Like a bargain? Do you need dividends? No problem. At this point, several S&P 500 stocks fit both requirements, and many boast true “forever” holding qualities. Here we summarize three of the current best practices.
There’s no denying that Pfizer ( NYSE:PFE ) is not the pharmaceutical giant it once was. The loss of patent protection for the blood thinner Lipitor in 2011 was a blow the company will never overcome, but it believes its research and development (R&D) and acquisitions are as strong today as they have been in the past. It’s also naive. During this time, competition in the pharmaceutical business seems to have become even more intense.
After a burst of bullish shine during and in the wake of the COVID-19 pandemic (Pfizer’s Paxlobid was an approved treatment), the stock has rebounded from its late 2021 highs. That’s why it fell 53%.
The long-awaited winds of change are finally blowing, even if it feels more destructive than helpful. Activist investor Starboard Value is shaking the chain, accusing Pfizer of failings in drug development and acquisitions. Starboard specifically noted that its $43 billion acquisition of cancer treatment company Seagen in 2023 has yet to show meaningful returns given its high costs, and that Pfizer’s $43 billion acquisition in 2019 He added that the 15 drugs they were touting as blockbusters could not be turned into moneymakers for these big companies.
CEO Albert Bourla defended the coronavirus, saying it had delayed research and development for most pharmaceutical companies, even if it only complicated the process of drug trials. Nevertheless, Starboard makes some valid points.
But what does this mean for current and future shareholders? While it is usually better for organizations to recognize their weaknesses and introduce much-needed changes, Board Value’s involvement should still facilitate a review of this expiry.
By the way, this drama will not change Pfizer’s dividend at all. Not only have they been paid quarterly like clockwork for years now, but they’ve also increased their annual net payments for 15 consecutive years. This losing streak isn’t particularly in jeopardy either.
The company’s forward dividend yield is 5.8%, but new entrants will likely enter the stock.
There’s a good chance you’ve never heard of Realty Income (NYSE: O). Don’t be fooled just because it’s not well known. This $55 billion S&P 500 component is here to stay and grow.
Real estate income is for the landlord. It is structured as a real estate investment trust (REIT). A REIT is an investment that trades like a stock, but a large portion of the rental income generated by the REIT’s underlying real estate portfolio is transferred. It’s an easy way for investors to get involved in the rental real estate business without the usual hassles of buying and selling properties, finding tenants, maintenance, etc.
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Real estate investment trusts come in all types, from office buildings to condominiums and hotels. However, even by REIT standards, real estate income is a little special. Its specialty is retail space.
This can raise red flags. The brick-and-mortar retail industry is largely on the defensive against the rise of online shopping. However, don’t rattle it too much. Realty Income’s tenant list includes Walmart, FedEx, and Dollar General, just to name a few. These are large companies with staying power, along with a vested interest in staying put once they establish their brick-and-mortar roots.
That’s what this REIT’s numbers say, anyway. Despite retailers being hit hard by the COVID-19 pandemic in 2020, Realty Income maintained an annual occupancy rate of 97.9%.
These numbers aren’t the only reason to be bullish about owning this dividend company, which currently yields just under 5% (on a forward-looking basis). Not only has Realty Income paid a monthly dividend for the past 54 years, it has increased its dividend every quarter for the past 27 years.
Last but not least, add Franklin Resources (NYSE: BEN) to your list of S&P 500 dividend stocks to buy. It is down 43% from its post-pandemic peak in 2021 and a whopping 65% from its all-time high set in late 2013. This weakness has pushed the company’s forward dividend yield to a healthy 6%.
Investors may be more familiar with this outfit than they think. This is the company behind the Franklin Templeton Mutual Fund, but it also operates several profit centers outside of the Templeton brand. Technology solutions, alternative financing and real estate are all within its wheelhouse.
Anyone who has been keeping an eye on this company probably knows that it hasn’t always had a strong track record. While Franklin was certainly well-respected within the investment management industry, he struggled to retain investor money in 2015 and 2016. You may remember that the market had been surging for some time at the time, and investors were demanding more performance than the investment manager could provide. .
But a lot has changed since then. That said, through some strategic acquisitions like options trading technology company volScout last year, the mutual fund giant is now able to offer investors (individuals as well as institutions) more of what they want. It has become.
It’s still not easy to see the upside. The post-pandemic bear market in 2022 made it difficult to determine exactly how much business the company should do and how much profit it should generate. It’s easy to see that margins still appear to be shrinking at this point.
Still, this investment manager’s dividend has increased every year for the past 44 years. The cash flow required to maintain these payments is actually quite secure, given that most of the income is generated by fees based on the percentage of assets under management rather than the performance of the fund. is.
Before purchasing real estate income stocks, consider the following:
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James Brumley has no position in any stocks mentioned. The Motley Fool has positions in and recommends FedEx, Pfizer, Realty Income, and Walmart. The Motley Fool has a disclosure policy.
The article 3 Great S&P 500 Dividend Stocks Drop 43%, 20%, and 53% to Buy Forever is published by The Motley Fool
