Although analysts have projected that the stock market will keep growing in the second half of the year, it is worth noting that these are just predictions, and a lot of these things can happen, including a crash. In the event of a stock market crash, many investors whose whole portfolio is in one sector could be counting losses. In contrast, those that diversified and invested in dividend stocks could have a safe landing during the crash.
What is a dividend?
In simple terms, a dividend is simply a regular payment made by a company to investors/shareholders (owners of the company’s stock). Companies pay dividends to shareholders to distribute revenue back to investors, and another way companies distribute revenue is to buy back their shares, something called share repurchase.
However, it is essential to note that not all companies pay dividends; therefore, investors interested in getting a dividend should opt for buying what is termed as “dividend stocks”. Dividends are paid to shareholders at different times according to various company policies. Some companies pay monthly, others quarterly (when they release earnings reports), while others pay semi-annually or even annually.
Dividend stocks are considered to be low-risk and can help investors protect and grow their wealth in even the most challenging economic environments like pandemics and stock market crashes. This is because investors receive a continuous flow of cash as dividends from their investments. Every investor loves a regular paycheck from their portfolio that is not a result of selling their holdings.
Although it is never desirable, a market crash presents an opportunity for investors looking to buy stocks at a price lower than their usual market price. In the event that of a stock market crash, Joe Tenebruso, an investment analyst at investment advice company Motley Fool, has handpicked three dividend stocks to buy. These three stocks provide attractive dividends to their shareholders, and they have revised their dividends upwardly over the previous five years or so.
Cloud computing giant Microsoft
Microsoft Corporation (ticker: MSFT) started as a software company in the ’70s with its world popular Windows operating system but has gone on to become a market leader in cloud computing software, hardware, and infrastructure. Now, almost every component of Microsoft is cloud-based, from the recent release of Windows 11 to its videogame console Xbox, Office 365, Teams, Etc. are all linked to Microsoft Azure, the company’s Cloud infrastructure. All these generate a considerable portion of revenue for the company, so much so that it crossed $2 trillion in market capitalisation in June. Microsoft highly benefited from the stay home directives and the shift of businesses to cloud computing during the pandemic.
In its Q4 FY2021, which ended on June 30, 2021, Microsoft reported that it generated a net income of a whopping $61.3 billion, allowing the company to pay out $16.5 billion in cash dividends while buying back its shares worth $27.4 billion.
Due to Microsoft’s impressive appreciation of its share price (currently at $289.46), its dividend yield is standing modestly at 0.8%. Over the past five years, the company has raised its dividend payout by 55%, as its stock price has grown by more than 400% in the same period. After an impressive FY2021 and the fact that the company’s cloud business is thriving more than ever before, Wall Street analysts expect Microsoft to continue growing in FY2022, with estimates of more than $63 billion and $186.74 billion in profit and sales, respectively.
In 1968, Waste Management, Inc. (ticker: W.M.) found a way of turning trash into cash, literally, and has never looked back. The company, which specialises in waste management, comprehensive waste, and environmental services, has grown over the years to a market capitalisation of $62.26 billion and is one of the biggest waste management companies in the U.S., notwithstanding strict regulations and opposition from homeowners against building new waste facilities.
According to Tenebruso, Waste Management has one of the safest stocks available in the market today, and it has continuously paid out a generous dividend to its shareholders over the years. The company’s dividend yield stands at an impressive 1.5%, and the company increased its dividend payout by 5.5% in December last year to an annual rate of $2.30 per share.
Waste Management is an attractive dividend stock because it has consecutively increased its dividend cash payout for 18 years. As long as there is waste to collect and manage in the company’s market (USA, Canada, and Puerto Rico), investors will continue smiling to the bank for that “trash cash”.
Waste Management stock is currently trading at $147.84 a share.
Apple, Inc. (ticker: AAPL), a tech powerhouse and a dividend powerhouse worth more than $2 trillion by market capitalisation registers growth and tremendous profit every other quarter and loves sharing those profits with its shareholders through attractive dividends.
In Q3 FY2021, Apple earned a net income of $21.74 billion, and its revenue surged 36% to $81.43 billion, its iPhone business delivering $39.57 billion in the quarter after sales of the smartphone rose 50%. The company’s other products like the Mac, the iPad, services, and wearable tech, among others, all continue performing well, keeping the company with enough cash to payout to shareholders and reinvest.
Apple’s dividend yield is currently 0.6%, thanks to its incredible profit and cash flow generation. The company spent $29 billion in dividends share repurchases in Q3 FY2021, and it has increased its dividend by nearly 55% over the past five years. Analysts expect the company to keep increasing its dividend payout well over the next decade, showing no signs of slowing down.
According to market data analysed by Rocky White, a Senior Quantitative Analyst at Schaeffer’s Investment Research, Apple has been one of the best stocks to own in August, making it one of the best short-term stocks investors might want to explore of adding to their portfolio. Apple’s stock is currently trading at $146.14 a share.
P.S: Stock prices quoted in this article can change at any time. The information contained in this article is intended for educational purposes and is not conclusive guidance of what investments to make.