5 Long-Term Dividend Stocks to Own in April 2017
Long-Term Dividend Stocks for April 2017
I think we can all agree that in general, today’s investors are not as patient as before. Back in the sixties, the average time someone used to hold a stock was eight years; now, the average time is less than six months. Still, the buy-and-hold strategy can pay dividends in today’s stock market. So in this article, we are going to take a look at the best long-term dividend stocks for April 2017.
The first thing to note is that although the buy-and-hold strategy is not as popular as before, it has helped numerous investors achieve their financial goals. The most famous success story would be Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK.B), who once said that, “when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” (Source: “Chairman’s Letter – 1988,” Berkshire Hathaway Inc, last accessed March 28, 2017.)
The strategy has certainly worked for Buffett. From 1964 to 2016, Berkshire generated a total return of 1,972,595%.
For income investors, dividends are obviously of great importance when it comes to using the buy-and-hold strategy. If an investor is not going to sell their shares anytime soon, there needs to be a way for their portfolio to provide them with income. But the good news is that there are plenty of long-term dividend stocks on the market.
One of the most important things when choosing buy-and-hold stocks is finding companies with a durable competitive advantage. Think of it as investing in businesses rather than stocks. Dividends come from a business’ profits. If an investor wants a business to provide them with regular dividends for the next 50 years, then the business needs to be able to generate recurring profits for the investment horizon. And in order to do that, the business needs to have a sustainable competitive advantage to protect its profits from competitors.
Also, income investors should take into account economic cycles when picking stocks to buy and hold forever. Our economy has been booming for a few years, but at some point, there will be a downturn. For long-term income investors, it’s crucial to have companies that are in recession-proof businesses in their portfolios.
For investors that are asking, “What are the stocks to buy for the long term?” here are the five best long-term dividend stocks to own for April 2017.
Best Stocks to Hold for the Long Term
|Company Name||Stock Symbol||Dividend Yield|
|Flowers Foods, Inc.||FLO||3.32%|
|Enviva Partners LP||EVA||7.66%|
|Johnson & Johnson||JNJ||2.55%|
|Realty Income Corp||O||4.30%|
1. Flowers Foods, Inc.
Flowers Foods, Inc. (NYSE:FLO) is the second-largest producer and marketer of packaged bakery foods in the U.S. Headquartered in Thomasville, Georgia, the company operates 49 bakeries in 18 states that produce breads, buns, rolls, snack cakes, and tortillas. Through a network of independent distributors, Flowers Foods’ products reach more than 85% of the U.S. population.
FLO stock may not be a hot ticker, but it is one of the best dividend stocks on the market today. The company was founded nearly a century ago and is now deeply entrenched in the bakery business. It owns many popular brands, including “Nature’s Own,” “Wonder,” and “Dave’s Killer Bread,” among others.
The key to note here is that Flowers Foods makes products that people need to consume on a daily basis. It doesn’t matter how the economy is doing, consumers need to put bread on their tables. This means the company could keep making money even when the economy enters a recession.
Flowers Foods’ rock-solid business allows it to distribute some of its profits to shareholders. The company has increased its dividend for 14 consecutive years. Right now, FLO stock pays $0.16 per share on a quarterly basis, translating to an annual dividend yield of 3.33%.
One of the reasons why Flowers Foods is worth considering right now is the recent pullback in its stock price. The company reported quarterly earnings in February, with improvements in both sales and adjusted net income. However, the stock market wasn’t happy with the results; FLO stock has tumbled 7.7% since the earnings release. (Source: “Flowers Foods, Inc. Reports Fourth Quarter and Year End 2016 Results,” Flowers Foods, Inc., February 13, 2017.)
Moreover, Flowers Foods is expected to review its dividend policy in April. If the company announces another dividend hike, it could further boost its appeal to long-term income investors.
2. Intel Corporation
When it comes to long-term dividend stocks to hold, technology companies are usually not the first ones to come to mind. However, investors may want to make an exception for Intel Corporation (NASDAQ:INTC).
Founded in 1968, Intel made its name by inventing the “x86” series of microprocessors found in most personal computers (PCs). Today, it is the largest semiconductor chipmaker in the world. The company operates through the following segments: Client Computing Group, Data Center Group, Internet of Things Group, Non-Volatile Memory Solutions Group, Intel Security Group, and Programmable Solutions Group.
The technology sector is known for its fast-changing nature. The hottest tech company today could become obsolete before we even know it. And if a company doesn’t even know if it will be in business tomorrow, why bother paying a dividend?
That’s why Intel stock is special. The company is well- established and is willing to return value to shareholders. Since 2001, Intel’s dividends have only been rising. In the past 10 years, its quarterly payout has increased by 142%. Right now, Intel stock yields a decent 3.07%.
Despite those aggressive dividend hikes, Intel still leaves a sizable margin of safety. Last year, the company generated adjusted earnings of $2.72 per share while declaring $1.04 of dividends per share. So Intel was paying out just 38% of its earnings. (Source: “Intel Reports Record Full-Year Revenue of $59.4 Billion; Reports Record Quarterly Revenue of $16.4 Billion,” Intel Corporation, January 26, 2017.)
Going forward, the company is well positioned to capture growth in some of the hottest fields in tech. Intel’s Data Center Group is now the company’s second-largest segment thanks to the booming cloud computing industry, while the “Internet of Things” (IoT) industry has helped Intel’s IoT segment generate double-digit growth quarter after quarter.
The company recently increased its quarterly dividend rate by five percent to $0.2725 per share. Investors wishing to collect this payment from Intel should consider owning this stock before the ex-dividend date of May 3.
3. Enviva Partners LP
In today’s market, stocks with ultra-high yields are usually not the safest bets for long term investors. However, in certain industries, it’s possible to find solid companies with yields that are well-above the stock market’s averages.
Enviva Partners LP (NYSE:EVA) is a master limited partnership (MLP) headquartered in Bethesda, Maryland. The stock is currently yielding 7.66%.
MLPs are typically involved in the oil and gas business. They are required by law to distribute most of their cash to investors. In return, they do not have to pay income taxes at the corporate level. That’s why MLPs can provide much higher yields than regular energy companies.
Although Enviva is an MLP, it is not really in the oil and gas sector. Rather, the partnership is in the business of processing a type of biofuel. Enviva aggregates wood fiber, a natural resource, and processes it into a transportable form: wood pellets. The most common type of biofuel, Enviva’s customers use wood pellets to replace coal in power generation. The partnership owns and operates six plants with a combined production capacity of three-million metric tons of wood pellets per year.
Note that although demand is not always easy to predict, the majority of Enviva’s wood pellets are sold through long-term, take-or-pay agreements with creditworthy customers in the U.K. and Europe. This adds stability to the partnership’s business.
What makes Enviva stand out among MLPs is its distributions. The partnership went public in May of 2015. Since then, it has increased its distribution every single quarter. Moreover, despite all the distribution hikes, the partnership achieved a distribution coverage ratio of 1.28 times in 2016, leaving a margin of safety. (Source: “Enviva Partners, LP Reports Strong Financial Results for Full-Year 2016 and Affirms 2017 Guidance,” Enviva Partners LP, February 23, 2017.)
Given the partnership’s solid operations and financials, I wouldn’t be surprised if it announces another distribution hike in the next month or two.
4. Johnson & Johnson
One of the most important qualities for long-term dividend stocks is the ability to stay profitable during economic downturns. On that front, few companies can match Johnson & Johnson (NYSE:JNJ).
Johnson & Johnson was founded in January 1886. Today, it is a multinational medical devices, pharmaceutical, and consumer packaged goods manufacturer. It has over 250 operating companies in 60 countries selling products throughout the world.
The key to note about Johnson & Johnson is that it makes products that users need, rather than want, so the demand for its products is relatively inelastic to how the overall economy is doing. For instance, in the pharmaceutical segment, Johnson & Johnson markets more than 100 drugs, 45 of which generate over $50.0 million in annual sales each. Products like these give the company the ability to return value to shareholders through thick and thin.
Indeed, Johnson & Johnson is one of the most solid dividend-paying stocks on the market. The company has raised its dividends every year for 54 consecutive years. Among the thousands of companies trading in the U.S. stock market, there are only 19 companies with more than 50 years of consecutive dividend hikes.
In April, Johnson & Johnson is expected to conduct a review of its dividend policy. I believe the company will have no problem announcing its 55th consecutive dividend hike sometime next month.
5. Realty Income Corp
Realty estate investment trusts, or REITs, can be great long-term dividend stocks. They are backed by real estate and are required by law to distribute at least 90% of their taxable income each year as dividends to shareholders. And Realty Income Corp (NYSE:O) is one of the best REITs on the market today.
Realty Income is a diversified REIT. It owns more than 4,900 properties located throughout 49 states and Puerto Rico. The properties are leased to 248 tenants operating in 47 different industries. By being well-diversified, it’s unlikely that a downturn in a particular industry or region would do too much damage to the company’s whole business.
The best part about Realty Income is its dividends. The company not only pays a generous amount, but pays it on a monthly rather than quarterly basis. As a matter of fact, the company calls itself “The Monthly Dividend Company,” and it definitely deserves the title. Realty Income has made 560 consecutive monthly dividend payments and has increased its payout for 78 consecutive quarters.
The latest dividend hike came on March 14, when the company raised its monthly cash dividend to $0.2105 per share. The next ex-dividend date is March 30.
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