One of the risks of investing in dividend stocks is the reduction or elimination of dividends.. In this case, not only the investor's income falls, but also the share price. MarketWatch has selected companies, who earn enough, to continue and even increase payouts.
A Sign of a Good Dividend Stock – Stable Free Cash Flow. This is money from the main activity minus capital expenditures. It is the free money that the company directs to dividends and buybacks..
You can estimate free cash flow by profitability - the relationship of cash flow to the capitalization of the company. But you can assess the stability of dividends by "stock" - the difference between the yield of cash flow and dividend yield.
The larger the stock, all the better. Negative stock means, that the company spends all its free money on dividends, as well as part of the savings. Some troubled companies may even take out a loan, not to cut dividends. And companies with a large margin can increase them..
Here's how MarketWatch selected companies:
- Dividend yield not less than 3%.
- There's a "margin" – the difference between the expected free cash flow yield in 2022 and the current dividend yield..
- Most analysts recommend buying stocks.
To take away dividend stocks, cash flow alone is not enough. Among other things, the investor should assess the stability and length of payments, credit burden and sales growth. The MarketWatch List is just a starting point.
Dividend stocks with a "margin"
| FCF | Dividends | stock | |
|---|---|---|---|
| Devon Energy (DVN) | 15,26% | 4,39% | 10,88% |
| Bristol-Myers Squibb (BMY) | 13,66% | 3,40% | 10,26% |
| LyondellBasell Industries (LYB) | 15,25% | 4,99% | 10,25% |
| NRG Energy (NRG) | 13,47% | 3,35% | 10,12% |
| Chemours (CC) | 11,15% | 3,11% | 8,04% |
| EOG Resources (EOG) | 11,10% | 3,33% | 7,77% |
| Phillips 66 (PSX) | 12,56% | 5,12% | 7,44% |
| Marathon Petroleum (MPC) | 11,01% | 3,62% | 7,38% |
| Valero Energy (FLEA) | 12,80% | 5,54% | 7,26% |
| Office Brands (KTB) | 8,97% | 3,40% | 5,57% |
| Chevron (CVX) | 9,53% | 4,53% | 5,01% |
| Merck (MRK) | 8,21% | 3,77% | 4,44% |
| Hanesbrands (HBI) | 7,32% | 3,40% | 3,91% |
| Williams Companies (WMB) | 9,00% | 5,93% | 3,07% |
| DT Midstream (DTM) | 6,84% | 5,05% | 1,79% |
| Coca Cola (KO) | 4,05% | 3,05% | 1,00% |
| Newmont (NO) | 4,76% | 3,90% | 0,86% |
