2019 has turned out to be one of the best years in many for dividend shares, as investors saved them because of the increasing fear of recession. That huge flight to safety pushed the ProShares S&P 500 Dividend Aristocrats ETF (NYSE 🙂 index up 23% this year.
Can this upward movement continue in 2020? Answering that question is not easy if there is so much uncertainty about the US economic expansion and the risks of the trade dispute in China still dominate the headlines – and may well consume the beginning of the coming year.
ProShares S&P 500 Aristocrats ETF Dividend Weekly price chart
That said, investing in dividend shares remains one of the best ways for investors to create a steady stream of income and prosperity. Reliable dividend shares generally offer higher returns than bonds and offer a hedge in times of extreme market volatility.
To help you start next year's buy list, we have selected two stocks that pay out growing dividends and whose values ??look attractive.
1. McDonald & # 39; s
At first glance, it probably doesn't seem like a good time to take a good look at McDonald & # 39; s Corporation (NYSE :), the world's largest fast food chain. It sells hamburgers and sugary drinks that many health-conscious consumers are trying to avoid – and the stock has plummeted in recent months. But enormous value can still be earned, especially for income investors.
The fall in the share price was not only a reaction to the shift in the consumer, but also specifically to the fact that this month the board fired CEO Steve Easterbrook for having a consensual affair with an employee. Shareholders are certainly not happy to see Easterbrook go, because during his tenure the stock turned out to be a big winning bet.
Indeed, initiatives such as all-day breakfast and automated order kiosks helped McDonald & # 39; s send shares to a total return of almost 100% since his appointment was announced in January 2015, compared to colleague & # 39; s such as Yum! Brands Inc (1945) and owner of Burger King Restaurant Brands International (NYSE :), as well as fast-growing competitors including Chipotle Mexican Grill Inc (NYSE 🙂 and ] Shake Shack Inc (NYSE :).
McDonald & # 39; s price list
MCD inventory has fallen by more than 18% since the end of August after reaching a record high, to close yesterday's session at $ 194.01. In our opinion, this weakness opens a good starting point for income investors who were waiting on the sidelines. The sudden management change is certainly an unwelcome move, but it does not change the strategic plan that the company is working on to drive growth.
For income investors, the most important factor in choosing a dividend share is stability in income payments. The company has been increasing its distribution every year since 1976, when it first started paying out dividends. That consistency in dividend growth is not at risk despite the recent setback, especially for a company that produces laudable growth. McDonald & # 39; s sales in the same store grew by 5.9% globally, above 5.4% that analysts were expecting by FactSet. share. This translates into an annual dividend yield of 2.59% at the current share price. Note that this was the company's 43rd consecutive annual dividend increase.
2. Johnson & Johnson
We believe that 2020 will be a good year to buy Johnson & Johnson (NYSE 🙂 shares, & # 39; the world's largest producer of both consumer and pharmaceutical healthcare products.
The company lost its charm somewhat last year, as investors focused on uncertainties regarding the obligations of thousands of lawsuits across all sides of the company. The stock remained under pressure this year amid lawsuits filed by nearly 12,000 claimants about the company's baby powder and other talc products. The complainants claim that asbestos in those products caused them to have ovarian cancer.
J&J (NYSE 🙂 shares have fallen about 7% compared to their highs this year and close to $ 137.17 yesterday as investors avoid the shares due to liability concerns. According to Chris Schott, an analyst at JPMorgan Chase & Co., these commitments can hit $ 20 billion and the company is already discounted in value to reflect that exposure.
But these short-term problems do not detract from the fact that the drug manufacturer still brings in a lot of cash, which means that his ability to reward income investors remains intact. For the, Johnson & Johnson reported that sales rose to $ 20.7 billion. It also increased sales throughout the year and EPS guidance as a result of this strong performance.
We believe that Johnson & Johnson will slowly overcome the litigation challenges and can be a good bet for patient investors whose focus increasingly deserves dividends. As mentioned earlier, the company has an excellent history of canals and stars in which it increases its payout for 55 years in a row. It currently pays $ 0.95 per share every quarter, which has grown 7% a year for the past five years, for an annual yield of 3.80%.
Bottom Line
With their earning power remaining strong, the current weakness in both MCD and J&J (NYSE 🙂 shares makes them good candidates to add to your income portfolio in 2020. They are well-managed, global companies and both have the resources and power to resiliently overcome their current challenges.
