After a long year in which uncertainty was -- and remains -- the core theme, many investors are understandably in the mood for assets that are less volatile and more reliable.
If you're hunting for steady, income-producing companies that can be counted on the regularly deliver a robust dividend while we wait for the global dust to settle, these three stocks look particularly juicy right now.
Home Depot's (NYSE:HD) current dividend yield of 2.2% may not be thrilling, but it's respectable -- and it's made even more so by the fact that management has raised the payout every year for the past 10. The home improvement retailer has a long way to go to earn a place among the Dividend Aristocrats, but it's certainly moving in that direction.
Its payout isn't the only reason an income investor would want to open a position in Home Depot, however.
While it's far from being able to produce the sort of growth that companies like Advanced Micro Devices or Tesla have achieved of late, Home Depot's top line grew 23.4% in the second quarter in spite of coronavirus-related challenges as much as because of them. Analysts expect comparable revenue growth when the company posts its third-quarter numbers on Tuesday.
Home Depot is benefiting from a huge home-improvement trend that was underway before the pandemic struck, and could continue once it ends. While the coronavirus has complicated such work this year, the Home Improvement Research Institute estimates sales of home improvement products will still grow by 8.7% in 2020, then level off at an annualized growth rate of 3.7% through 2024. Meanwhile, in August, sales of new homes in the U.S. hit a multiyear record annualized pace of 1.011 million units, spurred by record-low mortgage rates. This trend could persist for a while as well, given that the Federal Reserve has said it will be maintaining its current loose-money policies until the U.S. economy has worked itself out of the hole that the pandemic put us in.
In other words, Home Depot is a reliable slow-growth business that also happens to pay a decent (and rising) dividend.
Archer Daniels Midland
Like most stocks, shares of food and agriculture giant Archer Daniels Midland (NYSE:ADM) tanked in late February and early March, when investors were less sure about how the pandemic would impact the world. Unlike most stocks though, Archer Daniels Midland shares didn't race back to record highs afterward. In fact, the stock remains below its 2014 peak, and stuck in a trading range.
That's the crux of the opportunity for investors here. Archer Daniels Midland showed itself to be a reliable holding regardless of the environment not by what it did after the coronavirus slammed into the economy, but what it didn't do. What it didn't do was post dramatically different results for the second quarter, nor for the third. In Q2, sales fell less than a tenth of a percent year over year, and while they dropped off by nearly 10% in Q3, that stumble didn't come from a product unit. Instead, the segment of the company that manages investor services and insurance underwriting hit a proverbial wall due to the coronavirus. That's not a headwind that will persist.
Sure, ADM may never be a game-changing growth stock for any investor's portfolio. It's steady and reliable though, and management has been upping the payout annually for the past 45 years. The dividend at current share prices yields 2.9%.
And also worth noting is that Archer Daniels Midland can easily keep covering its current annual payout of $1.44 per share. Over the course of the past four quarters, it earned $2.83 per share.
Finally, it may be a cliche, but it's a cliche for all the right reasons -- utility companies make great dividend stocks because their customers pay their bills on a regular basis. Consumers may skip a trip to the mall or postpone a vacation over money concerns. But until they are in truly dire financial straits, they usually won't risk having their power or water cut off.
There are plenty of solid operators within the sector, but none is quite as compelling right now as Consolidated Edison (NYSE:ED). The relatively poor performance of the stock in 2020 has driven its dividend yield up to 3.8%, which is notably above the average payout most major utility stocks are offering.
The weakness of ConEd's shares this year can be traced to two concerns. One of them is its debt. There may simply be too much of it. Moody's downgraded a couple of tranches of the company's bonds in March, citing its plan to issue still more bonds through 2022, and what was expected to be lackluster cash flow for the foreseeable future.
The other issue that undermined the utility stock was the length of time it took the company to restore power to many customers after Hurricane Isaias ripped through New York in August. ConEd's image was tarnished, and the fallout eventually prompted Gov. Andrew Cuomo to propose stiffer penalties on utility providers that don't move quickly enough to resolve such problems.
The fact is, however, that neither of these developments ultimately changes anything about Consolidated Edison's operation. The current payout of $3.06 per share is still only about 70% of the company's trailing annualized earnings, which leaves plenty of flexibility for future dividend hikes. And those can be expected: ConEd has been boosting its payout annually for 46 straight years.