As 2020 grinds on, the stock market continues to send investors mixed signals.
Though the S&P 500 set yet another all-time high on Sept. 2, the end of the month has been decidedly worse as the benchmark dipped under 3,300 once more — a level not seen since previous lows in early August.
Such short-term uncertainty should not worry dividend investors too much, however, as these stocks tend to be less volatile than fast-moving growth names. Furthermore, stocks that pay dividends offer a steady stream of income that helps increase total returns and act as a hedge against declines. If you’re looking for the best dividend stocks right now, here are five names that stand out as October draws near:
— Ally Financial (ticker: ALLY)
— Discover Financial Services (DFS)
— International Paper Co. (IP)
— Ryder System (R)
— United Microelectronics Corp. (UMC)
Ally Financial (ALLY)
Current yield: 3.1%
Unsurprisingly, it remains one of the largest car financing firms in the U.S. to this day, but it also provides online banking, corporate lending, investing brokerage services and even mortgage services. Interestingly enough, despite serving millions of customers, it’s one of the first truly online banks — as Ally never built out a physical presence after its 2010 rebranding as a stand-alone entity.
That has allowed the company to function well in a 21st century economy, particularly amid the pandemic, and pay out a dividend that beats the average yield of the S&P 500.
Discover Financial Services (DFS)
Current yield: 3.3%
Another nontraditional financial stock, Discover is the firm behind similarly named credit cards.
In recent years, DFS has made a big push to do much more than just be a bit player in the payments marketplace as it has moved into checking and savings accounts, home equity loans, student loans and more.
While a long shot and far from first place among major U.S. credit card companies, Discover boasts more than 50 million cardholders — providing a strong foundation of regular revenue to help support above-average dividends.
International Paper Co. (IP)
Current yield: 5.2%
As you may have guessed, IP is a company that’s all about paper.
What you may not fully understand by the name alone is the breadth of its products. These span materials for cardboard shipping containers, toilet paper, diapers, books and even textiles.
As such a diversified industrial company, IP offers a fairly reliable business model that serves a wide range of customers and has the scale to ensure significant baseline demand no matter the broader economic environment. Throw in a dividend that’s more than twice S&P 500’s average, and IP makes for an unglamorous but safe dividend pick for late 2020.
Ryder System (R)
Current yield: 5.4%
Once known for its yellow box trucks, Ryder has moved far beyond truck rentals to become an integrated global logistics firm.
In addition to operating retail sale and lease locations across North America, Ryder offers maintenance and fuel services to commercial fleets, distribution management that includes overseeing the supply chain and warehousing for third parties, and a host of web-based tracking systems to allow for delivery receipts and vehicle monitoring. In the age of the pandemic, as “touchless” transactions are on the rise, knowing where trucks and goods are is more important to a business than ever before.
That makes Ryder a good dividend stock for the present moment — and its generous yield makes it worth holding for the long term.
United Microelectronics Corp. (UMC)
Dividend yield: 3.1%
Semiconductor foundry UMC is a top manufacturer of microchips based in Asia, which means it’s close to key customers in the electronics industry.
Unlike chip companies you may know like Intel Corp. ( INTC), this dividend stock is not in the business of research and design but simply manufacturing. The margins are lower in this model, but considering Intel announced in July that it may not be manufacturing chips anymore — including its internal patented designs — there is tremendous opportunity for a firm like UMC to serve INTC and other design shops in the sector.
Shares have recently surged by double digits as proof, delivering decent short-term profits for shareholders on top of a generous annual yield.
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