Opinions will always differ, but our current economic environment seems rather uncertain to me, with tariffs, tariff wars, the threat of inflation, and a lot of investors with stock market jitters. So if you're looking to invest in stocks, I suggest taking a close look at dividend payers.
Why dividend-paying stocks? Well, because to some degree, they've been prequalified. Sure, growth stocks are exciting, but they can be more volatile than slower growers, and they can be significantly overvalued, too, and ripe for a pullback.
Image source: Getty Images.
But a company generally has to grow enough to become somewhat established with fairly dependable cash generation before its management will commit to paying a regular dividend. After all, no company wants to end up having to reduce or eliminate a dividend.
Here are four dividend payers to consider for your portfolio -- whether you have $1,000 to spend or $100,000.
1. Constellation Brands
Let's start with Constellation Brands (STZ 0.71%). One reason to consider it is that its stock appears undervalued at recent levels. Its recent forward-looking price-to-earnings (P/E) ratio of 12, for example, is well below the five-year average of 19. Its dividend, meanwhile, recently yielded 2.25%. That's not a huge dividend yield, but it's not nothing, either, and it's growing -- by an annual average of 6% over the past five years.
NYSE: STZ
Key Data Points
Constellation Brands is in the business of making and selling alcoholic beverages, primarily in the U.S., Mexico, New Zealand, and Italy. Its brands include Corona, Modelo, Robert Mondavi, High West, and Casa Noble.
Some are worried about the company's prospects due to tariffs and trade wars, but none other than Warren Buffett's company, Berkshire Hathaway, has been a buyer of the stock recently.
2. Western Union
Western Union (WU 0.71%) is a familiar name, facilitating fund transfers across more than 200 nations and working with more than 130 currencies. It's connected to billions of bank accounts and millions of digital wallets and payment cards.
NYSE: WU
Key Data Points
Western Union may not be the first fintech stock you think about, but it's busy in that realm, and sports a fat dividend yield -- recently 8.7%. The dividend hasn't been growing briskly, but its current level is quite generous, and even if it were halved, it would still be higher than many payouts.
Western Union is not a slam-dunk buy, though, in part due to our uncertain economy. Much of its business involves helping immigrants in developed nations send money back to families in less developed nations. If many end up moving back home, the company could suffer.
So if you're drawn to this big dividend yield, consider buying, but plan to keep an eye on the company's developments. The company's forward P/E was recently 6, lower than its five-year average of 8.5.
3. The Campbell's Company
The Campbell's Company (CPB 0.55%) recently changed its name from Campbell Soup to reflect its broader range of offerings that includes brands such as Campbell's, Cape Cod, Chunky, Goldfish, Kettle Brand, Lance, Late July, Pace, Pacific Foods, Pepperidge Farm, Prego, Rao's, Snack Factory pretzel crisps, Snyder's of Hanover, Swanson, and V8. Indeed, the company has shifted much of its focus from soups to snacks.
NASDAQ: CPB
Key Data Points
Campbell's dividend recently yielded 4%, and that payout has been increased at an annual rate of 2% over the past five years. That's not a fast growth rate, but if you're starting at 4%, it's not so bad. The company's forward P/E was recently near 13, a bit lower than its five-year average of 15.5.
4. PepsiCo
PepsiCo (PEP +0.70%) is another stalwart company to consider. While many people think of it only as a beverage business, it's very much a snack business, too, with brands such as Lay's, Doritos, Cheetos, and Quaker alongside Pepsi-Cola, Gatorade, Mountain Dew, and SodaStream. PepsiCo has just announced a new acquisition of the prebiotic soda brand Poppi.
PepsiCo's stock recently sported a dividend yield of 3.6%, and its payout has been growing at an average annual rate of 7% over the past five years. Its forward P/E was recently 18, well below its five-year average near 23, suggesting a bargain price.
PepsiCo is a reasonably defensive business as well. If the economy falters, many may put off buying new cars or dishwashers, but they'll likely keep buying sodas and potato chips.
These are not the only dividend payers worth considering. You might also want to check out some dividend-oriented ETFs. You don't need much money to start investing in dividend payers -- $100 or 1,000 is plenty.
