If you think the market's most reliable dividend payers are mostly immune to steep sell-offs, think again. Even the bluest of income-driving blue chip stocks can suffer severe price setbacks sometimes.
The thing is, these price pullbacks rarely reflect that company's ability to keep dishing out dividends. Indeed, these sell-offs are often so temporary in nature that they're great buying opportunities; you can jump in while the yields are above their norm.
With that as the backdrop, here's a rundown of three great but beaten-down dividend stocks you can still trust to keep making their quarterly payments. If you step in now, you may even capture a little capital appreciation thanks to bouncebacks from the overzealous selling.
They're boring businesses to be sure. They're also tricky ones to manage when you're the size 3M is. Not only is the $85 billion conglomerate juggling a lot of different kinds of balls, none of its product categories boast a particularly wide moat. Competitors can easily step onto its turf, and will occasionally fight a price war with the industrial giant. This is arguably a big part of the reason 3M shares haven't made any net progress since the latter part of 2014, even though they've been all over the map in the meantime. It's tough for a global company to cost-effectively maintain market share selling low-cost consumables.
Image source: Getty Images.
JPMorgan Chase
Monday's dividend yield: 2.7%
Loss since Oct. 22, 2021: 17%
JPMorgan Chase (JPM 1.94%) isn't a name that needs much introduction. It's the nation's biggest bank as measured by assets ($3.3 trillion worth, according to the Federal Reserve's most recent tally), and it handles a great deal of investment banking and brokerage service as well.
This size didn't help shareholders any last month, when the stock dropped following the release of its fourth-quarter numbers -- it's down nearly 16% since then. While per-share earnings of $3.33 topped expectations of $3.01, revenue fell slightly on a year-over-year basis. Mostly, though, the company's guidance for the year now underway seriously spooked shareholders. JPMorgan Chase is bracing for roughly an 8% increase in this year's expenses, with investments in technology featuring prominently in those plans. That increase follows what some considered a ho-hum end to 2021, during which the mega-bank seemingly didn't do much to curb its spending anyway.
But don't read too much into these spending plans. While they may crimp profits, analyst expectations for earnings of $11.19 per share this year are still more than enough to fund the likely full-year dividend payout of $4 per share. Also bear in mind that the bank's recent ramped-up investments in technologies like alternative trading platform Zanbato and its own artificial intelligence applications may well end up more than paying for themselves sooner than later.
3M
Monday's dividend yield: 4.0%
Loss since May 10, 2021: 28%
If you've ever used a Post-It note, Scotch tape, or an Ace bandage, you're already a 3M (MMM 0.38%) customer. It's also likely you've used or benefited from its products without even realizing it. Goods ranging from dentistry supplies to automotive body repair to industrial lubricants to reflective road markers are all in its wheelhouse, and more.
3M's got a couple of clear edges here, however, that make this recent weakness a buying opportunity. One of those advantages is its huge scale, and the other is closely related: the distribution network linked to this sheer size. The company's got deep relationships with most major retailers as well as most major industrial supply outfits. If nothing else, its revenue-bearing product base is well entrenched. That's a big reason the company hasn't reported a quarterly operating loss in over a decade, and a big reason its dividend has grown at least a little every year for the past 64 years.
Franklin Resources
Monday's dividend yield: 3.8%
Loss since Nov. 2, 2021: 21%
Finally, add Franklin Resources (BEN 1.71%) to your list of dividend stocks that have been upended of late, yet still represent companies that are going to be just fine.
You may be more familiar with the outfit than you realize. Franklin Resources is parent to mutual fund company Franklin Templeton; it also acquired Legg Mason back in 2020, and owns a handful of smaller, lesser-known investment management names.
Like 3M, Franklin Resources faces lots of competition. There are on the order of 8,000 different mutual funds available to U.S. investors right now, and according to data from the New York Stock Exchange, the number of exchange-traded funds offered within the U.S. is nearing 3,000. Investment management companies really have to do something special to stand out in this crowded arena, and there's no denying Franklin Resources doesn't.
The stock's recent punishment, however, doesn't quite fit the proverbial crime.
Contrary to some beliefs, a fund company doesn't have to consistently beat the market to do well. Indeed, it doesn't have to beat the market (or any other relevant benchmark) to produce a profit. Fund management revenue is determined by the size of the asset base being managed, and is a fixed percentage of that pool. As long as mutual fund owners don't sell their stakes and "cash out," a fund's top line is fairly fixed from one quarter to the next. The biggest revenue disruption tends to come from marketwide sell-offs, which shrink the revenue-bearing asset base.
That's the long way of saying Franklin Resources' revenue is actually far more predictable than the stock's recent volatility would suggest. This revenue, of course, is converted into dividend-supporting earnings.
With that serving as the backdrop, both last year's per-share profit of $3.74 and this year's bottom-line projection of $3.77 per share are both more than enough to fund last year's dividend payout of $1.13 per share and this year's dividend payments that will roll on somewhere around $1.16.
