My Top 3 Dividend Stocks for May
Dividend stocks are still hot, but they are sizzling positively as investors look for safe ways to make their money grow in a volatile investment climate. Even better, falling prices mean you can find great stocks on sale with high-yielding dividends. My top picks for May are Home deposit (HD 1.91%), Starbucks (SBUX -0.57%)and Kimberly Clark (KMB -2.85%).
Endless home improvement
The Home Depot is the world’s largest home improvement chain with 2,300 stores in the United States, Canada and Mexico. It’s had its share of challenges throughout its long history, but they’ve been fleeting – as they should be for a healthy, well-run business – and they seem to have all but disappeared in recent years. Just as the company was finally anticipating a slowdown in growth, sales smashed estimates in the first quarter of 2022, rising 4% year-over-year to $1.4 billion, and profit per stock (EPS) fell from $3.86 to $4.09. Management raised its growth outlook to 3% year-over-year for 2022.
This is particularly impressive as the company faced tough competition last year – a 33% year-over-year sales increase in the first quarter of 2021 – as well as ongoing chain issues. supply and increased costs.
Home Depot is a solid stock that still manages to grow and become more efficient. It revamped its digital program before the pandemic and was well positioned to take advantage of the digitization of shopping – and it’s poised to enjoy continued growth thanks to its strong omnichannel strategy. It also has tailwinds in a still strong housing market as well as employees turning to remote work options.
However, the stock has fallen nearly 30% this year and trades at just 19 times past 12-month earnings. At this price, its dividend yields 2.3%.
More coffee, please
Coffee giant Starbucks, which fell 38% in 2022, is another dividend-paying stock that took a beating this month.
Starbucks faces all sorts of problems, from organizing employees to closing stores in China and rising costs. Former CEO Kevin Johnson recently stepped down from the top spot, and founder and former CEO Howard Schultz took over the driver’s seat to lead while seeking a permanent replacement.
However, the company is on track, showing solid growth and profitability despite its challenges. In the second fiscal quarter of 2022 (ended April 3), sales increased 15% year-over-year to $7.6 billion, including same-store sales growth of 12% to United States. EPS increased 4% from a year ago to $0.58.
The coffee titan operates more than 34,000 stores globally and continues to grow at a rapid pace, including 313 net new stores in the second quarter. Schultz finds that consumer habits have changed as a result of the pandemic, and the business needs to evolve with these new customer preferences. This means even more focus on digital, more store renovations and a shift of resources to develop more drive-thru services. He said there was “record demand,” which is pretty mind-boggling, and that means Starbucks’ growth story is far from over.
At the current price, Starbucks stock is also trading at a cheap valuation of 19 times trailing 12-month earnings, and its dividend yield is 2.65%.
Keep your home running smoothly
Kimberly-Clark makes many products you can’t live without — the essentials shoppers stockpiled at the start of the pandemic. Brands such as Cottonelle, Kleenex, and Huggies are its sources of income, which is why it’s about as stable a business as it gets. This also means that growth is generally slow but steady. And these types of businesses are often focused on becoming more efficient and increasing their margins.
Sales were up just 2% in 2021 after a higher than usual increase in 2020 due to pandemic stockpiling. Organic sales, which are sales from existing brands, were down 1%. EPS fell as the company faced supply chain safeguards and rising costs; it has also initiated some price restructuring and general changes in its operations.
It is already producing results. Just weeks after announcing its outlook for organic sales growth of 3-4%, the company released its first quarter results, reporting a 10% increase in organic sales. CEO Mike Hsu said this was due to better-than-expected volume and strong execution of his restructuring plan. Management raised its outlook for the full year to 4% to 6% organic sales growth.
The company also increased its dividend for the 50th consecutive year in 2022, gaining exclusive Dividend King status. At the current price, the stock is trading at 27 times trailing 12-month earnings, and its dividend yields 3.3%, making it a strong and extremely reliable dividend-paying stock.