The 8 Best Dividend Stocks In May 2019: What To Buy Now

The recent spike in volatility in the stock markets means investors should refocus on quality dividend stocks. Companies with durable competitive advantages and growth potential could outperform in a bear market, while strong dividends help provide a buffer against falling stock prices.

Investors looking for high-quality dividend stocks should consider companies with high profitability and dividends that are sufficiently covered.

With that in mind, we have compiled a list of the 8 best dividend stocks with a combination of an A rating for dividend risk in the Sure Analysis Research Database and an expected annual return of at least 10% over the next five years.

The 8 best dividend stocks for May 2019 are listed in order of 5-year expected total returns, from lowest to highest.

Best Dividend Stock #8: T. Rowe Price (TROW)

  • Dividend Yield: 3.0%

T. Rowe Price is a major asset management firm, with total Assets Under Management (AUM) of just over $1 trillion. T. Rowe Price is an attractive dividend growth company. T. Rowe Price is a member of the exclusive Dividend Aristocrats list.

You can view a further discussion of T. Rowe Price’s dividend in the video below.

 T. Rowe Price has a huge level of assets under management, and its AUM is diversified by asset class and client type:



Source: Investor Presentation

T. Rowe reported its first-quarter earnings results on April 25. The company managed to generate revenues of $1.3 billion during the quarter, which was down 2.2% from the same quarter last year. Still, revenue beat analyst estimates for the quarter.

The recovery in global stock markets during the first quarter helped grow AUM to $1.082 trillion. This represents an increase of $119 billion versus the fourth quarter of fiscal 2018. T. Rowe’s funds continued to perform well, as 86% of multi-asset funds outperformed their Morningstar median over the last year.

Strong fund performance is T. Rowe Price’s biggest competitive advantage, as it gives the company a high reputation within the asset management industry. This provides T. Rowe Price with the ability to bring in new client assets.

The company also beat analyst expectations on earnings-per-share, which increased 7.5% last quarter to $1.87. Share repurchases meaningfully helped boost EPS, as the company bought back 2.5 million (roughly 1%) of its own shares in the first quarter.

AUM has continued to rise in recent months. April AUM increased to $1.11 trillion, which bodes well for T. Rowe Price’s second-quarter results. As the stock market steadily recovered in the first quarter of 2019, this should fuel stronger AUM results in the months ahead.

We expect total annual returns above 10% for T. Rowe Price, comprised mainly of the 3% dividend yield, 6% expected annual EPS growth, and a small ~1% tailwind from an expanding price-to-earnings ratio. T. Rowe Price stock trades for a price-to-earnings multiple of 14.5x, compared with our fair value estimate of 16.0x.

Best Dividend Stock #7: Federal Realty Investment Trust (FRT)

  • Dividend Yield: 3.2%

Federal Realty Investment Trust is a Real Estate Investment Trust, or REIT, which means its business model is to own and lease real estate properties. Cash flow received from rents allows Federal Realty to acquire new properties, which then generate additional cash flow, and the process repeats itself over time.

Federal Realty primarily owns shopping centers. It also redevelops multi-purpose properties including retail, apartments, and condominiums. Its major markets are Washington, D.C., New York, Philadelphia, Boston, San Francisco, and Los Angeles. It also has also expanded into Miami and Chicago more recently.

The company’s investments focus on densely-populated, affluent communities, with high demand for commercial and residential real estate. These higher-quality locations allow Federal Realty to charge more per square foot than many other REITs.

FRT Overview


Source: Investor Presentation

Federal Realty’s property portfolio is also heavily insulated against the threat of e-commerce, as it focuses on retail properties that offer unique experiences that still appeal to consumers. The company’s e-commerce resistant properties provide it with steady growth.

In the most recent quarter, Federal Realty generated comparable property operating income growth of 3.5%. Thanks to new properties, funds from operation (FFO) on a per-share basis increased 2.6% for the quarter. Occupancy remained strong at 94.6%.

Federal Realty has a 3.2% dividend yield, which is relatively low for a REIT. But Federal Realty more than makes up for this, with dividend growth. The company has increased its dividend each year since 1967. Over the course of its 51-year streak of annual dividend increases, the company raised its dividend by 7% per year, on average.

Because of this, Federal Realty has the longest streak of annual dividend increases of any REIT. It is on the exclusive list of Dividend Kings, which have increased their dividends for 50+ years in a row. Federal Realty has continued to grow its dividend through many recessions and other challenging environments over the past several decades. This makes it a very attractive stock for dividend growth investors.

Federal Realty’s dividend appears to be secure.

 Based on company guidance for FFO-per-share of $6.30 to $6.46 per share, Federal Realty has an expected dividend payout ratio of 63% to 65% for 2019. Federal Realty also has a healthy balance sheet, with a credit rating of A- from Standard & Poor’s and Fitch Ratings. A high credit rating lowers the company’s cost of capital, an added measure of safety for the dividend.

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

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