First, identify stocks with yields higher than average in the S&P 500. The average yield is around 2%, and with Treasuries offering just under 3%, it makes sense to only invest in stocks providing higher than average yields. Second, cash flows are critical when it comes to dividends. Any dividend stock that you may consider must have cash flows expected to grow for at least the next several years. Thirdly, dividend payout ratios are critical when it comes to locating perfect dividend stocks. The ratio measures the percent of a company’s earnings that are given back to investors as dividends. I like to see this number 75% or less, which tends to show that there is room for continued dividend hikes in the future. Finally, I consider the long-term debt to capital ratio. Ideally, this ratio should be under 75%. Too much debt is a dividend killer for any company. Applying this criterion, I discovered seven dividend-paying stocks that make sense right now.
Merck & Co., Inc. (NYSE:MRK) is currently yielding 3.3% and is trading lower by over 6% in the last year. Shares of drugstore giant Walgreens Boots Alliance Inc (NASDAQ:WBA) are down over 20% over the last year and the stock yields 2.5%. Energy refining stock Valero Energy Corporation (NYSE:VLO) is higher by over 90% in the last year and boasts nearly $100 billion in revenue. Kraft Heinz Co (NASDAQ:KHC) long-term debt to capital ratio is sub 30%, and cash flow is expected to increase next year. Having increased its dividend for the last 55 years, Johnson & Johnson (NYSE:JNJ) is one of the most robust dividend payers on the market. Carnival Corp (NYSE:CCL) is my favorite company on the list. By far Target Corporation (NYSE:TGT) is the best recent performer on the list.
Source: InvestorPlace
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- Dividend Stocks in Today's Market
- 5 Big-Name Dividend Stocks Crushing The S&P 500
- How To Be a Better Investor During Difficult Times
- 4 Higher-Yielding, Low Debt Stocks With A Tiny Payout Ratio
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