Dividend stocks provide shareholders the best of both worlds. First, you can receive regular income each quarter, and you can also enjoy the benefits of share price growth when the companies that own these stocks perform well.
There are few dividend stocks that have over the years built up track records of delivering dividend increases each year. Among them, some are quite predictable about when during the year they are most likely to announce a rise. Today, we’ll look more closely at two of the best dividend stocks, including, UnitedHealth Group (NYSE: UNH) and Brookfield Property Partners (NASDAQ: BPY).
UnitedHealth Group (NYSE: UNH)
UNH is among the best dividend stocks to buy in 2020. Currently, the United Health Group pays its shareholders $1.08 each quarter and this amount has more than doubled from a few years ago when it was paying $0.50. The stock’s most recent dividend increase was 20%, and this raised the payouts for about a year.
UnitedHealth Group experienced a solid last year. Nonetheless, its share’s modest gain of 20% did not outperform the S & P 500’s. Considering the political uncertainty being experienced in the healthcare sector, it’s understandable why investors would hesitate to buy the dividend stock. Additionally, the increased pressure and regulations to maintain average consumer costs in this sector could result in significant drug price changes and rebates, which, in turn, could negatively affect the company’s bottom line.
However, the existing uncertainty surrounding this sector makes this dividend stock a cheap buy as well. This uncertainty is preventing the stock’s price from soaring too high in what has been a strong bull market for over a year. The stock is trading at a forward P/E of 16 and a PEG of just 1.4.
Moreover, the Price to Earnings ratio is a key metric used by value investors. This metric helps show how much investors are willing to pay for each dollar of earnings in a certain stock, and it is also among the most popular financial ratios. The best way to see the PE ratio is by comparing the stock’s current PE ratio with its past performance; how it compares with the industry average and the overall market.
In this case, UnitedHealth Group is trailing at a 12 month P/E ratio of 19. This level compares favorably with the market at large because the S&P PE ratio stands at 20.78. If we focus on the long term P/E ratio trend, the stock’s current P/E level puts it below its midpoint of 20.16 over the past half a decade. Additionally, at present, the PE ratio stands below the high for the stock, which suggests that it can be a solid entry point. As such, investors should expect an increase in the share of the company shortly.
Brookfield Property Partners (NASDAQ: BPY)
Brookfield Property Partners is a diversified global real estate company that owns, operates and develops one of the largest housing assets for offices, retail, self-storage, student housing, multifamily and manufacturing. The main investment objective of this company is to generate significant long term returns on equity of between 12% and 15% from stable cash flows, appreciation of assets and annual 5% to 8% distribution increase.
BPY is currently among the best yielding dividend stocks. The company’s dividend each quarter is at $0.33, which translates to a 6.7% annual dividend yield. And even though that is high, the company has always attempted to increase this percentage over the years.
About 6 years ago, the company was paying $0.25 each quarter, which means that dividend prices have increased by 32%, and this averages a compounded annual growth rate of 5.7% in 2014. For many investors, this is a good and sustainable percentage, but it does not guarantee a future of increases. Brookfield Property Partners has many assets in different parts of the world and thus may not be affected by political uncertainty. This means that it may offer more stability compared to other companies.
However, investors should not expect returns from this stock. BPY has lost about 10% in the last 2 years, which last the S&P 500’s gains of 16%. One of the main reasons is the company’s debt. Brookfield Property Partners owes over $46 billion long term debts, and as interest rates continue to increase, this attracts some risks which may push investors away. Nonetheless, one positive is that the debt has reduced from $58 billion in 2018.
Overall, the most important thing is to find the right investment strategy for your unique needs. This strategy should perform well, it should make you feel comfortable and should entice you to invest regularly. Purchasing stocks with dividends is a good strategy. This entails investing in companies with more than a decade of consecutive dividend growth, sustainable dividend payout ratios and solid growth prospects.
The two dividend stocks analyzed above provide positive future prospects for your investment portfolio.