The 10 Best Dividend Stocks Now

It is no secret that we recommend investors focus on the highest-quality dividend growth stocks. One of our favorite places to look for the best dividend stocks is the list of Dividend Aristocrats, an exclusive group of 64 stocks in the S&P 500 with at least 25 consecutive years of annual dividend increases.

But there are many high-quality dividend stocks to be found outside the Dividend Aristocrats. Investors can find strong investment opportunities in the U.S. and around the world, and in every market sector. What matters is that investors select companies with durable competitive advantages and future growth potential.

To help with the search, we reached out to several authors of popular investing websites for their individual recommendations. The following list represents these contributors’ favorite dividend stocks for 2020, in no particular order.

The 10 Best Dividend Stocks Now

Best Dividend Stock #10:  Altria Group, Inc. (MO)

This best dividend stock selection is from the Dividend Growth Investor

Altria Group, Inc. manufactures and sells cigarettes, smokeless products, and wine in the United States.

Altria is a dividend king, which has rewarded shareholders with a raise for the past 50 years in a row. Between 2008 and 2018, Altria managed to boost its earnings per share from $1.45 to $3.68. Altria is expected to generate $4.22/share in adjusted earnings per share in 2019 and $4.44/share in 2020.

There are a lot of reasons to like Altria. The products are branded and addictive and the market for tobacco products is in the hands of a few major players with Altria holding a dominant position. There is some threat of future legislation banning the sale of tobacco products or making it uneconomical. Governments take in a ton of money by heavily taxing tobacco products. It is hard to find another scapegoat that can be taxed so heavily.

The other factor to consider is that while the number of smokers is expected to be decreasing over time, so far the increase in prices has more than offset the drop in consumers. Alternative tobacco products can threaten cigarettes but also serve as a gateway to traditional products too.

Over the past decade, Altria has managed to more than double its dividend from $1.22/share in 2008 to $3.28/share in 2019. Altria raised its dividend in August 2019 by 5% to $0.84 per share.

Management has stated its target for Altria’s dividend payout ratio of approximately 80% of its adjusted diluted earnings per share. That hasn’t stopped it from more than doubling earnings per share over the past decade.

Currently, the stock is attractively valued at 11.90 times forward earnings has a safe dividend and yields 7.3%. I believe that the dividend is defensible and can grow over time above the rate of inflation.

About this best dividend stock selection’s author: Dividend Growth Investor is a private investor who has been covering dividend growth stocks since 2008.

Best Dividend Stock #9: Cheesecake Factory Inc. (CAKE)

This best dividend stock selection is from Lyn Alden

With a market capitalization below $2 billion, a dividend yield of 3.7%, and consecutive annual dividend increases since the inception of the dividend in 2012, Cheesecake Factory Inc (CAKE) is worth a serious look.

 

Chart Source: F.A.S.T Graphs

The company operates The Cheesecake Factory chain of over 200 large upscale casual restaurants. Most of these are located in the United States, but the company has been licensing new locations to a small group of developers in the Middle East and Asia as well.

This summer, they acquired Fox Restaurant Concepts, which is a successful incubator of new restaurant brands. Fox’s leading brand, North Italia, is an upscale casual Italian restaurant chain with 20+ locations, which the newly-combined company believes they can scale to 200+ nationwide. North Italia is particularly interesting because its restaurants currently have 35% cash-on-cash returns compared to 20-25% typical returns for The Cheesecake Factory locations, partly due to North Italia’s extensive wine and drink menu.

Cheesecake Factory Inc normally operates with a very strong balance sheet. They increased leverage a bit to buy Fox Restaurant Concepts, but they still maintain strong liquidity and plan to pay down that debt over time. With debt levels of around 3x net income, it’s still quite a reasonable balance sheet as is.

The company faces two key risks. The first is that many of the company’s locations are near malls, which is no longer a strong industry. A mitigation for this, however, is that the restaurants are often destinations in and of themselves and have external entrances, and therefore can be successful even if mall traffic diminishes. The second key risk is that the restaurant industry has faced rising labor costs in recent years, which is putting pressure on margins, although North Italia may help the company protect its overall margins.

Overall, I believe that Cheesecake Factory Inc, especially with Fox Restaurant Concepts as its new source of growth and diversification, offers a compelling blend of stability, yield, and long-run upside potential, with the nationwide expansion of North Italia being a particularly interesting catalyst to watch.

About this best dividend stock selection’s author: Lyn is the founder of Lyn Alden Investment Strategy, where she focuses on value investing with a macro overlay. Check out her free investment newsletter, which comes out every 6 weeks and includes market updates and her full portfolio list.

Best Dividend Stock #8: Bank OZK (OZK)

This best dividend stock selection is from Dividend Stocks Rock.

My selection is Bank OZK (OZK) which was once a stock market darling…until it declared an unexpected charge-off in 2018.

The small bank that sees big has a strong reputation in the savings and loan banking industries. OZK is well-positioned to benefit from the U.S. economic tailwind. I trust the man behind the bank. George Gleason II has been Chairman of the Board, Chief Executive Officer and President of OZK since 1979. He’s the beautiful mind behind this growth story, and I don’t think it will end today.

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Disclosure: I am long WBA

Disclaimer: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities. ...

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