With Wall Street struggling this year and the S&P 500 down more than 6%, now may be an optimal time to load up your portfolio with quality, dividend-paying stocks.
A couple of the more attractive income investments you can buy today are Gilead Sciences (GILD -2.70%) and Unilever (UL 5.93%). These stocks haven't been performing well over the past year, but their underlying businesses are strong and despite the recent bearishness, neither are incredibly risky investments to hold for the long term.
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The case for Gilead Sciences
Gilead Sciences doesn't have a long track record of paying dividends -- it's only been distributing them since 2015 -- but it still has some qualities that could make it an appealing income investment. The drugmaker's dividend yields 4.9% at the current share price -- more than three times the S&P 500's recent average of 1.3%. And it has consistently and significantly boosted its payouts -- from $0.43 per quarter seven years ago to $0.73 today, a 70% overall increase.
The dividend has been the main bright spot for shareholders of late because the stock itself hasn't been such a hot performer -- it's down 7% in the past 12 months compared to the S&P 500's 14% rise. At around $60, the stock is not just near its 52-week lows; other than during the volatile year of 2020, the last time it traded below these levels was 2013.
Investors haven't been willing to pay much of a premium for the stock -- its price-to-earnings ratio is just 12 -- likely seeing it as not much more than a dividend investment due to a lack of growth. Gilead's HIV treatment sales, which account for the bulk of its top line, have been relatively flat, ranging between $16 billion and $17 billion over the past three years.
But the company does have catalysts that could drive growth, including its candidate lenacapavir, a twice-a-year injectable HIV treatment. If approved by the U.S. Food and Drug Administration (FDA) and other nations' health regulators, it could prove a welcome change for patients who currently take pills every day. There's also the cancer drug Trodelvy, which the FDA approved last year and which, it is believed, could generate up to $5 billion in annual revenue at its peak.
Investors who are selling Gilead's stock now could be overlooking a promising opportunity. Not only is the dividend solid (its payout ratio is less than 60%), but there's reason to be optimistic about Gilead's future as well.
The case for Unilever
Consumer goods powerhouse Unilever has a portfolio of 400 brands, including such popular names as Hellmann's, Vaseline, Dove, and Ben & Jerry's. It's coming off a strong year: In 2021, its underlying sales growth rate of 4.5% was its best in nine years. The U.K.-based multinational benefited both from price increases and higher volume, with sales for the year topping 52.4 billion euros.
And despite the supply-chain challenges the company faced last year, Unilever's profits rose by 9% to 6.6 billion euros, amounting to 12.6% of its top line. Its payout ratio was just under 74%, which is both safe and sustainable. That's great news for income investors who want to cash in on the company's dividend, which yields an appealing 4.4% at the current share price.
Shares of the company are down 18% in the past year, and fell sharply after Russia invaded Ukraine last month. The company says it has stopped its operations in Ukraine and will only supply Russia with essential food and hygiene products that are made there. While Unilever didn't offer guidance as to how those changes might affect its financials, investors are likely anticipating that its results later this year will be softer than previously expected.
However, these are not conditions that investors should expect will prevail over the long term. Buying now while others are pessimistic could be a solid choice as Unilever is generally a safe investment. With its shares down around levels not seen since 2017, it could be the right moment to add this underrated dividend stock to your portfolio.
