A steady flow of income through some solid dividend stocks can help calm the mind of any investor agitated by the uncertainty doing the rounds.
Dividend Stocks to Deal with the Market Uncertainty
Covid-19 cases are rising again in Europe and the US, causing further gloom. European countries are thinking of imposing lockdown again, generating fears of another economic slowdown. These are concerns that dominate online trading now. But all is not lost, and there are some great opportunities out there particularly if your interest is for stocks providing reliable income.
Investors seek dividend stocks if they’re looking for regular income. Sometimes, these stocks come really cheap. That raises your potential for profits. Motley Fool analyst David Jagielski particularly has a few stocks in mind. Whatever the circumstances have been, these stocks have paid shareholders regular income.
CVS Health ($CVS)
The company has been down 20% since the beginning of 2020, despite the S&P 500 climbing nearly 6%. Though the company experienced a decline, it has managed to adapt to the Covid-19 pandemic and has provided testing locations for patients all through the country as well as telehealth functionalities in almost every state. Sales have managed to be steady.
The second-quarter results released by the company on August 5 actually revealed year over year sales up by 3% for the period till June-end, touching $65.3 billion. Its net income was reported to be $3 billion, a 54% rise. This improvement was significant enough for CVS to raise its cash and earnings guidance from its operating activities.
What really makes the stock exciting is that it trades at a P/E (price-to-earnings) ratio much lower than any average healthcare stock listed on the Health Care Select Sector SPDR Fund. While a typical healthcare stock listed on the fund has a P/E ratio of 24 as well as a book value that’s over 4 times, the CVS stock trades at a P/E of only 9 as well as a book value of around 1.2. The quarterly dividend stock is currently at $0.5, a 3.3% yield. That’s higher than the average S&P 500 yield of around 2%.
Another healthcare stock in the attention of Jagielski is Pfizer. Pfizer is in the limelight for being in the race to get a Covid-19 vaccine developed. The stock is down 4% in 2020. Comparing it with CVS, Pfizer stock is actually performing better. Still, it isn’t anywhere close to the S&P 500.
The great news about Pfizer is its BioNTech experimental coronavirus vaccine which is in phase 3 of trials. It has been making significant progress, which could eventually lead to the company applying for Emergency Use Authorization (EUA) by next month. With the vaccine coming through, the company could add $3.5 billion worth revenue in 2021, believes Jagielski. In 2022, that could add $1.4 billion to the company’s revenue. While those figures may not be significant for a company of the stature of Pfizer that earned a revenue of $51.8 billion in 2019, the stock is known for its consistency and the overall value it provides, even without the highlight of a Covid-19 vaccine. The company has earned profits margins exceeding 10% in every one of the previous 10 years.
Moreover, Pfizer has a P/E of just 15, and its P/B is just 3.3. That’s way below the value of the average healthcare stock. Recently, the company has also been increasing its dividend payments every year. Its current quarterly dividend is $0.38, a yield of 4.1%. These are just some of the stocks to consider if your strategy is to acquire a steady flow of income that could help tackle the uncertainty the market throws at you. Many trading strategies can be considered, including exchange traded funds (ETFs).