Investors searching for yield may want to consider these 4 stocks, which traders say look set to continue to outperform.
Value stocks have perked up in recent weeks on positive news on the COVID-19 vaccine front, but for most of this year, dividend stocks have languished.
Still, some dividend strategies have worked better than others in 2020, even before the rotation into value.
“Investors have preferred to focus on companies with a long-term history of increasing their dividend,” said Chris Senyek, chief investment strategist at Wolfe Research, adding that investors have “largely avoided dividend-yielding stocks this year over dividend cut concerns and their ‘value’ investment style tilt.”
In fact, Wolfe Research found that the best-performing basked of dividend stocks this year are those that have delivered consistent dividend growth over at least 25 years including names like Johnson & Johnson (NYSE: JNJ), McDonald’s (NYSE: MCD), and Target (NYSE: TGT).
Investors searching for yield in the equity market may be in luck now as two traders say there are a few names that look set to continue to outperform while also offering healthy dividends.
Miller Tabak’s Matt Maley said this week that he has his eyes on two stocks in particular: 3M (NYSE: MMM) and Verizon (NYSE: VZ), which carry yields of 3.41% and 4.08%, respectively.
“One of the things about 3M is it not only pays a nice dividend, but they’ve increased their dividend every single year for more than 50 years, so it’s a nice, safe play,” Maley, Miller Tabak’s chief market strategist, said.
3M shares have gained 52% since the market bottom back in March, and Maley says the stock’s chart points to more upside ahead.
“It’s broken up above its trend line going back three years, and it’s now trying to break to make a key higher high,” Maley said, “so if we can break above that level of $180 in any kind of meaningful way, it’s going to be very bullish for the stock on a momentum basis.”
3M currently sits 3.7% below the $180 level.
“The other one I like is Verizon,” Maley said, with “a nice dividend over 4%, but you also have the benefit there of getting exposure to 5G.”
Verizon shares are currently trading just 2.9% below the stock’s all-time high of $62.29 set back in October 1999.
Aside from 3M and Verizon, New Street Advisors founder Delano Saporu is watching two retail names, Target and Nike (NYSE: NKE).
“Target’s yield is on the lower end at about 1.4%, but if you look at what the company’s been doing during these times – shifting business, they talked about last earnings that their curbside business increased by over 500%, increased home delivery by over 250%,” Saporu said. “They’re really shifting their business model but also still paying investors that cash dividend over this time which is a difficult thing to do for a lot of companies.”
As for Nike, Saporu noted that it yields a relatively small 0.8%, but argues that the stock is a bet on continued e-commerce strength as traditional brick-and-mortar retailers continue to struggle amid the ongoing coronavirus pandemic.
Both Target and Nike shares have surged higher this year, with Target adding more than 34% and Nike rising nearly 36%.