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3 Dividend Stocks I'd Buy Right Now

By David Jagielski – Jun 21, 2020 at 8:11AM

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They're great options for risk-averse investors who just want to collect cash.

Finding a good dividend stock can be challenging since there's so much uncertainty relating to the COVID-19 pandemic. However, investors simply need to adapt and look for safer options right now to minimize their exposure to the markets.

The three stocks listed below can help you do just that. They're in different industries, so collectively they can offer recurring payouts and help diversify your portfolio, keeping it safe in future downturns. Here are the three income-generating stocks that are great options to buy right now:

1. Innovative Industrial Properties

Innovative Industrial Properties (IIPR 3.59%) gives investors a healthy mix of both growth and dividends. Its tenants use its facilities to grow pot, which means it can be a smart way to gain exposure to a fast-growing cannabis industry without the risk that comes with investing in a pot producer. One of its strategies is to find and acquire distressed cannabis assets and then lease them back to the cannabis grower. Thus, whether the cannabis industry is doing well or not, Innovative Industrial will probably still be in a strong position.

Pile of paper U.S. currency on a white background.

Image source: Getty Images.

A real estate investment trust (REIT), Innovative Industrial legally has to pay out at least 90% of its taxable income as dividends. The REIT hasn't had a problem with that, recording a profit in each of its last four quarterly results. In its first-quarter results of 2020, the San Diego-based company reported net income of $11.5 million on revenue of $21.1 million. Profitability is an important consideration for investors, as a dividend stock would be of little use if it was incurring losses that necessitated it to slash or suspend its payouts.

Instead, Innovative Industrial has been increasing its dividend payments. On June 15, the REIT announced its payouts would be rising from $1.00 to $1.06. On an annual basis, investors will be earning a dividend yield of 4.3%, which is well above the S&P 500 average of 2%. 

2. Clorox

Clorox (CLX 0.38%) doesn't pay as well as Innovative Industrial does, but it more than makes up for that with a terrific performance so far in 2020. Up around 40%, Clorox has been one of the best stocks to hold this year amid the COVID-19 pandemic.

Five months ago, few people would have been so bullish on a company that's known for household cleaning products. But in a COVID-19 world where there's a big emphasis on keeping surfaces clean to minimize the spread of the virus, Clorox's products have been in high demand.

When the company released its third-quarter results of 2020 on May 1, it reported year-over-year revenue growth of 15%. While that may seem modest, it becomes a lot more impressive when you compare it to the company's most recent fiscal year, in which sales rose by just 1.5%. Like Innovative Industrial, Clorox has also consistently posted a profit in each of its past four quarterly reports.

On May 19, Clorox hiked its dividend by almost 5%, from $1.06 to $1.11. It's the 20th year in a row that the company has increased its payouts. Investors who buy today can now earn a dividend yield of around 2.1%, just slightly better than the S&P 500 average.

3. Cisco

Cisco Systems (CSCO 1.88%) is another solid dividend stock that could diversify your portfolio. The tech company is known for its routers and communication equipment. At a time when many people are working from home and travel is very limited, this could be a good stock to hang on to.

When the San Jose, Calif.-based company released its third-quarter results on May 13, Cisco's sales were down 8% from the prior-year period and profits had dropped by 9%. Product sales had declined by 12% and more than offset the 5% growth that Cisco saw in service revenue.

However, that may not necessarily be a long-term trend for the company. The period ended on April 25 -- when many businesses were still in survival mode, trying to slash any expenses they could to keep their cash safe during the pandemic. As cities are now reopening, there could be a resurgence in demand for networking equipment.

As the crisis subsides and there's some sense of normalcy, Cisco should see its numbers rebound. In its most recent fiscal year, the company's sales were up 5.2% from the previous year. The important takeaway is that even amid COVID-19, Cisco still posted a profit. It's the third quarter in a row in which its profit margin came in above 20%.

The company currently pays a quarterly dividend of $0.36. It increased its dividend payouts earlier this year, from $0.35 to $0.36, for a modest 2.8% bump. Today, its dividend yields 3.1% per year.

Which stock is best?

Here's a quick snapshot of how each of these stocks has done so far this year:

CLX Chart

CLX data by YCharts

If you can only invest in one stock today, I'd suggest going with Clorox. It may have the lowest dividend yield on this list, but it has the brightest future right now. Even though the stock has been soaring, it's still a savvy buy, as its products are going to remain in strong demand for the foreseeable future even during a recession. That makes it a perfect investment to buy, forget about, and reap the rewards in the long-run.


David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Cisco Systems, Inc. Stock Quote
Cisco Systems, Inc.
$40.75 (1.88%) $0.75
The Clorox Company Stock Quote
The Clorox Company
$128.88 (0.38%) $0.49
Innovative Industrial Properties Stock Quote
Innovative Industrial Properties
$91.68 (3.59%) $3.18

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

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