No matter how you look at the stock market, it has had a few rough months since its peak in the first week of January. The rising interest rates, inflation worries, and an increased likelihood of a recession in the coming months are potential causes of the massive sell-off we have seen in the market. The supply chain issues, the Russia-Ukraine conflict, and ever-increasing fuel prices are some of the additional problems that the companies are facing.
Obviously, all of this has resulted in low investor confidence. At the same time, the sell-off has all but ensured that solid performers with excellent management are within our reach. If you can follow my bear market playbook, you will see this drop in price as an opportunity.
It is the first time in the last many years that a small retail investor can actually invest in the stock market without paying a premium for some of the more prominent names like Microsoft.
Before we go on with the details, please note that this is not financial advice.
For today, given the negative sentiments toward the stock market, I thought you guys would be interested in knowing about the companies that offer a reliable income stream. At the same time, these companies should have good enough operations to face the challenging business environment that may arise in the near future.
I am Armaghan, and this is my story for today.
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Dividend Stock # 1: Exxon Mobil
It is a leading supermajor which means it is “an energy company with vast upstream and downstream activities.” This is just a fancy way of saying that Exxon Mobil not only produces natural gas, oil, and LNG but also refines them, sells them, and has a separate chemicals business based on the by-products of these natural resources.
This diversification has been a solid competitive advantage for Exxon Mobil in periods of low commodity prices. It has helped the Company stay profitable even when most of the industry faces a downturn. This explains how Exxon Mobil has continuously grown its dividends for twenty-five years.
The Company is highly profitable, especially in the current environment, and has recently given an impressive Q1 result. The revenues increased by fifty-three percent, with Earning Per Share of $2.07.
Other than the dividends, Exxon Mobil has been working on share buybacks to return some of the cash generated to its shareholders. With the current business environment in play, I expect the Company’s margins to go up at least for the next few months before we see any form of a change in supply from OPEC that can affect the oil and gas prices.
Yesterday, Exxon Mobil closed over $104, just a dollar short of its all-time closing high. The Company is expected to win a stake in expanding the largest LNG project offshore Qatar, which will further perform a solid boost.
As of today, the analysts expect the share price to reach $120 in the coming weeks. Exxon Mobil can add substantial value to a portfolio due to its solid dividend history, share buybacks, and expected price appreciation in the coming days.
Dividend Stock # 2: Abbvie
It is one of those companies that seems to be in my top picks for almost every category. It is a spin-off of Abbott. It is a biotech company. Obviously, its products are not really cyclical. This is because the economy’s strength does not really affect the medical treatment required. One of the world’s leading drugs, Humira, falls under AbbVie and a portfolio of other assets. This portfolio has been further strengthened by the takeover of Allergan a couple of years back.
In the latest quarter, Abbvie saw its revenues grow by 4%, with Earnings Per Share of $3.16. This means that the Company is trading at a Price to Earnings ratio of just about 10. For the dividends, Abbvie has more than doubled its dividends in the last five years. Obviously, it is not possible for any company to continuously increase the dividends at the same rate, but the investors can expect high dividends in the future too.
As I said earlier, the business of Abbvie is resilient when it comes to the economic cycles, the costs are comparatively under control, and it has considerable power over its prices. It is evident that Abbvie is not only a dividend investment; it can also be a value-based investment at this price point.
Dividend Stock # 3: Lowe’s
This is one of the trickier stocks to put on the list. It is one of those stocks that will divide the market for where they stand. Lowe’s is a leading home improvement retailer in North America. It is a direct competitor to Home Depot, and both companies have controlled the market sharing the margins.
Lowe’s has given us solid results for the past couple of years.
But going forward, with interest rates rising, making the mortgages expensive, and resulting in a cool down of the housing market, the operations of lowe’s can be affected. This is where the disconnect comes. I believe that the housing market in the US will not drastically cool off. This is because the Feds will not increase the interest rates to such an extent that it causes the economy to stop running at all. This makes the recent sell-off of Lowe’s stock overblown for me. But this is just my opinion, and I can be completely wrong here.
The Company is now trading at a price to earnings of 14. It is a dividend aristocrat, a company that has increased dividends consistently for more than twenty-five years. The Company also has plans of share buybacks during the year, which will obviously help with shareholder returns, just in case the Company’s operations do end up getting negatively impacted in the coming months.
With the solid business model, rising dividends with a healthy margin for further growth, expected share buybacks, and low valuation, Lowe’s is definitely a company to evaluate for your portfolio.
These were the three stocks that I found interesting for dividend investing in the month of June. Obviously, these are not the only investments that can grow drastically, and your due diligence, in light of your own risk profile, will help you make a better selection for your portfolio. Use this video as a starting point for your analysis, and I am sure you will come up with some good stocks.
If you are interested in getting a bit more quotient of the stock market, you can go through my top picks for June 2022.
Do let me know in the comments below what your selections are for this month.
I’m Armaghan Tanveer, a numbers guy by profession and a romantic by heart. I write about everything I find interesting, including productivity, investments, passive income, and personal experiences. If you like what I do, you can buy me a coffee ☕️ here.