Investors are currently facing increased risks. Even as the COVID-19 pandemic continues to spread, a closely contested US presidential election makes it even more difficult to decide which stocks to buy long-term and which ones now.
But these concerns are especially for those who are quick to invest in stocks. For buy-and-hold investors, whose goal is to achieve steadily increasing returns, this market volatility doesn't mean much.
Such people carefully choose their property because of their sustainable competitive advantage and ability to withstand economic and political shocks. The idea behind this strategy is to ensure that regular dividend payments will continue to come even when the markets are in turmoil, as is happening in March last year and now while the US presidential battle remains undecided
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The challenge: carefully selecting suitable stocks. Fortunately, the guidelines are relatively simple: if a company has a dominant position in the industry, has significant free cash flow, and has a history of solid dividend growth, chances are it will turn out to be a good long-term position.
We have two dividend paying candidates worth considering:
1. Walmart
With its massive scale, solid balance sheet, and growing sales, megaretailer Walmart (NYSE 🙂 in both good and bad times provide a steadily growing income.
The company has increased its payout every year since it began distributing dividends in March 1974, placing it in the elite club of 53 stocks called "dividend aristocrats." That's the designation given to companies that have regularly raised dividends for 25 years or more.
During the pandemic, Walmart proved it to be one of the safest dividend stocks to own. The Bentonville, Arkansas-based retailer continues to capitalize on the many ways the pandemic has transformed consumer needs and spending habits.
In the report, Walmart reported that comparable store sales in the US were up 9.3% from a year earlier, far exceeding analyst estimates. The growth was powered by the e-commerce division, where sales were up 97% from a year earlier, with both takeout and delivery options once achieving high sales volumes.
These figures show that Walmart is successfully meeting the threat of attack from e-commerce competitors. It could also provide investors with long-term stability in terms of dividend sustainability.
The stock now has an annual dividend yield of 1.56%; the company pays a quarterly dividend of $ 0.54 per share. As of March 1, Walmart shares have posted total profits, including distributions, of 31%. On Wednesday the stock closed at $ 141.96.
2. Microsoft
If a leading technology stock is a good fit for your long-term dividend portfolio, Microsoft (NASDAQ 🙂 is the best choice. Since 2004, when the software and infrastructure giant first began paying dividends, its payout has increased sixfold. Microsoft's current annual dividend yield is 1.11% with a quarterly payout of $ 0.56 per share.
The good news for new investors in MSFT stock is that the company is in an excellent position to support that kind of growth, supported by increasing free cash flows and a low 32.9 payout ratio. Shares closed at $ 216.39 on Wednesday.
In the US, the Seattle-based company showed that it continues to benefit from the pandemic as consumers switch to cloud-based connectivity and online subscriptions to its Office software, which comes with teleconference programs and home-working tools.
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Microsoft's earnings momentum will continue as it expands its market share in the cloud computing segment, while maintaining its leadership position with legacy software products such as Windows and Office.
This sustainable advantage will certainly help the company achieve sustained, double-digit growth in sales, earnings per share and free cash flow, making it a reliable technology stock in the long run.
