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3 Safe Dividend Stocks to Buy Right Now

By David Jagielski – Oct 5, 2021 at 6:25AM

Key Points

  • Pfizer, PepsiCo, and CIBC are top dividend stocks with not just solid yields, but safe business models too.
  • The temptation may be to buy Pfizer for the bump up it'll get from COVID-19 vaccine revenue, but the business is much more well-rounded than that.
  • All of these businesses have been generating improved results of late and are much better buys than they were a year ago.

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They'll pay you much more than the paltry return you'll get with the average stock in the S&P 500.

Investors think it's time to stop taking risks in the stock market. That's according to a recent study from CNBC, where an overwhelming number of respondents (76%) in a September poll, which included portfolio managers and chief investment officers, said that "now is a time to be very conservative in the stock market."

One way to be conservative is to park your money with some safe dividend stocks. Three stocks that are not just safe but that will pay you a solid dividend are Pfizer (PFE 1.93%)PepsiCo (PEP 0.31%), and the Canadian Imperial Bank of Commerce (CM -0.09%)

A person counting money in their living room.

Image source: Getty Images.

1. Pfizer

Although its COVID-19 vaccine has made it popular this year, there's a lot more to Pfizer's business than that. And for long-term investors, it's probably better to look beyond just the vaccine, simply because it's hard to predict what the future will be and how much revenue it will generate in the years to come.

Over the first six months of this year, revenue from all vaccines totaled $14.1 billion and was nearly five times the $2.9 billion the company reported from the segment the same time last year (Pfizer could record up to $33.5 billion in sales just from its COVID-19 vaccine this year). But the company has other segments that are generating solid growth as well -- oncology revenue of $6 billion grew 18% year over year and its smallest segment, rare disease, generated $1.7 billion in revenue and increased by 30%.

In August, the company acquired Trillium Therapeutics, an immuno-oncology company that Pfizer believes can expand its pipeline, "potentially enhancing growth in 2026-2030 and beyond" (Trillium is a clinical stage company and it doesn't generate any meaningful revenue just yet).

Between its COVID-19 vaccine, Trillium and other potential acquisitions, and Pfizer generating a mammoth $20.6 billion in free cash flow over the trailing 12 months, there's little worry about the healthcare company's business over the long term. It's a household name, and that isn't likely to change anytime soon.

Pfizer's 3.6% dividend yield will also bring in much more in recurring revenue than the 1.3% payout you can expect with the average stock on the S&P 500. Its diluted per-share profit of $2.33 over the past four quarters is nearly 50% higher than the $1.56 annual dividend it currently pays, leaving plenty of room to cover its payouts, even if there's a slowdown in revenue from its COVID-19 vaccine. 

Pfizer is more than just a COVID-19 stock; it's a safe buy-and-forget investment that could be a pillar for your portfolio for decades.

2. PepsiCo

PepsiCo pays a more modest yield of 2.8%, but that's still well above average. And if the economy continues to bounce back from COVID-19, the food and beverage company could become a hot buy; year to date, it's up just 1% while the S&P 500 has increased 14% (Pfizer is up 15%). 

The pandemic won't last forever, and once there is a full return to normal, PepsiCo will undoubtedly benefit from a resurgence in people eating out at restaurants and resuming their regular day-to-day activities. The company has been seeing an uptick already; in the period ending June 12, its net revenue of $19.2 billion rose 21% year over year as the company generated growth across all of its major segments. In the same period last year, the company's sales were down 3%. 

PepsiCo's payout ratio of 70% is sustainable, and with 49 annual dividend hikes in the books already, one more will make the stock a Dividend King. PepsiCo is a safe stock, and with its shares underperforming the markets this year, now is as good a time as any to buy it.

3. Canadian Imperial Bank of Commerce

The Canadian Imperial Bank of Commerce (CIBC) is one of my favorite dividend stocks, because not only is the top bank stock a safe buy, it also normally pays a much higher yield than its peers. At 4.1%, this is the highest-yielding stock on this list -- and that's even with its shares rising 50% over the past year. Buying the stock before that surge would've resulted in securing an even higher yield. 

CIBC's business is not just sound (its profit has been at least 20% of revenue in each of its past five fiscal years), but it's also diverse; with operations in North America, the Caribbean, Asia, and the U.K., CIBC has a broad reach around the globe. 

The bank is benefiting from an improvement in the economic outlook as it reversed 99 million Canadian dollars in provisions of credit losses for the period ending July 31. In the same period last year, provisions for credit losses weighed down its bottom line by CA$525 million. As a result, net income this past quarter of CA$1.7 billion was 48% higher than in the prior-year period. On a per-share diluted basis, it earned CA$3.76 -- easily enough to cover its quarterly dividend payments of CA$1.46.

CIBC's business is stable, and with a top dividend payout as a bonus, it's easy to justify buying and forgetting about this stock.

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.

Stocks Mentioned

Pfizer Stock Quote
Pfizer
PFE
$50.67 (1.93%) $0.96
PepsiCo Stock Quote
PepsiCo
PEP
$182.19 (0.31%) $0.56
Canadian Imperial Bank of Commerce Stock Quote
Canadian Imperial Bank of Commerce
CM
$43.08 (-0.09%) $0.04
Trillium Therapeutics Stock Quote
Trillium Therapeutics
TRIL

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

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