One thing has become very evident in 2020. Interest rates are going nowhere, and they likely won’t for years. With the 30-year Treasury bond yielding a tiny 1.66% and five-year certificates of deposit a pathetic 1% or lower, income investors have hit a wall when looking for dependable sources of income.
While stocks will never replace the safety of Treasury debt or bank CDs, some of the best-known U.S. companies pay extremely large dividends. The odds are that if they haven’t cut them by now, there is a solid chance they probably won’t.
We screened our 24/7 Wall St. research database for companies rated Buy that pay significant dividends. Again, there always is a chance they could cut them, but with 2020 almost over, and the hope for an economic rebound in 2021, the odds they keep them intact are rising.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This top telecom and entertainment play would be a conservative addition for any growth and income investors. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.
While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.
The third-quarter results showed solid subscriber growth in the company’s market focus areas of wireless and fiber broadband, while continuing to reflect strong cash flows, financial strength and business resiliency. AT&T also updated guidance and now expects 2020 free cash flow of $26 billion or higher, with a dividend payout ratio of 57% or so.
Investors receive a 7.70% dividend. BofA Securities has a $36 price target for the shares, while the Wall Street consensus target is $31.60. AT&T stock closed trading on Tuesday at $27.46 a share.
This energy giant is a safer way for investors looking to be positioned in the energy sector. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas.
Back in the spring, at the height of the pandemic, Chevron slashed spending after halting its $5 billion-a-year share buyback and halving spending in the Permian Basin, which means a large decrease in projected output from America’s biggest shale region.
The California-based oil giant lowered projected 2020 capital spending by 20%, or $4 billion. The Permian will account for the largest single element of that reduction, translating into 125,000 fewer barrels of oil equivalent per day than previously forecast, a quantity equal to about 2.5% of the basin’s total current production.
Chevron posted a surprise profit on better downstream, with the company close to breaking even on a cash basis, including the dividend. Preliminary 2021 capital spending guidance suggests it will be flat to lower, but inclusive of 330 thousand barrels of oil equivalent per day from the purchase of Noble Energy.
Investors receive a 7.50% dividend, which appears to be safe. The BofA Securities target price is $97, above the consensus target of $94.92. Chevron stock ended Tuesday at $71.74 a share.
Philip Morris International
This company has continued to grow global market share and its stock makes good sense for total return investors now. Philip Morris International Inc. (NYSE: PM) is one of the largest international cigarette producers, with a share of 28% of the international cigarette/heated tobacco market. Key combustible brands include Parliament, L&M and Marlboro, also one of the most valuable brands in the world.