Ah, summer. Warm days, picturesque skies, and, historically, a period when the stock market slows down.
The summer “doldrums,” as investors call them, often involve bearish or sideways market movements. These can lead to stunted or even negative returns until conditions improve as the year progresses.
So, how can investors avoid doing a sideways shuffle during summer? Well, they can invest in quality dividend stocks. And what’s more “quality” than companies that have increased their payouts for 50 years or more in a row?
So, today, we'll look at three high-yield Dividend Kings that you can buy to ride out the summer sideway market, and collect a little income along the way.
How I Screened For The Following Stocks
Just because a stock is a high-yielding dividend king doesn't make it worth buying alone. Therefore, I like to search for more than one indicator to create a buy list. In this case, I used two of Barchart’s features to generate a list of safe, high-yield Dividend Kings. They’re quite easy to use, so you can follow along.
First, I accessed my Barchart Watchlists and selected the pre-prepared Dividend Kings list. I clicked on Screen on the following page, which brought me to the Stock Screener feature.
Then, I added the following filters to get my desired results:
- Annual Dividend Yield: I left this blank to sort using this heading on the results page.
- Current Analyst Ratings: This time, I set the ratings from 3.5 and up so that the results only show me stocks with Moderate Buy to Strong Buy ratings based on average scores. The idea is that if most analysts think the stock is a good buy, then they’re generally safer choices.
- Dividend Payout Ratio: I love Dividend Kings with high yields, but my trading experience has shown me that yields aren’t everything. I also like to look at dividend payout ratios, which tell me how much money the company uses for dividends compared to its after-tax net income. Generally, companies with 35-55% dividend payout ratios are considered safe, so I screened for stocks with payout ratios of 50% and below.
After clicking on See Results, I got 22 hits.
Then, I arranged the list from the highest to lowest dividend yields, and the results are in. To kick off this list of safe Dividend Kings with high yields, let’s start with:
National Fuel Gas Company (NFG)
Analyst Rating: 3.80
Number Analyst Coverage: 5
The first dividend king of this analysis, National Fuel Gas Company, is a prominent energy sector player focusing on natural gas in the Appalachian region. The company has a strong presence in Pennsylvania and New York due to its diverse business segments: gas exploration, production, pipelines, storage utility services, etc.
National Fuel Gas is famous for growing its businesses and rewarding its shareholders. This is evident with its track record of 122 consecutive years of dividend payouts and 54 straight years of increasing them.
Speaking of dividends, the company’s payout ratio is currently 39.07%, while its annualized dividend rate is $2.06, translating to a forward yield of 3.77%.
Despite a decrease in revenue from $717.3 million to $629.9 million YOY, the gas company once again proved its resilience by increasing net income from $140.1 million to $166.3 million in Q2'24, which, in turn, resulted in an improved quarterly EPS of $1.81.
Johnson & Johnson (JNJ)
Analyst Rating: 3.80
Number Analyst Coverage: 20
Another high-yielding dividend king on my radar is the healthcare titan Johnson & Johnson. The company’s portfolio encompasses pharmaceuticals, medical devices, consumer health products, and more. With a focus on research and development, the company has significantly impacted therapeutic areas like immunology and neuroscience.
The healthcare giant’s impressive dividend record solidifies its position as a reliable income generator for investors, which is 62 years of consecutive dividend increases. The company currently has a forward rate of $4.96 per share or a dividend yield of 3.35%. Its payout ratio of 44.47% highlights the company’s ability to grow its dividends while investing in its business—an attractive option for investors looking for a stable income stream.
Johnson & Johnson’s Q1'24 was a pretty solid quarter, with revenue increasing by 2.3% to $21.38 billion. The company's net income also experienced a remarkable turnaround, with adjusted EPS increasing by 12.4% YOY to $2.71.
Target Corp (TGT)
Analyst Rating: 4.10
Number Analyst Coverage: 31
Target Corp is renowned not only as a general merchandise retailer but also as a dividend king. This retail giant operates an extensive network of stores and digital platforms catering to a wide customer base called "guests."
The company's product assortment encompasses everyday essentials and fashionable, differentiated merchandise across categories such as apparel and accessories, beauty and household essentials, food and beverage, hardlines, and home furnishings and decor, all offered at competitive prices.
The company’s Q1'24 financials revealed minor setbacks compared to the previous year. Revenue decreased 3.1% YOY to $24.5 billion. Net income decreased by 0.8% to $942 million, resulting in a quarterly EPS of $2.04.
Despite the slight decline, Target Corp never misses the chance to reward its shareholders. At the time of writing, Target’s dividend payout ratio is 48.99%, with a forward rate of $4.48 per share, translating to a 3.12% dividend yield.
Final Thoughts
As these safe, high-yield Dividend Kings prove, the stock market offers opportunities to make money in every market condition. All investors need to do is watch out for such opportunities—and grab them when possible.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.