The Kraft Heinz Co. (ticker: KHC) recently got hammered by a quadruple whammy: a one-third dividend cut, news of an SEC investigation, a $15.4 billion write-down and a one-day share price plunge of more than 25 percent. Those dependent on KHC’s dividend gasped, while pundits broke out the gustatory puns: “in a pickle,” “food flight,” “nothing to relish” and “catch up” among them.
On one level, the news gave some dividend hunters the jitters, even as the markets in 2019 haven’t found their groove. But long-term income investors shouldn’t put away the payout punch bowl just yet. The website Seeking Alpha reports that in December 2018, close to 6,000 firms declared dividends, a jump of 32 percent from the same time in 2017. Is the dividend field turning into an investing field of dreams? Depends on where you look.
And if you can take your eyes off KHC’s gravy train wreck, something wonderful happened on the investing front — and on the same day.
“Consolidated Communications Holdings reported rising revenue in its fourth-quarter earnings for 2018,” says David Tawil, president at Maglan Capital in New York City. “It has an annual dividend yield of greater than 14 percent at its current share price of $10.50.”
Tawil’s bottom line? “It is impossible,” he says, stressing the “i” word, “to find a similar yield without real default risk or risk of dividend cut.”
As for how dividend stock shareholders can get their high-yield cut, here’s the case for CNSL and four more dividend winners to invest in during March, all of which may prove better that a St. Patty’s Day pot o’ gold.
Here are five of the best dividend stocks to buy in March:
— Consolidated Communications Holdings (CNSL)
— Amgen (AMGN)
— JPMorgan Chase & Co. (JPM)
— Six Flags Entertainment Corp. (SIX)
— Enbridge (ENB)
Consolidated Communications Holdings (CNSL)
If not a dividend king, CNSL still deserves a spot in the royal court. “The company has paid its dividend for 55 consecutive quarters and it’s not at any near-term risk of elimination or reduction,” Tawil says.
Headquartered in Matoon, Illinois (three hours south of Chicago), Consolidated Communications is a broadband and business communications provider worth close to $770 million. The stock has bounced around the last 12 months, leaving shares off by about 14 percent. Still, those who decide to invest on Christmas Eve snagged quite the lovely holiday gift, as CNSL shares have since surged more than 15 percent.
So which way should investors tip the scales? You could call CNSL a “strong buy,” as two analyst firms have done, or a “hold,” as three recommend. The consensus then is “buy”; in an industry punished by Wall Street recently.
“This is truly a story of the baby being thrown out with the bath water and a clear gem,” Tawil says.
Based in the Los Angeles area, this pharmaceutical company has recently made market timing investors reach for prescription pain pills. If you got in and out between May and October last year, you enjoyed a smooth uninterrupted climb of 25 percent. Since then? Down 11 percent. But over the last 12 months? Flat.
Those numbers hardly tell the whole story, though. “AMGN is growing cash from operations at 7 to 10 percent a year, and the dividend is expected to grow by approximately 10 percent per year going forward,” says Ellen Hazen, senior vice president and portfolio manager, F.L.Putnam Investment Management Co. in Wellesley, Massachusetts.
What’s more, a flat performance across 12 months hardly adds up to a flatline for income investors. The company has “promising products in the pipeline,” Hazen says. “During 2019, key milestones to watch will include progress for migraine drug Aimovig and market share of cardiovascular drug Repatha.”
JPMorgan Chase & Co. (JPM)
Experts believe the banking sector could outperform this year, and certainly Warren Buffett could use some good news in that arena after taking a $4 billion ketchup bath recently on Kraft Heinz. Yet that astronomical loss still amounts to chump change for a guy worth some $85 billion, and betting against his bet to invest in JPM wouldn’t exactly qualify as smart.
“The pick of the litter in big banks is JPMorgan Chase,” says Robert Johnson, professor of finance at Creighton University’s Heider College of Business. “In the most recent quarter, Berkshire Hathaway increased its already sizable stake in JPM by 40 percent.”
It’s easy to see why Warren Buffett chose to invest. Under Jamie Dimon, now in his 15th year as CEO, “JPM has an attractive forward dividend yield of 3.03 percent and sells at a below-market forward price-to-earnings ratio of 10.6 times earnings.”
While JPM has slipped 10 percent since this time last year, “investors are beginning to realize the stock’s value as it has advanced nearly 9 percent year to date,” Johnson says. And for income investors, the current payout of 80 cents per quarter has doubled since mid-2015.
Six Flags Entertainment Corp. (SIX)
There’s nothing amusing about an amusement park company that wins a rickety race to the bottom. On Feb. 13, Six Flags unintentionally coined a name for a new ride based on its Wall Street performance: The 14 Percent Drop.
“The stock was hammered after an earnings miss,” says Marc Lichtenfeld, chief income strategist at The Oxford Club in Delray Beach, Florida. Cold consolation that it is, the loss of $9 per share meant a spike in the dividend yield to 6 percent; SIX trades at roughly $57.
Could now be a good time to invest in SIX? “Despite the earnings miss, revenue in 2018 was a record $1.5 billion,” Lichtenfeld says. “That’s an 8 percent increase over the previous year, while free cash flow grew 7 percent.”
Meanwhile, SIX has raised its payout for nine straight years. The quarterly payout of 82 cents per share is up 5 percent from August 2018.
So far, 2019 has been very, very good to this Canadian energy company. Insulated from America’s interest rate anxiety and trade tariff squabbling, Enbridge is enjoying a bull run that is so 2013. The stock is up 17 percent, currently trading at $37 U.S. per share.
“We think ENB is still highly undervalued,” says Patrick R. McDowell, an investment analyst with Arbor Wealth Management, Miramar Beach, Florida. “It is also our largest holding.”
The current dividend yield sits above 6 percent “and after a few more years of dividend hikes Enbridge will be considered a dividend aristocrat,” McDowell says. Since 2011, quarterly payouts have nearly tripled to 73.8 cents per share — yet another sign of solid performance in a sector that’s had the crude kicked out it for years.
One advantage Enbridge has centers on its business model. It operates Canada’s largest natural gas distribution network as well as the longest crude oil and hydrocarbon transport system in North America.
Says McDowell: “We like the toll-booth nature of the business and think the dividend will grow around 10 percent per annum for the foreseeable future.”
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