10 Dividend Stocks to Watch in 2017
Top 10 Stocks to Watch in 2017
With interest rates expected to rise next year, many investors may be asking what will be the best dividend stocks in 2017. The 10 best dividend stocks of 2017 will be large-cap stocks with a long history of providing investors with capital appreciation and a high-yield dividend that gets raised annually.
It may sound boring, but these kinds of stocks tend to outperform the broader market regardless of the interest-rate environment.
You may be tempted to look for a smaller company providing a much higher dividend yield, but you need to remember there is a risk/reward trade-off with dividends. The higher the dividend, the greater the risk. Not only do you risk losing capital if the stock price plunges during a correction, but if the company doesn’t have a lot of money, the company could cut its dividend yield, which could also kill the share price.
One way to determine whether or not the company will be able to maintain and raise its annual dividend yield is to look at its free cash flow. This is the amount of money left over after capital expenditures.
Below is a list of 10 stocks for dividend growth investors to watch in 2017. These stocks should do well, even when the Federal Reserve starts to raise rates.
Altria Group Inc
Headquarters: Richmond, Virginia
Share price: $62.90
Market capitalization: $122.9 billion
Forward P/E: 18.83
Annual sales: $19.1 billion
Dividend yield: 3.89%
Payout Ratio: 78.2%
Levered Free Cash Flow: $5.19 billion
Altria Group Inc (NYSE:MO) is the largest cigarette maker in the U.S., controlling more than half of the U.S. market. With a long history stretching back more than 180 years, the company’s leading brands include “Marlboro,” “Copenhagen,” “Skoal,” and “Black & Mild.” The company also develops and markets tobacco products, including “MarkTen” and “Green Smoke” e-vapor products.
Altria is an excellent buy-and-hold stock. In 2015, a year in which the S&P 500 lost 0.7% of its value, Altria Group’s share price increased 23%. So far in 2016, Altria is up more than 12%, while the S&P 500 is up just five percent.
For dividend growth investors, Altria provides an annual dividend of 3.89%, or $2.44 per share. Best of all, Altria has raised its annual dividend for the last 47 consecutive years. (Source: “Stock & Dividend Information,” Altria Group Inc, last accessed September 21, 2016.)
Headquarters: Irvine, California
Share price: $37.76
Market capitalization: $17.65 billion
Forward P/E: 13.63
Annual sales: $2.63 billion
Dividend yield: 6.14%
Payout Ratio: 80.7%
Levered Free Cash Flow: $1.87 billion
HCP, Inc. (NYSE:HCP) is a self-administered real estate investment trust (REIT) that invests in, develops, and manages real estate that it leases to health care facilities. An S&P 500 company, HCP has approximately $24.3 billion in assets under management, which represents its real estate portfolio. (Source: “Inside HCP,” HCP, Inc., last accessed September 21, 2016.)
Its diversified real estate portfolio consists of 1279 investments in senior housing (533 properties), post-acute/skilled nursing (305 properties), life science (118 properties), medical offices (228 properties), and hospitals (16 properties). The company also has 13 additional properties in different stages of development.
HCP provides an annual dividend of 6.14%, or $2.30 per share, which it has raised annually for each of the last 31 years.
Johnson & Johnson
Headquarters: New Brunswick, New Jersey
Share price: $117.97
Market capitalization: $324.5 billion
Forward P/E: 16.59
Annual sales: $70.88 billion
Dividend yield: 2.72%
Payout Ratio: 56.8%
Levered Free Cash Flow: $16.9 billion
Johnson & Johnson (NYSE:JNJ) is a diversified health care juggernaut that provides the most comprehensive and broadly based health care products. JNJ is the fifth-largest pharmaceutical company in the world, the sixth-largest biotech company, and the sixth-largest consumer health care company. (Source: “2015 Investor Fact Sheet,” Johnson & Johnson, last accessed September 21, 2016.)
The company markets more than 100 drugs, 46 of which have annual sales over $50.0 million, 34 of which have yearly sales of over $100 million, and 11 of which enjoy annual sales of over $1.0 billion. Approximately 70% of sales are derived from products and businesses that have a number-one or number-two global market share position.
Some of the company’s top brands include “Acuvue,” “OneTouch,” “Neutrogena,” “Band-Aid,” “Listerine,” “Tylenol,” “Stayfree,” “Sudafed,” “Benadryl,” “Zyrtec,” and “Motrin.”
JNJ provides an annual dividend of 2.72%, or $3.20 per share. Thanks to the company’s dominant market share and strong cash position, JNJ has been able to raise its annual dividend for the last 54 consecutive years.
Verizon Communications Inc.
Headquarters: New York, New York
Share price: $51.40
Market capitalization: $209.5 billion
Forward P/E: 12.76
Annual sales: $130.1 billion
Dividend yield: 4.51%
Payout Ratio: 63.8%
Levered Free Cash Flow: $15.77 billion
Verizon Communications Inc. (NYSE:VZ) is the second-largest communications provider in the U.S., with 112.1 customers. However, it’s bigger than AT&T Inc. (NYSE:T) when it comes to lucrative wireless services, which cover 98% of the U.S., and serve 99% of Fortune 1000 companies. (Source: “Fact Sheet,” Verizon Communications Inc., July 26, 2016.)
Verizon also has a dedicated customer base. Among the “Big Four” (Verizon, AT&T Inc. [NYSE:T], Sprint Corp [NYSE:S], and T-Mobile US [NASDAQ:TMUS]), Verizon customers are most pleased with their service. Perhaps most importantly, Verizon is the destination of choice for consumers switching carriers.
Verizon provides an annual dividend of 4.51%, or $2.31 per share. Verizon has raised its annual dividend for the last 11 consecutive years.
Old Republic International Corporation
Headquarters: Chicago, Illinois
Share price: $18.07
Market capitalization: $4.7 billion
Forward P/E: 12.64
Annual sales: $5.88 billion
Dividend yield: 4.12%
Payout Ratio: 43.8%
Levered Free Cash Flow: $735.3 million
Insurance is boring but lucrative. Old Republic International Corporation (NYSE:ORI) is one of America’s 50 largest shareholder-owned insurance companies, with operations in the U.S. and Canada. It primarily serves the insurance needs of a large number of America’s leading industrial and financial services institutions.
The company’s common stock has demonstrated a long history of capital appreciation and dividend payments that now extends to 75 consecutive years. On top of that, Old Republic is one of just 98 companies to have increased its annual dividend for at least 25 consecutive years.
Old Republic has raised its annual dividend for the last 35 years. It currently pays an annual dividend of 4.12%, or $0.75 per share.
Procter & Gamble Co
Headquarters: Cincinnati, Ohio
Share price: $88.66
Market capitalization: $236.7 billion
Forward P/E: 21.02
Annual sales: $65.3 billion
Dividend yield: 3.03%
Payout Ratio: 69%
Levered Free Cash Flow: $7.67 billion
Procter & Gamble Co (NYSE:PG) is a consumer staples giant that serves roughly five-billion people in more than 180 countries. With dozens of billion-dollar brands, the company operates through five segments: “Beauty;” “Grooming;” “Health Care;” “Baby, Feminine and Family Care;” and “Fabric Care and Home Care.” (Source: “P&G Fiscal 2015 Highlights,” Procter & Gamble Co, last accessed September 21, 2016.)
Some of P&G’s most well-known products include “Always,” “Braun,” “Crest,” “Fusion,” “Head & Shoulders,” “Gillette,” “Olay,” “Old Spice,” “Oral-B,” “Wella,” “Bounty,” “Charmin,” “Dawn,” “Downy,” “Duracell,” “Gain,” “Pampers,” “Tide,” and “Tampax.”
Procter & Gamble provides an annual dividend of 3.03%, or $2.68 per share. The company has raised its annual dividend for the last 60 consecutive years.
Realty Income Corp
Headquarters: San Diego, California
Share price: $65.71
Market capitalization: $16.99 billion
Forward P/E: 21.62
Annual sales: $1.06 billion
Dividend yield: 3.71%
Payout Ratio: 213.6%
Levered Free Cash Flow: $647.0 million
Realty Income Corp (NYSE:O) is a REIT that purchases commercial real estate and leases it to tenants under long-term agreements (10-20 years). The company currently owns over 4,600 properties in 49 states and Puerto Rico. (Source: “Company Overview,” Reality Income Corp, last accessed September 21, 2016.)
Realty Income provides an annual dividend of 3.71%, or $2.42 per share ($0.202 per share paid monthly). The company has paid a dividend for the last 553 consecutive months. Over that time, it has increased its dividend 88 times, including for the last 76 consecutive quarters (35 years). (Source: “Monthly Dividend Commitment,” Reality Income Corp, last accessed September 21, 2016.)
Duke Energy Corp
Headquarters: Charlotte, North Carolina
Share price: $80.40
Market capitalization: $55.4 billion
Forward P/E: 17.03
Annual sales: $22.5 billion
Dividend yield: 4.25%
Payout Ratio: 86.8%
Levered Free Cash Flow: $165.5 million
Duke Energy Corp (NYSE:DUK) is, as its name suggests, an energy company with operations in the U.S. and Latin America. It operates through three segments: “Regulated Utilities,” “International Energy,” and “Commercial Portfolio.” (Source: “Fast Facts,” Duke Energy Corp, last accessed September 21, 2016.)
Its “Regulated Utilities” business unit serves 7.4 million retail customers in six states in the Southeast and Midwest regions of the United States, representing a population of approximately 24-million people. The company also has a total of 525,000 natural gas customers in Ohio and Kentucky.
Duke Energy currently pays an annual dividend of 4.25%, or $3.42 per share. The company has paid a quarterly dividend for the last 90 consecutive years. Moreover, the company has raised its annual dividend for the last 12 years. (Source: “Dividends – Duke Energy,” Duke Energy Corp, last accessed September 21, 2016.)
Headquarters: Toledo, Ohio
Share price: $73.43
Market capitalization: $26.28 billion
Forward P/E: 15.67
Annual sales: $4.04 billion
Dividend yield: Four percent
Payout Ratio: 181.1%
Levered Free Cash Flow: $1.26 billion
Welltower Inc (NYSE:HCN) is an independent REIT that owns more than 1,400 properties in major, high-growth markets in the United States, Canada, and the United Kingdom. The company’s assets are closing in on $30.0 billion. (Source: “About Us,” Welltower Inc, last accessed September 21, 2016.)
The company’s portfolio includes seniors housing and health care real estate, including seniors housing communities, skilled nursing and post-acute facilities, medical office buildings, inpatient and outpatient medical centers, and life science facilities.
In August 2016, Welltower announced that it will acquire a portfolio of properties operated by Vintage Senior Living for $1.15 billion. The acquisition consists of 19 properties in Southern and Northern California, including the Los Angeles and San Francisco markets. (Source: “Welltower Agrees to Acquire Premier California Portfolio,” Welltower Inc, August 2, 2016.)
Welltower provides an annual dividend of 4.7%, or $3.44 per share, and has raised its annual dividend for the last 13 years. With 10,000 baby boomers entering retirement each day, the company’s dividend growth trajectory should continue for years to come.
Headquarters: Minneapolis, Minnesota
Share price: $68.69
Market capitalization: $39.5 billion
Forward P/E: 12.89
Annual sales: $71.6 billion
Dividend yield: 3.48%
Payout Ratio: 41.9%
Levered Free Cash Flow: $3.94 billion
Cheap and chic, Target Corporation (NYSE:TGT) is the second-largest general merchandise retailer in the U.S., with approximately 1,800 Target and “SuperTarget” stores and 38 distribution centers across the U.S. (Source: “Corporate Fact Sheet,” Target Corporation, last accessed September 21, 2016.)
In addition to welcoming millions of in-store shoppers, Target.com is consistently ranked as one of the most-visited retail web sites, reaching more than 63 million unique monthly visitors. (Source: “Meet Our Guests,” Target Corporation, last accessed September 21, 2016.)
While Target’s share price has taken a hit from lower same-store sales and lowered guidance for the remainder of 2016, the company is taking steps to revive its grocery business. Overall though, Target continues to generate a lot of cash and its share price will rebound when revenue and earnings growth returns.
Fortunately, the lagging sales environment hasn’t hurt the company’s annual dividend yield, as it currently pays 3.48%, or $2.40 per share. For dividend growth investors, Target has raised its dividend for the last 45 consecutive years. Most recently, it increased its dividend 7.1% in June to $0.60. (Source: “Target Corporation Announces 7.1% Dividend Increase,” Target Corporation, June 8, 2016.)
Target hasn’t missed a quarterly dividend payment since it went public in October 1967—that equals 196 consecutive quarters.