United States. Federal Reserve Chairman Jerome Powell made clear this week that interest rates in the world's largest economy will remain close to zero for the foreseeable future as he struggles to grow in an economy driven by COVID-19- pandemic is ravaged, to revive and bring back millions of jobs lost during this crisis.
Powell said:
"We don't even think about thinking about raising rates," he told a video press conference after the Federal Open Market Committee held its key interest rate near zero. "We are determined to use our tools to do what we can for as long as we need to."
This restrained attitude means that investors seeking returns will not receive income from lower-risk assets, such as government bonds, or the cash in their savings accounts. To find a reasonable return, they have to venture out and look for quality dividend stocks whose payouts are safe and offer higher returns.
Below we have put together a group of three dividend stocks that we believe will keep their dividends and provide a steady stream of income.
1. Verizon
Yield: 4.24%
Quarterly Payout: $ 0.615
Telecom is considered a defensive game in times of uncertainty. In general, these companies regularly increase payouts, and in many cases they have been regularly increasing dividends for decades.
Long-term holding of these stocks is a great way to ensure a stable flow of income, with above-average returns, even when other parts of the market are undergoing sharp adjustments.
In this space, we love wireless service provider Verizon (NYSE :). Rather than filling the balance with mega deals, Verizon has focused on improving its infrastructure. The company has avoided making the kind of "Big Entertainment" purchases that colleagues like AT&T (NYSE 🙂 have pursued.
Instead, Verizon placed smaller bets that focused on ways to quickly improve the network. Due to the timely acquisition of Straight Path Communications in 2018, Verizon leads the race to build a 5G network – part of an industry-wide effort to increase speed and open up new sources of revenue.
In April, Verizon made another smart acquisition when it announced the acquisition of BlueJeans Network, a private video conferencing competitor to Zoom (NASDAQ :), which has become the face of home work during the pandemic and has a market value of $ 42 billion.
With its strong balance sheet, growing dividends and leading position in the rollout of 5G, Verizon is a solid – and relatively safe – income choice for long-term investors looking to protect their portfolios from continued market volatility.
2. Royal Bank of Canada
Yield: 4.49%
Quarterly payout: $ 0.7825
Banks are considered cyclical stocks and generally do not perform well when interest rates are very low. But if you're a long-term investor looking for a stable dividend income, Canada's top lenders will do.
In Canada, banks operate in an effective oligopoly, where their domestic activities are well protected from outside competition and regulation is much more difficult than in many other developed markets.
Buy Royal Bank Of Canada (NYSE :), the country's largest lender, to gain exposure to one of the best banking systems in the world. The Toronto-based bank generates significant cash flows and distributes approximately half of its income in dividends annually. RBC has paid dividends every year since 1870.
The current economic crisis has certainly harmed RBC's revenues and more resources have been made available to absorb potential credit losses. But the quarterly payout of $ 0.7825 per share is a safer bet than buying riskier U.S. bank shares.
“A conservatism, a force, a diversification and a profitability position us well to resist and reverse the uncertainty and leave this stronger bank and one that can take advantage of the opportunity that will arise in the future occur, "Dave McKay, Royal Bank's Chief Executive Officer, told analysts in a Bloomberg report after the earnings call late last month.
3. Johnson & Johnson
Yield: 2.75%
Quarterly payout: $ 1.01
A proven strategy to take advantage of this massive adjustment in the markets is to buy shares of companies that are cash-rich, have a history of dealing well with recessions, and pay steadily growing dividends.
Johnson & Johnson (NYSE :), the world's largest manufacturer of both consumer and pharmaceutical healthcare products, fits nicely into this category.
The company has increased its dividend every year for the past 57 years, with at least 50 consecutive annual increases.
The current public health environment further strengthens J & J & # 39; s position, benefiting from strong demand for its over-the-counter products. J&J makes everything from innovative cancer therapies to medical devices and non-available staples, such as pain reliever Tylenol.
In April, J&J increased the quarterly dividend by 6.3% $ 1.01 per share from $ 0.95.
Bottom Line
In an environment where interest rates are likely to remain close to zero until 2022, diversifying your portfolio with quality dividend stocks that offer steadily growing payouts is a good strategy. These three dividend stocks are unlikely to yield huge capital gains. But defensive investors could regularly earn income from these names without fearing too great a disadvantage.
