Investment fads come and go, and growth stories eventually end. Income-producing stocks always fit into a portfolio, however, even if those dividends are being collected to purchase other sorts of positions. And, given the uncertainty that lies in our immediate future, a little more certainty and a little less risk certainly couldn't hurt.
To this end, investors looking to fill in some gaps with any idle cash right now may want to look at Colgate-Palmolive (NYSE:CL), AbbVie (NYSE:ABBV), and McDonald's (NYSE:MCD). These companies are still stalwarts regardless of the pandemic and despite the current political drama. Their dividend payouts and profiles aren't too shabby, either. Let's take a closer look at these three dividend stocks.
Dividend yield: 2%
You probably know the company by its toothpaste and dishwashing detergent, but Colgate-Palmolive is so much more than Colgate and Palmolive. This is the same company behind brands like Speed Stick deodorant, Murphy Oil Soap, Irish Spring body wash, and more.
These are, of course, consumer goods that people keep buying regardless of the environment. Brand loyalty is pretty high within the category as well.
This idea bears out in last quarter's numbers. While other companies are still struggling under the weight of the COVID-19 pandemic, Colgate-Palmolive continues to fire on all cylinders. Sales for the three-month stretch ending in September were up 5.5% year over year, and higher by 7.5% on an organic basis. Earnings improved to the tune of 21%. The company's second quarter was progressive, too, defying the early brunt of the coronavirus' impact.
Sure, the current dividend yield isn't stellar. Think bigger picture though. This company has increased its payout in each of the past 57 years, not only qualifying it as a Dividend Aristocrat, but one of the very selective list of Dividend Kings in terms of consecutive years of improved payouts.
Dividend yield: 5.3%
Drug company AbbVie is another Dividend Aristocrat. It doesn't have quite the same track record as Colgate-Palmolive does when it comes to unfettered dividend growth, but when factoring in the company's history before it split with Abbott Laboratories in 2013, it's credited with 47 straight years of annual payout growth.
The 5.3% yield isn't bad, either. In fact, that's a much bigger yield than almost all of its peers like Merck and Amgen.
Still, pharmaceutical companies can be tricky investments. Patents on drugs eventually expire, and if an organization fails to constantly replenish its research and development pipeline, it can eventually find itself losing out to generics as well as rivals. AbbVie finds itself in this very position, in fact. Key patents on its flagship drug Humira -- which accounts for nearly half the company's sales -- will start to expire in 2023.
AbbVie is hardly beyond hope, however. The company completed its acquisition of Allergan in May of this year, adding drug franchises (Botox in particular) that produce about $20 billion in annual sales to AbbVie's portfolio. At the same time, AbbVie's home-grown drug pipeline currently includes about a couple dozen phase 3 trials that could wrap up and be submitted to the FDA for approval before Humira's patent protection expires. Among these are trials of Skyrizi, Rinvoq, Imbruvica, and Venclexta, which have already been approved for indications other than the ones undergoing trials right now.
Dividend yield: 2.4%
Finally, add McDonald's to your list of dividend stocks to consider stepping into.
Contrary to the prevailing pretense, McDonald's isn't a fast-food giant. It's a real estate company that happens to rent exclusively to fast-food franchisees. Of the 39,096 McDonald's in the world as of the end of September, only 2,658 were actually owned by the company. The other 36,438 are owned by franchisees.
That mix has changed pretty dramatically in recent years -- by design. As of September of 2014, the company owned and operated 6,692 of its own stores, while franchisees owned the other 29,172. This shift away from ownership and toward franchising is how the company's top line has been sinking since that point, yet the bottom line has continued to grow. Franchise fees, rent payments on restaurant structures it owns, and the sale of the supplies required to operate a McDonald's restaurant is a higher-margin business than actually owning and operating a franchise.
That's not to suggest McDonald's cash flow is completely immune to circumstances. The company's top line tumbled 30% year over year for the quarter ending in June, reflecting the impact of coronavirus-related shutdowns. That made it difficult (if not impossible) for some franchisees to make their rent payments, while ongoing royalty payments to the franchisor also suffered.
If nothing else though, McDonald's is resilient. Its third-quarter same-store sales in the United States were up 4.6% year over year, as consumers flocked back to its locales after the pandemic looked like it was starting to ease. By that time, the fast-food chain had also had enough time to adapt to the pandemic, particularly as it pertains to doing more business digitally. Now with a prospective COVID-19 vaccine on the horizon, the company is even better positioned to return to its pre-pandemic growth pace.
The clincher: McDonald's has now upped its dividend payout for 44 straight years.