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3 Top Dividend Stocks to Buy Right Now

By David Jagielski – Jun 14, 2020 at 6:55AM

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These aristocrats are among the safest dividend stocks you can hold in your portfolio today.

It's an interesting time in the stock markets to say the least. The S&P 500 is up 9% in the past three months, nearly making up for the crash that happened in March.

Despite millions of Americans losing their jobs due to the COVID-19 pandemic and resulting lockdowns, there's a lot of bullishness in the markets -- perhaps too much. The possibility of another market crash lurks around the corner, and for concerned investors now may be the time to add some top dividend stocks into your portfolio for safety. Below are three excellent ones that look like solid buys right now.

1. Abbott Laboratories

Abbott Laboratories (ABT 0.29%) is up about 13% in three months, but its valuation hasn't taken off like many other stocks have during that time. What makes the healthcare company a top dividend stock is that not only has Abbott paid dividends since 1924 without missing a beat but it's also increased its dividend payments for 48 years in a row, making it a Dividend Aristocrat.

Its most recent increase occurred this year, when its payments rose from $0.32 every quarter to $0.36, for a bump up of 12.5%. Currently, the stock's dividend yield is 1.6% -- a bit less than the S&P 500 average of 2%. But what investors lose with dividend yield they'll make up with stability.

A stack of $100 bills on a cluster of coins

Image source: Getty Images.

The Illinois-based company is one of the better buys during the pandemic as its ID NOW test has already been distributed to millions of people. It came under fire last month when a New York University study suggested that the test wasn't as accurate in detecting COVID-19 as other tests. The study claimed Abbott's test was missing 48% of positive cases.

However, since then, the Texas Cardiac Arrhythmia Institute did its own testing of ID NOW and found that Abbott's tests were accurate, showing a 97.8% correlation with positive COVID-19 results when compared with other laboratory platforms. And it had a 100% correlation for specimens that came back negative.

Abbott Labs' top line could get a much-needed boost from the ID NOW tests. In the company's first-quarter results of 2020, which were released on April 16, sales were up a modest 2.5%. That's down from 2019, when its sales growth was 4.3%. But the good news for dividend investors is that, for nine straight quarters, the company's recorded a positive net income figure while also generating strong free cash flow. However, the company stated in its Q1 results that it was unable to predict the impact COVID-19 will have on its financials moving forward.

Despite the uncertainty, Abbott's still one of the best dividend stocks you can have in your portfolio today. With its strong financials and an incredible track record for paying and increasing dividends, investors don't have to worry too much about this stock and its payouts.

2. Target

Target (TGT -0.35%) is similar to Abbott in that not only does the stock have a long history of paying dividends but it's a good buy during the pandemic. When the company released its first-quarter earnings on May 20, Target reported comparable sales growth of 10.8%. This was due to customers making larger purchases and stockpiling during the pandemic. It's a great sign of the company's resiliency and the trust consumers have in the Target brand. Target boasts online ordering pick up at its stores and has purchased several delivery start-ups that allow it to ship orders -- initiatives that have been very valuable during lockdowns.

It's a significant improvement from the company's most recent fiscal year, where sales were up just 3.7%. Like Abbott, Target's been consistently stable, generating profits in each of its last 10 quarterly results.

The retailer's done so well that it comes as no surprise that it announced on June 11 it would be increasing its dividend payments for the 49th year in a row. Shareholders will now be receiving dividends of $0.68 every quarter, an increase of 3% from the $0.66 that the Minnesota-based company was previously paying. Currently, the stock's now providing investors with a dividend yield of 2.3%.

With the stock doing well during the pandemic, Target's an easy option for dividend investors to earn an above-average payout without taking too much risk.

3. AT&T

AT&T (T -0.99%) is another aristocrat that investors may want to add to their portfolios. The telecom giant last increased its dividend payments in December, when it hiked them by 2%, from $0.51 to $0.52. It was the 36th year in a row that AT&T had increased its dividend payments. Currently, the stock's dividend yield is 6.5% -- making it the highest payout on this list.

However, the stock isn't risk-free: In its first-quarter results released on April 22, the company stated that the COVID-19 pandemic cost it approximately $435 million worth of earnings before interest, taxes, depreciation, and amortization (EBITDA). Thus, the Texas-based company has had to shut down retail stores, which has impacted its top and bottom lines.

But with cities already starting to reopen, the worst may be over for AT&T. Although sales were down 4.6% year over year, the company still reported a profit in Q1, as it has in each of its last 10 quarters.

It's a stable stock and so too is its dividend, making it one of the better buys right now.

Which stock is the best of the three listed here?

Here's a quick look at how all three stocks have done this year compared with the S&P 500:

Ycharts

Image Source: YCharts

Only Abbott has outperformed the S&P 500 so far this year, but any one of these three stocks are great long-term buys.

AT&T's attractive yield definitely sets the company apart from its peers and would be my choice today. Consumers will continue to need telecom services whether there's a pandemic or not. And with the launch of HBO Max in May, it could lead to even more growth for the company in the years ahead as it looks to win back some cord-cutters. There's a lot to like about AT&T's stock, and that's why it gets the edge over the other companies on this list.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AT&T Stock Quote
AT&T
T
$15.93 (-0.99%) $0.16
Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$103.38 (0.29%) $0.30
Target Stock Quote
Target
TGT
$156.41 (-0.35%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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