Is it time to think about dividend investing again?
Sure, the dividend investing style is often overlooked as most prefer growth securities that are rapidly increasing earnings or revenues, or those that have value metrics like low PEs or modest valuations. But dividend investing still has its place in many portfolios even though many consider it a 'boring' way to develop wealth.
But since markets are near all-time highs and volatility is returning to the market, it may be time to look at dividend stocks again right now. Stocks in this category tend to be a bit less volatile than most, while their regular cash distributions pay you to wait.
Even if you aren't concerned with the state of the overall market right now, dividend investing can be great for different reasons too. The idea of reinvesting dividends– where investors use to dividend payments to buy more shares– can be a great long term strategy too. After all, this approach can really add up over time thanks to the impact of compounding and it is a factor that is often overlooked by investors these days.
Where to Find the Best Dividend Stocks Now
One of the biggest problems with dividend stocks is how do you find the right ones? Plenty of stocks pay dividends and you certainly don't want to just zero in on those that have the highest yields. A great way to find the best is to look at securities paying more than the market in terms of yield, but have been seeing rising earnings estimates as of late too.
Securities with this combination could be the perfect mix of dividend payment and well-positioned stock for price outperformance, so definitely consider any of the names highlighted below if you are looking for excellent income stocks in this environment:
Dow Chemical (DOW)
If you are looking for a large cap play in the income world, DOW will be tough to beat. Not only does the company pay out a robust 3.2% yield, but it is starting to see a positive earnings estimate revision trend as well.
Nine estimates have gone higher for the current year time frame compared to zero lower in the past sixty days, while the consensus estimate has risen a few cents a share as well. Best of all, the stock currently has a positive Earnings ESP which when coupled with the security's current Zacks Rank #2 (Buy) make this an interesting choice for investors right now.
Cracker Barrel (CBRL)
The restaurant segment has been well-positioned to take advantage of the current economic climate but there are few dividend choices in this space. However, CBRL is a good dividend payer in the restaurant world, paying roughly 3.5% a year in yield to investors.
And like many restaurants lately, CBRL is expected to see solid EPS growth this year, with nearly double digit growth expected the following year too. Add in a rising consensus estimate and a history of beating expectations at earnings season, and it is easy to see why CBRL is a Zacks Rank #2 (Buy) and a great pick for income investors.
Chemical Financial (CHFC)
Many stocks in the financial segment pay out solid yields and CHFC is no different. This Midwest bank pays out 2.8% a year in dividends while it should be a prime beneficiary of rising rates too.
Analysts have been increasing their earnings estimates for CHFC stock as of late as well, including not a single estimate lower in the past sixty days for the current year time frame. Chemical Financial also has a great track record when it comes to earnings season as the company has beaten estimates by about 10% on average over the past year. Add in a Zacks Rank #2 (Buy) and you can see why this is a top financial stock right now for income investors.
Hersha Hospitality Trust (HT)
A list of great dividend payers wouldn't be complete without a REIT and today's selection is HT, a REIT that operates in the hotel segment of the industry. Yields are pretty impressive here as the payment comes out to about 4.7% a year making it a great income pick.
This REIT has also seen good news on the earnings estimate revision front and it has been enough to move HT to a Zacks Rank #2 (Buy) security. In fact, not a single estimate has gone lower for either the current year or next year time frames, while it has crushed recent estimates at earnings season too, making it a top REIT to look at for income right now.
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