My 3 Favorite US Dividend Companies

With news this week that the Pfizer (PFE) consortium had developed a vaccine against Covid-19 with 90% effectiveness value stocks have gained massively. At the same time, companies that had done well during the pandemic – Amazon (AMZN), Zoom (ZM) and Peloton (PTON) – have fallen on vaccine news.

With that, here are 3 dividend paying companies that I hold in my portfolio that I love.

Johnson & Johnson (JNJ)

Despite having faced a number of lawsuits due to scandals concerning opioids and baby powders, Johnson & Johnson remains a well trusted brand. It has a highly diversified range of business income from drugs and vaccines to personal health and food products. This diversity has meant that it has maintained decent sales, only down 2% year on year despite a pandemic.

In fact, JNJ has had strong sales over the last few years. Sales have increased from $74.3bn in 2014 to $82.1bn in 2019. This represents a 2% compound annual growth rate. It also has a respectable dividend yield of 2.8% and holds dividend king status – over 50 years of consecutive dividend growth. JNJ continues to innovate and grow as shown by its work to develop a Covid-19 vaccine, at the same time returns great income to investors.

AT&T (T)

This is an often divisive company, AT&T has had a challenging year with the pandemic impacting on many of its operations – namely Time Warner Studios. In the past it has made some questionable acquisitions such as DirecTV in 2015 for $49bn and Time Warner in 2018 for $85bn. The former CEO Randall Stephenson believed in acquiring as many companies as he could, however, this has led to a massive debt burden which currently stands at a whopping £149bn.

That being said, AT&T should not be written off just yet. It has been actively taking steps to pay down debts, having reduced total debt by $31bn since the Time Warner deal in 2018. The company has also managed a 50% reduction in debt maturities over the next 5 years, giving increased flexibility to manage near term liabilities. The new CEO, John Stankey, has committed to $3bn in asset sales expected to close by the end of this year, and is exploring further non-core asset and services sales.

What makes AT&T a great stock to hold is is amazing dividend, a yield of 7.2%. What is more amazing is that the payout ratio is only in the high 50s% based on free cash flow. The company is also innovating with its lauch of HBO Max with a steady growth in subscribers (currently 38m). Additionally, it is poised to take advantage in the development of 5G services.

Waste Management (WM)

The number 1 thing I love about Waste Management is how simple their business model is. They collect and process trash. WM is arguably a recession proof stock to own, it is the largest trash collection and disposal business in the US, and largest collector of recyclables. The economy could crash, but trash is still produced and still needs to be collected.

Evidence of this resilience is in their last quarterly earnings. EBITDA was at $1.10bn compared to $1.14bn the year before, a relatively small drop. Free cash flow, however, increased to $691m from $478m last year. WM has increased its dividend for the last 17 years to where it currently stands at $2.14 per share. This give a yield of only 1.9%, but that is only because the share price has increased 7.51% year to date, or 135% over the last 5 years.

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None of the content in this article should be considered financial advice, I am not a financial advisor and you should always do your own research prior to investing. These are my opinions only.

I do own shares in the companies mentioned above, however this should not be considered an endorsement for you to purchase shares. Please do your own research prior to investing in any company.

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