As stomach-churning as sell-offs may be, they're often stellar opportunities to load up on shares of stocks that'd be too pricey to buy otherwise, and that goes double for shares of dividend payers. Today, I'll be examining a trio of dividend stocks that are highly stable and have already stood the test of time.
All three of these stocks have dividend yields that are a bit on the low side compared to the market's average of 1.2%, and that's one of the many reasons why they're ripe for purchase if there's a sell-off, correction, or crash in the market. If external factors cause these stocks to drop, it'll drive up the yield and make them even more attractive for investment.
So, without further ado, let's examine these three supercharged dividend stocks to see whether they might be the right choice for your portfolio in the aftermath of a price drop.
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1. Abbott Laboratories
What do BinaxNOW antigen tests, continuous glucose monitors, and Pedialyte have in common? If you guessed that they're just a few of the products made by Abbott Laboratories (ABT), you'd be correct.
With an intro like that, it shouldn't be surprising for anyone to hear that Abbott's $43.1 billion in 2021 revenue comes from an astoundingly diverse set of sources. Between medical nutrition products, surgical tool sets, diagnostics, and medical devices, its quarterly revenue has expanded by more than 81% in the last five years. And so has its dividend, rising by 77% in the same period.
Furthermore, Abbott's dividend has been increased for the last 50 years consecutively, making it a Dividend King. That means it's probably pretty safe to expect that its payment will keep rising over time, thereby rewarding longterm investors more and more.
If there's a market sell-off, it won't change anything about Abbott's ability to do business or the reasonable expectation that its dividend will keep growing. But it will drive the stock's dividend yield -- currently 1.5% -- upward, meaning that it'll take you less time to recoup your cost basis.
2. Thermo Fisher Scientific
Thermo Fisher Scientific (TMO -0.76%) makes a smorgasbord of different products for biomedical research. And with a market cap of $209 billion, it's also one of the largest companies in the world and the healthcare sector.
Last year, it made $39.2 billion from sales of its analytical instruments, scientific analyzer devices, laboratory services, and specialty diagnostics. Of its income, 46% comes from sales to pharma and biotech companies, and 58% of its revenue comes from sales of consumable products that customers will need to buy repeatedly.
Thermo's strong relationship with the life sciences has been quite lucrative over time; in the past 10 years, its quarterly revenue rose by 250%, and its quarterly net income popped by 498%. Plus, its dividend ratcheted up by over 130% in the same period.
It's hard to imagine a future in which its products aren't ubiquitous in nearly every biomedical laboratory on Earth. The biggest issue with Thermo's stock is that its forward dividend yield is a scant 0.2%. That makes it especially ripe for a pickup if the market dips.
3. Costco Wholesale
If you're not familiar, Costco Wholesale (COST 0.20%) is a massive discount retailer and it's also a great dividend stock. The wholesaler's business is derived from bulk sales of groceries, consumer health goods, clothing, and its annual membership fees, not to mention a bevy of other products, all of which are distributed from its 828 warehouses worldwide.
And thanks to its focus on selling at a low cost and providing superior service, its loyal customers aren't likely to go elsewhere, even if there's turbulence in the economy. Of Costco's 114.8 million members, 92% opt to renew their membership each year, yielding the company $4 billion since the second quarter of 2021.
In the past 12 months, it sold $206.2 billion in goods. Over the last 10 years, its dividend rose by 187%, powered by 170% growth of the company's quarterly free cash flow (FCF) and a 126% rise in quarterly revenue in the same period. So it's safe to say that the management team is effective in executing the business model.
Its forward dividend yield is currently 0.6%, but that isn't the whole picture. Once every few years, Costco tends to hand out a special dividend, which sends its yield soaring temporarily. Therefore, buying the stock during a sharp downturn is a great way to build exposure to these massive special payments whenever they may happen down the line.
