There are plenty of pitfalls that investors should try to avoid when it comes to dividend investing. Some of the most common mistakes include only focusing on a stock’s dividend yield, not doing enough research ahead of a purchase, and placing a big emphasis on the current payout versus future dividend payouts. Avoiding these kinds of errors is a lot easier when you shift your focus to strong businesses that have room to grow.
After such an eventful and tumultuous year in the market, dividend investing is a nice option since many of them are low-beta stocks in defensive sectors. The overall idea is to buy great companies with a history of dividend growth and use the additional income to take advantage of compounding over the long run. Below, you will find 3 reliable dividend stocks to buy in January. Keep each one of these stocks in mind if you are interested in adding some new income-generating assets to your long-term portfolio this month.
If you are interested in a dividend growth stock that is poised to flourish as the economy recovers from the impacts of COVID-19, look no further than BlackRock (NYSE:BLK). It’s one of the leading investment management companies in the world and the largest asset manager in the United States with over $7.8 trillion in assets under management as of last September. Since the Federal Reserve stated that the current low-interest-rate environment could last for years, big earnings are likely on the way for companies like BlackRock.
BlackRock is a member of the S&P 500 and offers a current dividend yield of 2.01%. The company has rewarded investors with a 5-year dividend growth rate of 11.32%, which is exactly the kind of consistency that dividend investors should be interested in. The company consistently beats earnings estimates as well, and in Q3 BlackRock reported a 24% year-over-year increase in diluted EPS along with an 18% year-over-year increase in revenue. If the company can produce strong earnings results like those amidst so much economic uncertainty, think about how strong this best-in-class asset manager will be when the economy is in full swing again.
Next on our list is a Dividend King or a company that has recorded 50 or more consecutive years of dividend increases. Lowe’s (NYSE:LOW) had a fantastic 2020 as people spent big on home improvement projects during the pandemic, yet the price has pulled back significantly from its October highs, offering an intriguing entry point for long-term investors at this time. The stock offers a dividend yield of 1.5%, but the real reason why investors should be attracted to this leader in home improvement retail has to do with the strategic moves the company is making.
Lowe’s has invested heavily in its supply chain system which should help to boost sales over the long run, particularly with local contractors. With an improved e-commerce platform and significant cost reductions due to outsourcing, the company’s management appears to be making all of the right moves. The large shift in consumer spending towards home improvement projects could be here to stay, which should also help the company achieve sustained growth. With so many factors working in Lowe’s favor, it’s a strong choice for dividend investors that are interested in a business firing on all cylinders.
Rounding out our list is PepsiCo (NASDAQ:PEP), a diversified major international producer of branded beverage and snack food products. This is a great example of a stock that should be viewed as a defensive blue-chip name thanks to its stable earnings and healthy balance sheet. The demand for Pepsi’s products, which includes iconic brands like Frito-Lay, Quaker Foods, and PepsiCo beverages, is steady enough for long-term investors to count on. Pepsi stock consistently rewards investors in the form of dividends and share repurchases, and the stock currently offers a 2.76% dividend yield.
Pepsi should continue to benefit from an uptick in consumer-staples spending in the United States and abroad while the pandemic continues to keep people at home. Investors should also be attracted to the company’s potential in emerging markets, which is an area that is growing quickly for the company, especially for its Frito-Lay business. The company is also adding healthy products to its portfolio like Sabra Hummus that could contribute to its top-line growth. PepsiCo is a great dividend stock to add in January that offers reliability along with the possibility for continued earnings growth.Leave a comment