This story was originally published here.
As much as income investors prize high-yield dividend stocks, bear markets like the one we're going through now can throw a wrench into an otherwise prudent strategy.
The coronavirus bear market in particular has been tough on dividend stocks. Many companies have suffered sudden, sharp drops in revenue, and profits that have affected their ability to pay shareholders their dividends.
Companies in industries such as travel, entertainment, restaurants, REITs (real estate investment trusts), and energy have been hit especially hard.
According to CNBC, more than 200 stocks have reduced or suspended their dividends so far this year. With the pace of an economic recovery uncertain at best, more dividend stocks are likely to follow suit.
And that includes a lot of prominent names. We're talking about household names like General Motors Co. (NYSE: GM), Macy's Inc. (NYSE: M), and The Boeing Co. (NYSE: BA). Even a Wall Street darling like Walt Disney Co. (NYSE: DIS) had to trim its dividend following a 93% drop in earnings in its fiscal second quarter.
Collectively, investors stand to lose as much as $490 billion in dividend payments for all of the 2020 calendar year, according to a forecast from the Janus Henderson Global Dividend Index.
While grim news for fans of high-yield dividend stocks, it's possible to avoid much of the carnage by putting your money into the companies least likely to cut their payouts. And with share prices down, yields have been pushed higher – making this an excellent time to grab such stocks.
To find the best choices, we used several criteria.
First, we screened for stocks with dividend yields of 5% or higher. Then we looked for companies with a payout ratio below 80% to ensure the dividend is affordable.
Finally, we ran our choices though a five-tier rating system devised by investing firm Reality Shares called DIVCON. The system rates the health of a company's dividend.
We looked for stocks ranked in the top two tiers. Both Tier 4 and Tier 5 stocks, according to Reality Shares, are likely to increase their dividend over the next 12 months (although a Tier 5 stock is more likely to do so).
Here's what we came up with…
The Best 5 High-Yield Dividend Stocks
AbbVie Inc. (NYSE: ABBV)
Dividend yield: 5.31%
Payout ratio: 79%
This Big Pharma company was spun off from Abbott Laboratories (NYSE: ABT) in 2013. Although in 2023 it will lose U.S. patent protection on big moneymaker Humira – the world's best-selling drug – the company has been making moves to prepare for that day. It has several immunology and cancer drugs, namely Skyrizi and Imbruvica, that are evolving into major moneymakers. AbbVie also completed its $63 billion acquisition of Allergan this month. Allergan adds 120 new products, headlined by the blockbuster Botox, as well as 60 more in the pipeline. With steady, solid growth expected for years to come, ABBV is a textbook income stock.
Editor's Note: For the rest of the stocks, click here.
This World-Renowned Angel Investor is Sharing his #1 Secret to Pre-IPO Riches
Investing in startup companies can be one of the easiest and most profitable opportunities available today. With startups, you're getting in at the earliest possible time.
That means you're in line for the biggest possible gains – way more than you could get from the stock market.
Investing in startups used to be reserved for the mega-rich… the millionaires and billionaires of the world.
But thanks to a recent groundbreaking piece of legislation, the doors to this private market have been blown open.
As of today, any person above the age of 18 can invest in these incredible startup companies… and you don't need tons of money to get started.
Here's what you need to know:
Step 1: Transfer $50 into your checking account
Unlike most other types of investments where you need upwards of $2,500 and a verified brokerage account to get going, investing in startups is easy and affordable.
- You can do this without a broker.
- You can do this without completing a single piece of paperwork.
- You can do this with as little as $50.
In most cases, your investment comes directly out of your checking account!
So to get started, just transfer $50… $100… $500… however much you'd like… into a checking account of your choice.
Step 2: Find a startup that excites you!
Next, it's time to figure out where you'd like to invest that $50.
Whether you're into technology, health, entertainment, food… there are literally hundreds of thousands of startups available to anyone over the age of 18.
That's far more opportunities than what you'll find in the typical stock market – and dozens more startups are coming online every single week.
I'm talking about companies like…
People can't buy shares of Instagram today – they're not on the market. But you could've gotten in during the startup phase…
From their startup days to when Facebook bought them – the value of Instagram jumped 47,519%.
Anyone who was smart enough to invest even $50?
Well, they turned that $50 into $23,809.
$500? That would've turned into $238,090.
Or Uber. Now, this example is utterly exceptional – but get this:
If you had invested even $50 in Uber just a few years ago, you'd be sitting on $1.2 million today.
It's completely absurd – and, of course, your $50 could have gone poof right into zero… but find a winner like Uber, and you're set for life.
If you were to stick with conventional stocks, you can expect to need at least $2,500 just to open your brokerage account. Then, you have the usual (meager) 7% return per year to look forward to.
But with startup investing, you can experience absolutely insane returns … and it's so much more affordable to get started.
Just choose a startup that excites you, and it's on to step 3.
Step 3: The Fun Part…
Once you've got your $50 ready – and once you've identified what kind of startup you want to begin with…
The next step is the fun part!
It's also the place where the most successful startup investors are separated from the herd – where the true millions of dollars (and, in some cases, billions) are made.
This step is covered in full detail by serial entrepreneur, Neil Patel and Shark Tank's Robert Herjavec in a recent video.
Watch and you'll learn how you could access two time-sensitive deals with huge upside.