If picking growth stocks in this topsy-turvy market has proven more stressful than productive, don't beat yourself up. It's the environment, and you're not alone.
On the other hand, with no end to the coronavirus pandemic in sight as we inch closer to what could be a landmark presidential election, the volatile market environment may not be changing anytime soon either. This may be a time to switch gears with some portion of your investment portfolio and simply let dividends do more of the heavy lifting.
With that in mind, here are three top dividend prospects that are worth a closer look, sooner rather than later.
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1. Discover Financial Services isn't in dire straits
Dividend yield: 3.66%
The 64% drubbing credit card stock Discover Financial Services (DFS 0.27%) suffered between mid-February and mid-March was brutal, but understandable. Equally understandable (unlike most other stocks) is the failure of Discover shares to recover most of what was lost in March's meltdown. Worldwide lockdowns meant to contain COVID-19 make it difficult for consumers to spend. And, should those lockdowns lead to a job-killing recession, Discover Financial Services could be on the hook for a lot of soured consumer debt.
It's arguable, however, that investors priced in too much doubt about Discover's foreseeable future. Even if only out of necessity and sheer boredom, consumers and retailers are finding a way to connect outside of conventional channels, and more recently, people are shrugging off the resurgence of coronavirus cases and visiting reopened stores and restaurants. The Census Bureau reported last month that May's retail sales grew nearly 18% from April's sharply depressed levels.
That doesn't necessarily mean we're in a roaring economy. But with most of Discover Financial Services' sell-off still intact, the trailing and forward-looking price-to-earnings (P/E) ratio of just above 7.0, in addition to a trailing dividend yield of 3.6%, are all just too compelling to pass up.
2. Bristol Myers Squibb is built to last
Dividend yield: 3%
Several pharmaceutical companies are jockeying to be the first player to come up with a COVID-19 vaccine. Bristol Myers Squibb (BMY -0.87%) isn't one of them.
It may seem like a mistake on the surface. But the decision not to rush into the development of a drug without a clearly promising candidate already in place -- especially when so many other pharma names are -- is actually brilliant in the long run. The coronavirus will eventually be licked, at which point industry companies will once again turn the focus back on their respective portfolios and pipelines.
To that end, know that Bristol Myers Squibb is the name that owns powerhouse drugs like cancer-fighting Opdivo, blood thinner Eliquis, and blood cancer treatment Revlimid, the first two of which each generated more than $7 billion worth of revenue last year. Also know that with its recent acquisition of Celgene, the company believes its existing pipeline could drive $20 billion worth of additional annual sales beginning in the second half of this decade. That's significantly more than the pre-merger working figure of $15 billion. It all translates into longevity for the company's cash flow.
In the meantime, new investors will buy into Bristol Myers Squibb's position with a trailing yield of 3% based on a dividend that's been raised every year for 10 straight years now.
3. Walmart is ready for the new normal
Dividend yield: 1.7%
Finally, there's never really a bad time to own Walmart (WMT -0.32%) stock. But the next several years could prove to be an especially good time to own a piece of the company. Not only are newcomers plugging into the stock at a decent trailing yield of 1.7%, but they're also stepping into a position in the world's biggest retailer after it's proven it's ready for the new normal in a post-COVID world.
Yes, its curbside pickup capabilities have a lot to do with that argument. Consumers can now retrieve online orders of groceries at about 3,000 Walmart stores, allowing those shoppers to completely sidestep the need for social distancing as the world works through the coronavirus pandemic. The company isn't stopping there, however. Grocery delivery to consumers' homes is now an option at roughly 1,400 stores.
Better still, curbside grocery pickup isn't aimed at just grocery customers anymore. In May, the retailer combined its grocery shopping app with its app that lets consumers shop the rest of the store, adding all sorts of big-ticket items that can be loaded into a shopper's virtual shopping cart. Then in June, its warehouse shopping arm Sam's Club rolled out curbside pickup at all its U.S. stores.
On the surface, these things may all seem like just another way of doing the business Walmart was already doing. Under the surface, though, the moves are a business builder. As Edward Jones' consumer research analyst Brian Yarbrough told business news venue Marketplace in May: "For Walmart, it's about gaining market share, and gaining new customers, and offering the options."
