3 Dividend Stocks to Put on Your Watchlist

A few blue chip stocks that still deliver better-than-average dividend yields.

Sep 3, 2014 at 4:40PM


High-yielding dividend stocks are harder to find these days. 

With the market setting new all-time highs, it's getting harder to find quality, high-yielding dividend stocks. But that's no reason for income-seeking investors to start wading in riskier waters like junk bonds or micro-caps. After all, stretching too far for a meaty yield will likely saddle your portfolio with a dividend cut or serious capital losses.

The good news is that some of the biggest, most proven companies around still sport healthy dividend yields -- enough to provide solid income with little risk of stock price volatility or a nasty payout cut.

Procter & Gamble (NYSE:PG): Yield 3.1%

As far as dividend pedigree goes, it doesn't get much better than Procter & Gamble. The consumer goods giant has sent a portion of its earnings to investors each year since 1890. And a hike this past spring made 2014 the 58th consecutive year in which P&G has raised that payout. 

Lately, the stock has gotten cheaper, though, relative to the market. Shares are up only 60% over the last five years, which is well below the S&P 500's 100% rise. 

PG Chart

PG data by YCharts

That underperformance is tied to some sluggish sales growth at P&G. Organic sales ticked higher by just 3% in the last fiscal year. And while that met the low end of management's goals, it still translates into very little progress in gaining market share from competitors. As CEO AG Lafley put it in a recent conference call with analysts, "We could have and should have done better."

P&G plans to get growth back on track through a renewed focus on its core brands. That's why it has been busy whittling its portfolio down to roughly 80 of its biggest, most promising product lines. Combined with an ambitious cost-cutting program that's already delivering results, P&G's business, and its dividend, could improve nicely in the years ahead.

McDonald's (NYSE:MCD): Yield 3.5%

Growth has been even harder to come by at McDonald's lately. The fast food giant's comparable-store sales fell by a brutal 1.5% in the United States last quarter. Mikey D's struggles can almost all be traced to declining customer traffic trends: guest count growth has been shrinking for years as customers flock to higher-end fast casual shops like Chipotle Mexican Grill (NYSE: CMG):

Year Guest Count Growth
2011 4%
2012 2%
2013 -2%

McDonald's global guest count. Source: Financial filings.

Still, McDonald's has huge resources at its disposal, particularly in the form of billions of dollars in cash flow which it can use for capital investments, marketing, and menu innovations. The company is also planning to refranchise a significant portion of its company-owned locations, boosting profitability in the process. A similar move sparked Wendy's (NASDAQ: WEN) run to become one of last year's top restaurant stocks, and it should at least help McDonald's fund a strong uptick in capital returns to shareholders.

Home Depot (NYSE:HD): Yield 2%

In contrast to P&G and McDonald's, Home Depot's business is clearly on the upswing. Comparable store sales grew by a scorching 6% last quarter, putting the company well above competitors like Lowe's, and among the fastest-growing retailers around. Home Depot's profits have been improving at an even better pace: per-share earnings were up 22% through the first six months of 2014.

Hd Pic

All of that success has made the stock more expensive, which has pushed its yield down. Shares are up 200% over the last five years, or double the market's rise. Still, dividend investors that buy Home Depot now are betting on its capital returns spiking higher in the years ahead. After all, the company is on track to spend $7 billion repurchasing its own shares this year. Meanwhile, its improving profitability, with return on invested capital approaching 30%, points to the likelihood for a substantial dividend hike in the near future. 

More great dividend picks
The smartest investors know that dividend stocks like these simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool recommends Chipotle Mexican Grill, Home Depot, McDonald's, and Procter & Gamble. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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