10 Top Dividend Stocks to Watch in 2017
Dividend investing doesn’t seem to get that much attention when it comes to making investment decisions these days. When you can get triple-digit returns on capital gains alone, who cares about dividend-paying stocks? But for those who still believe in the power of dividend growth investing, here are 10 dividend stocks to watch in 2017.
1. Johnson & Johnson
As a consumer goods company, Johnson & Johnson (NYSE:JNJ) stock might not sound as exciting as the names in the Internet sector. But note this: Johnson & Johnson has been increasing its quarterly dividend rate for 54 consecutive years!
With over $300 billion in market cap and 130 years of history, triple-digit capital gains are probably not what JNJ stock investors are chasing after. Rather, it’s the steadily increasing dividends that really make the company stand out. The latest dividend hike came this April, when Johnson & Johnson raised its quarterly dividend rate by 6.7% to $0.80 per share. At today’s price, that gives JNJ stock an annual dividend yield of 2.69%.
The company is huge and well diversified. Johnson & Johnson’s products are sold through 250 operating companies in 60 countries, generating nearly half of its sales internationally. (Source: “Investor Fact Sheet,” Johnson & Johnson, last accessed August 29, 2016.)
Johnson & Johnson operates through three segments: Consumer, Pharmaceutical, and Medical Devices. In particular, its Pharmaceutical segment could be recession-proof. JNJ markets over 100 different drugs, 46 of which generate over $50.0 million in annual sales. Pharmaceutical and healthcare companies are the classic examples of companies with relatively inelastic demand for their products. That makes this stock a top dividend stock to watch in 2017.
2. Toronto-Dominion Bank
Bargains are hard to find in today’s stock market. If a stock’s yield is high, there is usually an associated level of risk. But this foreign bank with a near-four-percent yield could be an exception.
Toronto-Dominion Bank (NYSE:TD) is a well-diversified Canadian financial institution that also operates in the U.S. It has three segments: Canadian Retail, U.S. Retail, and Wholesale Banking. The U.S. Retail segment includes TD Bank, one of the ten largest banks in the U.S., with over 25,000 employees.
Of course, with the U.S. economy still recovering from the last financial crisis, investors might be a bit skeptical when it comes to bank stocks. But TD is different from many financial institutions in that it doesn’t have an overly large investment banking segment.
In the most recent fiscal quarter, only 12% of TD’s net income came from its Wholesale segment. By not having a smaller exposure on the wholesale side, TD could be more recession proof than its peers. (Source: “TD Bank Group Quick Facts,” Toronto-Dominion Bank, last accessed August 29, 2016.)
And then there’s the dividend. In the past 10 years—not a particularly easy period for financials—TD’s quarterly dividend rate has more than doubled. It currently has an annual dividend yield of 3.85%.
3. Wal-Mart Stores, Inc.
If you live in the United States, then this company needs no introduction. Whether you like to shop at its stores or not, you can’t deny that Wal-Mart Stores, Inc. (NYSE:WMT) is a solid dividend payer. The company currently has an annual dividend yield of 2.81%. What’s more impressive is the growth in its payout. In the past 10 years, Wal-Mart’s quarterly dividend rate has nearly tripled.
However, for the most part of 2015, the market wasn’t so nice to Wal-Mart stock. And the company itself shouldn’t be the one to blame; it was all about the booming ecommerce industry.
WMT stock bears have a solid point. When you can get everything—including fresh groceries—delivered to your doorstep through just a click of a button, why bother going to a physical store?
But the company is not standing still. In fact, it has been making solid progress expanding its presence in the ecommerce industry. In the second quarter of its fiscal 2017, Wal-Mart’s ecommerce sales surged 11.8% year-over-year on a constant currency basis. Gross merchandise volume (GMV) increased 13% year-over-year. (Source: “Walmart Reports Q2 FY17 EPS of $1.21, Adjusted EPS of $1.07, Raises Full Year Adjusted Guidance Range to $4.15 to $4.35,” Wal-Mart Stores Inc, August 16, 2016.)
Don’t forget, Wal-Mart’s ecommerce business just got a huge catalyst. Earlier this month, the company announced that it agreed to buy Jet.com, Inc. for $3.0 billion in cash and $300 million of Wal-Mart shares. (Source: “Walmart Agrees to Acquire Jet.com, One of the Fastest Growing e-Commerce Companies in the U.S.,” Wal-Mart Stores, Inc., August 18, 2016.)
With this acquisition, Wal-Mart could get hold of Jet’s sophisticated pricing algorithm, warehouses, and customer data. Wal-Mart said that Jet is adding more than 400,000 new shoppers each month and has an average of 25,000 daily processed orders.
If things go as planned, the deal could change the landscape in the ecommerce industry and give a new reason for income investors to take a look at Wal-Mart stock.
4. The Walt Disney Company
Other than providing great childhood memories, The Walt Disney Company (NYSE:DIS) also provides solid dividends.
You might think that with the latest Star Wars movie, Star Wars: The Force Awakens, that’s as good as things are going to get for Disney stock. And since Disney stock didn’t do that well since the movie’s release last December (although it did climb quite a bit prior to the release), there’s not that much upside in DIS stock.
But I doubt that this will be the case. Despite the lackluster performance of Disney stock, the company had huge success at the box office. In just 20 days after the latest Star Wars movie’s release, it became the highest grossing film of all time in the U.S.
The success continued to 2016. With theatrical releases such as Zootopia, The Jungle Book, Captain America: Civil War, and Finding Dory, Disney is having a huge year at the box office.
And for 2017, the company has quite a few candidates for box office hits, including Beauty and the Beast, Guardians of the Galaxy Vol. 2, and Star Wars: Episode VIII.
And don’t forget, Disney recently opened its first theme park in mainland China—a region with a huge following for Disney’s creations. The company’s theme parks in California and Florida are also about to get Star Wars-related theme park expansions.
With so many upcoming catalysts, Disney stock is among the top dividend-paying stocks to watch in 2017.
5. Microsoft Corporation
If you were deciding whether you should forgo some growth potential for a steady yield, here’s a company to add to your watch list: Microsoft Corporation (NASDAQ:MSFT), because why not have both?
Technology companies are not known for their durability. Each time a recession hits, some of them go out of business; even some of the multi-billion-dollar ones aren’t really recession-proof. But Microsoft could be an exception.
You see, among other things, Microsoft offers the “Windows” operating system and the “Office” productivity suites. While these are old news, it’s been decades since these products’ debuts and there is yet to be a challenger to threaten their market-leading positions. Microsoft’s first mover advantage in the personal computer world ensures that it can keep making money in the industry and return some of it to shareholders.
And then there’s the dividend growth investing angle. In today’s tech world, companies need to keep innovating, otherwise they get left behind. Fortunately, Microsoft is keeping up with new trends just fine. Its cloud services arm, Microsoft Azure, grew its revenue 102% year-over-year in the most recent fiscal quarter. At the same time, the company is also building a huge ecosystem of users by letting consumers subscribe to its products rather than doing just one-time sales. (Source: “Earnings Release FY16 Q4,” Microsoft Corporation, July 19, 2016.)
What this means is that Microsoft will not only stay relevant, but also provide solid dividend growth prospects for income investors.
6. Omega Healthcare Investors Inc
The top 10 dividend stocks to watch in 2017 list wouldn’t be complete without a real estate investment trust, or REIT. And my pick for 2017 is Omega Healthcare Investors Inc (NYSE:OHI).
This REIT invests and provides financing to the long-term healthcare industry, with a special focus on skilled nursing facilities in the U.S. The company’s portfolio includes more than 900 properties located in 42 states and in the U.K.
Why do I like Omega Healthcare Investors? Well, as a growing amount of baby boomers enter their golden years, the long-term care industry could see its business growing. Moreover, Omega also stands out among its peers with solid growth in its business. In the second quarter of 2016, the company generated $173 million in Adjusted Funds From Operations (AFFO), a 15.6% improvement year-over-year. (Source: “Omega Announces Second Quarter 2016 Financial Results; Adjusted FFO of $0.87 and EPS of $0.57 Per Share for the Second Quarter,” Omega Healthcare Investors Inc, August 2, 2016.)
With its recent dividend hike, Omega has a quarterly dividend rate of $0.60 per share, which translates to an annual yield of 6.6% at today’s price. This high-yield healthcare REIT definitely deserves a spot on your watch list.
7. PepsiCo, Inc.
Sugary sodas might not be good for your health, but having some PepsiCo, Inc. (NYSE: PEP) stock could be good for the health of your income portfolio.
PepsiCo is a solid dividend stock. Since 1972, PEP stock’s dividend payout has only been increasing. At the same time, the company has also repurchased quite a bit of its shares.
Right now, PepsiCo stock has an annual dividend yield of 2.79%. The company plans to return a total of approximately $7.0 billion to shareholders in full year 2016, with around $4.0 billion in dividends and $3.0 billion in stock buybacks.
Moreover, PepsiCo is much more than chips and soda these days. The company has a large portfolio of brands, and some of them—such as Quaker and Tropicana—have plenty of growth potential, even if consumers move away from Lay’s and Cheetos.
For those reasons, this century-old food and beverage company earns a spot in the top 10 dividend stocks to watch list.
8. Apple Inc.
I would put Apple Inc. (NASDAQ:AAPL) stock near the top of the watch list for any investor in 2017, and not just for dividend investors.
With a 2.13% annual yield today, Apple stock is not really a high-yield one. But from a dividend growth investing point of view, there are a few things that make AAPL stock stand out.
The company is probably not going to shoot through the roof, but with tens of millions of “iPhones” being sold each quarter, the company is running a business so solid that Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B) increased its stake in Apple by 55% in the second quarter. (Source: “Warren Buffett’s Berkshire Hathaway Raises Stake in Apple by 55 Percent,” CNBC, August 15, 2016.)
The company has a lot of cash; more than $200 billion of it. Even though most of that cash is stored overseas, it does create the possibility of bringing some of it back at some point in the future. And when that happens, Apple’s capital return program would get a huge boost.
Having enough cash on hand also means growth opportunities. For instance, if Apple decides to get the necessary technology for driverless car through an acquisition, enough cash on hand gives it the ability to do so.
However you look at it, Apple stock just screams value. Yes, it is already the largest company in the world by market cap, but if you invest in Apple today, you pay less than $13.00 for each dollar of its earnings. The same cannot be said for most of its peers.
Apple is already doing an impressive job in terms of returning value to shareholders. It has completed almost $177 billion of its $250-billion capital return program by the end of June. If it further boosts its dividends and buybacks program, Apple stock investors could be further rewarded.
9. Royal Bank of Canada
Speaking of Canadian banks, you can’t ignore the largest bank in the country, Royal Bank of Canada (RBC) (NYSE:RY). Founded back in 1864, RBC now has over 80,000 employees serving more than 16 million clients in Canada, the U.S. and 26 other countries. By the end of the third quarter of its fiscal 2016, RBC had $1.2 trillion in assets. (Source: “RBC at a Glance — Q3/2016,” Royal Bank of Canada, last accessed August 29, 2016.)
In an environment where the 10-year Treasury note is yielding a measly 1.563%, RBC’s yield looks quite appealing. With a quarterly dividend rate of $0.83 per share, the bank has an annual dividend yield of 4.09%.
Despite its giant size, RBC is still growing at a decent pace. In the company’s third fiscal quarter, which ended July 31 2016, net income was at a record $2.9 billion, up 17% year-over-year. (Source: “Royal Bank Of Canada Reports Record Third Quarter 2016 Results,” Royal Bank of Canada, August 24, 2016.)
While the quarterly result included gains from the sale of RBC’s home and auto insurance business, the company’s adjusted net income still went up seven percent year-over-year to $2.66 billion. Moreover, the company also announced a two-percent increase in its quarterly dividend rate.
10. Nike Inc
While many multinationals are posting declining business results due to economic uncertainty around the globe, as well as currency headwinds, Nike, Inc. (NYSE:NKE) just kept growing.
In the company’s most recent fiscal quarter, revenue increased six percent year-over-year to $8.2 billion. Excluding the impact of foreign exchange (FX) headwinds, revenue growth would have been nine percent. (Source: “Nike Inc Reports Fiscal 2016 Fourth Quarter and Full Year Results,” Nike, Inc., June 28, 2016.)
Going forward, there is good news; Nike’s worldwide futures orders were up eight percent year-over-year by the end of May, and would have been up by 11% on an FX-neutral basis. These futures orders are scheduled for delivery from June through November 2016, with a total value of $14.9 billion.
2017 is going to be a crucial year for Nike, especially for its basketball segment. Starting with the 2017–2018 season, Nike is going to be the official on-court apparel provider for the NBA.