2 dividend-paying stocks I would buy now
Realizing the full benefits of investing will take time and patience, as it is a long-term game. Stock markets and risk go hand in hand. Therefore, if investors want regular and stable income, dividend paying stocks are the safe haven option.
Among dividend-paying stocks, my favorites are the health / consumer giant Johnson & johnson (NYSE: JNJ) and cannabis-related real estate investment trust (REIT) Innovative industrial properties (NYSE: IIPR). While both stocks look attractive for their dividend yield, this alone should not be the basis for choosing a dividend stock. Let’s take a look at the other factors that make these two stocks the best dividend-paying stocks to own right now.
Johnson & Johnson is a guarantee of stable and constant dividends
In addition to being an admired name in the consumer space, Johnson & Johnson also has a reputation for being a King of dividends (a company that has increased its dividends for at least 50 consecutive years). It has introduced some of the most popular products, such as Listerine, Neutrogena, and Benadryl, to name a few, to the world.
His strong financial data has helped the company pay dividends consistently for 59 years. The company continues to grow, so investors can rest assured that dividend payments won’t stop anytime soon. He recently increased his quarterly dividend again by 5% to $ 1.06 per to share. His dividend payout rate (based on cash flow) of 38.9% reveals that the company is stable enough to continue paying dividends to its employees. shareholders. (The payout ratio helps determine whether a company’s dividend payments are sustainable; the lower it is, the better.)
Johnson & Johnson’s strength lies in its diverse business, made up of three segments: Consumer Healthcare, Pharmaceuticals and Medical Devices.
The company had another strong second quarter as it saw double-digit growth across all three segments, with a huge year-over-year increase of 63% in the medical device segment. The segment revived with a recovery in the market for medical devices and elective procedures that had otherwise been postponed during the pandemic. A slow recovery in the US market contributed to 50% of total sales during the neighborhood.
Management expects FY2021 adjusted operating sales to increase 12.5% to 13.5% year-over-year, and adjusted diluted earnings per share to increase by 18.4 % to 19.6% from the previous year to reach $ 9.50 to $ 9.60. This indicates another successful year and a likely rise in the dividend.
Innovative Industrial Properties has other advantages besides being a dividend stock
Investors will enjoy many more benefits by investing in Innovative in addition to receiving dividends. Its consistency in dividend payments can be attributed to its excellent financial performance so far. It is a REIT that provides real estate capital to cannabis companies. The illegal status of the drug prevents pot makers from setting up larger production facilities. So Innovative helps them by buying these properties and renting them out to cannabis companies, thus generating rental income (the only source of income for the company). Total revenue jumped 101% year-over-year to $ 49 million for the most recent quarter ended June 30; and profit more than doubled from $ 13 million to $ 29 million a year ago period.
As a REIT, Innovative is legally required to return 90% of its taxable income to shareholders. It has done so successfully, as evidenced by the increase in its Adjusted Operating Fund, or AFFO, which grew 105% year over year to $ 43 million in his Q2. AFFOs determine the earnings of a REIT that can be paid out as dividends (similar to the net earnings of a non-REIT). This increase in AFFOs allowed Innovative to increase its quarterly dividend year-on-year by 32% to $ 1.40 per share in the second quarter. It was also the 11th dividend hike for the company since its IPO in 2016.
The success of Innovative’s business model is evident from the fact that it now owns 73 properties in 18 states totaling 6.8 million square feet of space. In addition, 100% of its properties are leased by cannabis companies. So, in addition to dividends, Innovative will also give investors (who are reluctant to invest in pot stocks) indirect access to the sector. Some popular American cannabis players like Cresco Laboratories, Trulieve Cannabis, Curaleaf Holdings, and Green thumb industries are the tenants of Innovative. These companies are thriving in the industry right now, with solid expansion plans that give me confidence that Innovative has a bright future ahead of it.
Innovative and Johnson & Johnson do not offer very high dividend yields, at 2.6% and 2.48%, respectively, but they are better than the S&P 500an average of 1.3%. However, the dividend yield is not all that matters. The fact that both companies are stable with high growth prospects gives me confidence that their dividends will also continue to grow.
Not being directly associated with the cannabis sector warns Innovative of any risks related to the sector. But with the rise of state legalization, plans for expansion of cannabis companies will skyrocket and Innovative will continue to grow.
Johnson & Johnson’s pharmaceutical segment carries a small risk (most of its drugs might not be successful). However, the business does not depend on a single product or segment to generate revenue. In fact, most of its products are non-cyclical, which protects it in a volatile market. His involvement and his success with his Covid-19 vaccine is also an added benefit. The company is forecasting around $ 2.5 billion in sales in 2021 for its vaccine, which could represent nearly 2.7% of its total sales (based on its advice).
Analysts expect shares of Johnson & Johnson and Innovative to rise 16% and 10% over the next 12 months.
Both stocks are trading at 10% and 8% of their 52 week highs. This drop makes it a good time for investors to buy and hold these two great dividend choices for the long term.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.