5 Dividend Dow Stocks to Buy That Might Survive a Nasty Correction

Investing

Published: January 21, 2020 7:15 am

Last Updated: January 30, 2020 11:02 am

Twenty years ago, the table was set just like it is now. Technology stocks were leading everything higher and people breathlessly plowed into the stock market for the same reason they do now. Despite valuations and fundamentals that were extended far beyond the normal multiples, and just like today, the “FOMO” (fear of missing out) was the driving force. While staying invested on a long-term basis is always the best investment strategy, the time for chasing the gigantic FANG moves may be reaching an end.

With the staying invested theme in play, we screened the 30 companies in the venerable Dow Jones industrial average looking for reasonable valuations and a somewhat defensive posture. Then we screened the candidates that made the cut against the Merrill Lynch research coverage universe to look for companies that paid dividends and were rated Buy.

We found five dividend-paying stocks that look like good selections for growth accounts with some risk appetite that are looking for total return.

Caterpillar

This large-cap leader was hit by trade worries in 2019 and is offering a very solid entry point. Caterpillar Inc. (NYSE: CAT) is the largest manufacturer and marketer of construction equipment worldwide, and it is also a leading manufacturer of diesel engines and turbines for transport and industrial applications.

With 2018 sales and revenues of more than $54 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through three primary segments (Construction Industries, Resource Industries and Energy & Transportation) and also provides financing and related services through its Financial Products segment.

Caterpillar shareholders receive a solid 2.80% dividend. Merrill Lynch has set a $165 price target for the shares, which compares to the Wall Street consensus target of $146.27. The stock closed Friday’s trading at $147.78 a share.

Coca-Cola

This company remains a top Warren Buffet holding and offers not only safety but also an incredibly strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

Coca-Cola investors receive a 2.82% dividend. The Merrill Lynch price target is $60, while the posted consensus target was last seen at $59.29. The stock closed most recently at $56.94 per share.