Investing

9 Dividends That Should Absolutely Not Be Killed During the Coronavirus Recession

Clorox Co. (NYSE: CLX) is not among the highest yields in consumer products, but the coronavirus scare has created a run on consumer products that includes bleach and wipes. After all, Clorox bleach kills everything, and consumer demand will remain high for every home and office place that doesn’t have a septic system. Clorox’s $4.24 per share dividend generates a 2.46% yield from a $172 share price. This stock has been routinely trading up, even on down-days in the stock market.

Kroger Co. (NYSE: KR) has a long operating history of making money through the ups and downs of the business cycle. Selling groceries, consumer staples and household goods has to go on whether they restrict hours or not. Kroger also has seen its shares hold close to 52-week highs and has traded up on down days. Its sales are even getting a boost as manic consumers are cleaning out toilet paper and canned food aisles. The $0.64 per share payout is against trailing earnings of about $2.00 per share, and it yields 2%.

Lockheed Martin Corp. (NYSE: LMT) is among the biggest and best defense giants in America, worth nearly $90 billion. At $306, its shares have slid just over 30% from its peak, but the $9.60 dividend per share is against normalized earnings in excess of $20.00 per share. Even with a regime change in America looking possible, it turns out that the rising tide of Russia and China and more geopolitical issues than can easily be summarized for the Middle East has made a safe bet on the viability of defense companies, even if the multiple the market wants to pay has contracted massively. Many of its U.S. and ally governmental contract programs are also on the books for years or more than a decade into the future. The new lower share price and the $9.60 payout now generate better than a 3.1% dividend yield.

Merck & Co. Inc. (NYSE: MRK) has seen its shares drop about 20% from its highs, but the coronavirus pandemic doesn’t really prevent people from taking their daily medicines. Perhaps the biggest risk here is if things get so bad that an overwhelming number of deaths occur from patients who are under high-risk categories and who were taking statins, ED meds, blood pressure meds and cancer meds. Merck would halt its reorganization before it drops its dividend at this stage. The $2.44 payout per share is against normalized earnings of over $5 per share. The yield, based on the much lower $74.50 share price, is almost 3.3%.

Microsoft Corp. (NASDAQ: MSFT) has seen its shares fall almost 25% from its $190.70 peak, but the $1.1 trillion valuation and $416 share price are only part of the story here. Businesses and consumers alike, assuming they don’t just vanish, are all dependent on Microsoft in some form or fashion. The company has a diversified flow of revenues and earnings, and even keeping its workers at home rather than at their office desks won’t unglue the dividend. The $2.04 per share payout and the 1.4% dividend yield is against more than $4 per share in retroactive income, without even considering that Wall Street is still expecting earnings growth ahead. Business can slow way down in many aspects, and it can stop buying back stock, but having more than $130 billion in cash should offer more than enough cushion to keep that payout going.

Verizon Communications Inc. (NYSE: VZ) has seen its shares slide less than 20% from its peak. The new $52 share price and $2.46 per share dividend currently offers a dividend yield of 4.7%. There is a conceivable notion that the dividend might come down some under an extreme situation, but Verizon’s normalized earnings are handily above $4 per share and its focus on wireless is far less leveraged now than the model by AT&T. Verizon owns no significant content creation companies, no theme parks and no side businesses that are too difficult or outdated to easily explain. It’s also almost all a story about America. Customers can cut all sorts of things in a pinch, but no one is going to cut their cellphone off, and if churn increases here it is increasing at the other carriers as well.

Visa Inc. (NYSE: V) has grown and grown over time, and the company is both highly capitalized and already has more than an ample cushion as it had a low payout ratio. Visa’s dividend of $1.20 per share generates a yield of 0.7% based on its $165 share price. The market multiple has been coming down sharply after it recently peaked at $214.17, but all that Visa has to have happen is for transactions to occur at any level outside of cash. Even if all the bars and restaurants close for some time, people still have to make purchases and, unlike the banks (and card issuers), the company takes no real credit risk. The financial woes of today also may put a serious dent in all those other emerging fintech players that wanted to steal away some of Visa’s business. Even if earnings growth stops and reverses into negative growth, Visa should be wildly profitable. The company also had more than $12 billion in cash on the books on last look, and the company has been shrinking its long-term issued debt.