5.1 percent right now. So if there is a chance that a dividend stock produces over the long-term, GM may just be one place to look in the auto sector.
The big-box consumer retailer is hitting on all cylinders now, which makes it all the more surprising that its stock price fell by 15 percent last year. Right now, its dividend payments are yielding record highs, as its profitability increased 36 percent in the first quarter of the year. One of the reasons behind this surge was that it improved its high-margin categories and its grocery offerings. Also helping it was that any problems it experienced in consumer traffic growth was felt across the industry by titans like Wal-Mart as well.
All of these factors have combined to make Target a reasonably discounted price for investors. Considering that its valuation is set for 13 times next year's profit and its dividend yield is currently 3.3 percent, the retail giant is a great bargain.
The ubiquitous soda brand is always a smart move for investors. Currently yielding 2.87 percent for investors, its dividend payments are strong, according to Yahoo Finance.
Considering that Coca-Cola sells over two billion beverages around the world every day, it should always be near the top of any investor's list for dividend stocks. The only concern many have with the soda titan is that it is in the process of a major transformation.
This transition will streamline and trim down certain product lines to become a more profitable corporation. Such a bottle-make refranchising effort is focused on having executives raise capital to drive profit margins and sales. Despite these changes though, Coca-Cola isn't going anywhere anytime soon, particularly not downward. It will continue to be one of the most valuable and profitable brands in the world.
Procter & Gamble
The consumer goods giant is an interesting case in the dividend stock class. Right now, it currently yields 3.19 percent, which is a fairly handsome return for investors. Furthermore, according to the Motley Fool, the company plans to deliver $70 billion to its investors by 2019. All things sound pretty straightforward, right?
Well, Procter & Gamble is currently in the midst of transforming its product portfolio. This shift will now push the company to focus on its 65 top performing brands in 10 product categories. The concerns dealt specifically with the fact that there were no signs of strong organic growth in the short-term future. But the silver lining was that the company has seen profitability and sales growth after cutting its costs, which has positioned it for big-time earning hikes in the future.
So if investors can tolerate some tough periods, it may pay off – particularly if the company's plan to boost returns to $70 billion in three years pans out.