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Got $5,000? Buy These 3 Dividend Dynamos

By Brian Feroldi – Apr 22, 2020 at 6:00AM

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If you're looking for reliable income, these three companies have you covered.

Lots of investors focus exclusively on dividend-paying stocks. I'm not one of them.

Instead, I look for the highest-quality businesses that I can find. If they happen to pay a dividend, great. If not, it's no big deal.

I do follow a handful of dividend-paying stocks that I believe have incredibly bright futures ahead of them. Which ones? Accenture (ACN -1.41%)Broadridge Financial Solutions (BR -1.86%), and Starbucks (SBUX -1.39%). If you're after income, here's why you should give them a closer look.

Man handing over hundred dollar bills

Image source: Getty Images.

Accenture

Accenture is a global consulting powerhouse. The company employs more than 500,000 experts who provide a wide range of strategy, digital, technology, and operations consulting services to customers around the world.

Once Accenture lands a customer, it tends to hang onto them for a long time. Accenture's guidance for the upcoming quarter shows just how sticky its business is. Given the COVID-19 pandemic, you'd assume that Accenture's numbers were about to sink like a stone. Instead, management expects revenue in the upcoming quarter to be about flat with the year-ago period. That's a result that most businesses would kill for right now. 

This consistency allows Accenture to use its growing cash flow to buy back stock and pay a growing dividend. While the company's dividend yield of 1.8% might not get your heart racing, I like that it has been raised every year for the last nine years and still consumes less than half of net income. That gives the company plenty of room to continue to grow it from here, even if profits don't move much.

Meanwhile, Accenture's stock is still down more than 18% from its recent high. That makes right now an opportune time to get in.

Broadridge Financial Solutions

You're forgiven if you never heard the name Broadridge Financial Solutions before. This company provides a number of boring but mission-critical back-office services for the financial industry, including investor communication, posttrade management and settlement, and a varitey of services for advisors and wealth managers.

Broadridge's dominance in these markets can't be overstated. Broadridge distributes about 80% of broker regulatory communications to 140 million shareholder accounts. It settles and clears more than $7 trillion in trading volume every day. It aggregates data for over 200,000 agents and advisors. These numbers are nothing short of amazing.

What all of these business services have in common is that they provide Broadridge with predicatble revenue and profits. Management uses that dependable cash stream to reward shareholders. The company has grown its dividend for 12 years in a row and currently offers up a 2% yield. With a payout ratio of less than 43%, the dividend looks very safe. There's also plenty of room to left for management to boost it, too. 

Broadridge's stock has also been sold off in the market beat-down and is still down 20% from its February heights. The stock isn't dirt-cheap, but high-quality businesses rarely are. I think right now is a fine time to pick up a few shares.

Starbucks

Restaurant stocks have been hit incredibly hard by COVID-19. With substantial operations in China, Starbucks has been dealing with the crisis for longer than most. 

Starbucks has responded as well as anyone could have hoped. It has shifted to a drive-thru and delivery model, and it's paying all of its workers through May 3, even if they aren't actively working. Those who are working through the crisis are getting an additional $3 per hour, and those who become afflicted with the disease are getting extra benefits to stay at home.

Starbucks has enough liquidity to get through this crisis, but it is likely that many of its small mom-and-pop competitors won't. That could allow Starbucks to pick up market share in a recovery. 

The next few quarters are going to be ugly for Starbucks -- it just reported that profits got cut in half in the first quarter -- but I believe that the company will eventually make a full recovery. About 90% of its stores have already reopened in China, for example, and the U.S. is expected to start reopening after May 3. 

Starbucks' stock is still down more than 22% from its recent high, which has pushed its dividend yield up to 2.2%. I think that's an incredibly attractive yield for such a wonderful business.

 

 

Brian Feroldi owns shares of Accenture and Starbucks. The Motley Fool owns shares of and recommends Accenture, Broadridge Financial Solutions, and Starbucks. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$85.90 (-1.39%) $-1.21
Accenture plc Stock Quote
Accenture plc
ACN
$258.25 (-1.41%) $-3.68
Broadridge Financial Solutions, Inc. Stock Quote
Broadridge Financial Solutions, Inc.
BR
$146.12 (-1.86%) $-2.77

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