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

With expected FFO growth of 5.5% annually, the 3.2% dividend yield, and valuation changes of 1.7% per year, we expect total returns of 10.4% per year for Federal Realty.

Best Dividend Stock #6: Target (TGT)

  • Dividend Yield: 3.4%

Target is a giant U.S. retailer with over 1,800 stores. Target reported strong financial results for fiscal 2018. In the fourth quarter, the company grew its comparable sales by 5.3%, more than the expected 5.0% growth rate. Comparable sales from stores increased 2.9% in the fourth quarter.

Traffic growth of 4.5% fueled Target’s comparable sales growth in the fourth quarter. For the full year, comparable sales grew 5.0%. This was the strongest comparable sales performance for Target since 2005.

Reported and adjusted earnings-per-share were $5.50 and $5.39, respectively. Both figures set new all-time highs for the retailer.

2019 is expected to be another good year for Target. Company management expects comparable sales to grow at a low-to-mid single digit rate for the year, while earnings-per-share are expected in a range of $5.75-$6.05 for 2019. At the midpoint of guidance, Target expects to generate 9.5% earnings growth in fiscal 2019.

Target’s future growth is focused on renovating existing stores, opening new stores, and e-commerce. In recent years, the brick-and-mortar retail industry has come under great pressure from online retail competitors like Amazon (AMZN). Target has successfully driven its own traffic growth by modernizing its stores, emphasizing its own brands, and investing in new concepts like small stores.

Target has rapidly built its own e-commerce platform to compete directly with Amazon. Comparable digital sales soared 31% in the fourth quarter. And, 2018 marked the fifth-consecutive year of digital sales growth above 25%.

Target has a solid dividend yield of 3.4%, and a long history of dividend growth. Target has increased its dividend for 47 consecutive years, making it a member of the, a group of 57 companies in the S&P 500 Index with 25+ years of annual dividend increases.

Target’s current annual dividend payout of $2.56 per share equals an expected dividend payout ratio of 43% in 2019, based on the midpoint of company guidance. Target has a secure dividend and should continue to increase its dividend each year, as it has done for nearly five decades.

Target’s dividend safety is discussed in the following video.

 Due to a combination of dividends (3.4%), expected EPS growth (4%), and valuation changes (4.1%), we expect total returns of roughly 11.5% per year for Target over the next five years.

Best Dividend Stock #5: Bank OZK (OZK)

  • Dividend Yield: 2.9%

Bank OZK, previously called Bank of the Ozarks, is a regional bank operating in multiple states including Arkansas, Florida, North Carolina, Texas, Alabama, South Carolina, New York and California. Bank OZK offers traditional banking services including checking, business banking, commercial loans, and mortgages. The stock has a market capitalization of $4 billion.

On April 17th, 2019 Bank OZK reported operating results for its 2019 first quarter. For the quarter, total interest income increased 15% from the same quarter last year. However, net income fell 2.2% to $110.7 million, as expenses grew faster than revenue.

Earnings-per-share came in at $0.86, a 2.3% decline compared to $0.88 in the year-ago period. Returns on average assets, stockholders’ equity and tangible equity all declined modestly in the 2019 first quarter. Still, total loans increased 5.2% while tangible book value increased 22% to $24.73 per share.

We expect 8% annual earnings growth for the company over the next five years, comprised mainly of loan growth. Rising interest rates would be an added catalyst, although the Federal Reserve has suspended rate hikes for the time being. Still, the steady GDP growth of the U.S. economy is a broad tailwind for regional banks such as Bank OZK.

Bank OZK has generated consistent net interest income growth over the past five years. In fact, Bank OZK reported record net interest income in 17 of the past 20 quarters.

OZK Net Interest Income


Source: Investor Presentation

Bank OZK is an attractive stock for value and income. First, shares appear to be undervalued today. We expect Bank OZK to generate earnings-per-share of $3.50 for 2019. Based on this, the stock has a price-to-earnings ratio of just 9.0x. Our fair value estimate is a price-to-earnings ratio of 12.0x. This means an expanding valuation multiple could boost shareholder returns by approximately 5.9% per year, over the next five years.

In addition, the stock is appealing for dividend growth. Bank OZK stock has a 2.7% current dividend yield, which beats the average yield in the S&P 500 Index, currently near 2%. And, Bank OZK has a strong dividend growth history. The company has increased its dividend for 35 consecutive quarters, including a recent 4.6% increase.

The combination of projected 5-year EPS growth (8%), the current dividend yield (2.7%), and expansion of the price-to-earnings multiple (5.9%) adds up to total expected returns of 16.6% per year through 2024.

Best Dividend Stock #4: Caterpillar (CAT)

  • Dividend Yield: 2.7%

Caterpillar manufactures heavy machinery used in the construction and mining industries. The company also manufactures ancillary industrial products such as diesel engines and gas turbines. Caterpillar generates annual revenue of $58 billion.

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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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