3 Dividend Stocks to Buy After the Fed Slashed Rates

Markets initially offered a tepid reaction to the response from G-7 leaders on the COVID-19 coronavirus.

The world's seven largest economic powers said they would use policy tools to provide support to the global economy. But they failed to provide specifics.

Well, we got more clarity when the U.S. Federal Reserve issued an emergency interest rate cut of 50 basis points.

They weren't supposed to meet again until March 17-18.

But they realized the best thing they could do to act in line with the unpredictability of the coronavirus was to cut rates immediately.

After the rate cut, U.S. President Donald Trump tweeted, "The Federal Reserve is cutting but must further ease, and most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!"

So it's safe to say we're on our way to 0% interest rates. And possibly negative ones after that.

Should the global economies come together to prevent a massive outbreak, lower rates would likely fuel a quick rebound of the equity markets as investors pile back into equities and push us back to new records.

That's just how cheap money and asset prices have worked over the last decade.

However, even if this process is more prolonged, now is the best time for investors to start looking for stocks that can outperform in the long term and offer terrific dividends in the process...

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Today, we are digging into three dividend stocks to buy in the wake of the recent market pullback and Fed rate cuts.

Here's what you need to know for tomorrow's trading session.

Dividend Stocks to Buy No. 3: Toronto Dominion Bank

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Don't let lower interest rates in the United States scare you away from owning one of the best financial institutions in North America.

Toronto-Dominion Bank (NYSE: TD) is a Canadian financial services company that hasn't missed a dividend since 1857.

With more than 1,200 bank branches in the United States and more than 1,100 in Canada, the company maintains a wide geographic scope and splits its revenue about 40/60 favoring the Great White North.

The company has a rock-solid balance sheet and recently reported big gains in revenue and profits, sharp cuts in expenses, and another dividend hike during its fiscal first quarter earnings report last week.

In fact, the company hiked its dividend by 7% and now sits at a current yield of 4.41%.

Plus, TD currently trades at a price/earnings ratio of 10.4, a figure that is the lowest it has been since the start of last decade.

Investors would be wise to lock in that dividend and ride the stock back to its price target of $65.

That figure represents a potential 12-month upside of 28%.

Dividend Stocks to Buy No. 2: Digital Realty Trust

Here at Money Morning, you know we are big fans of real estate investment trusts (REITs).

The market loves real estate plays in this asset class because of the favorable tax distributions enjoyed by REITs. In addition, they pay higher-than-average dividends.

Right now, you can buy some of the market's top-performing REITs at a 10% discount.

Digital Realty Trust Inc. (NYSE: DLR) is a REIT that specializes in data centers.

With widespread 5G on the horizon, DLR stands as one of the top ways to generate income and appreciation upside on the back of rising demand for storage.

It already counts major enterprises like International Business Machines (NYSE: IBM), CenturyLink Inc. (NYSE: CTL), Facebook Inc. (NASDAQ: FB), and Microsoft Corp. (NASDAQ: MSFT) as tenants.

The recent pullback has given investors a lot of upside for the future.

In addition to offering a 3.4% dividend, Digital Realty has a one-year price target of $188.

That target represents a potential upside of 45% from today's price level.

Dividend Stocks to Buy No. 1: CenturyLink

Finally, we want to take a very close look at CenturyLink Inc. (NYSE: CTL). This telecom giant pays a massive 7.94% dividend currently.

CenturyLink has been moving higher over the last year despite the recent pullback in stocks.

While its copper-line telecom business has weakened, its enterprise data business and 5G fiber network are poised to drive shares higher in the year ahead.

It's important to remember that 5G will be deployed regardless of the coronavirus outbreak.

In fact, it could be considered one of those vaunted "stay at home" stocks that have benefited from the coronavirus hype.

CenturyLink has the potential to cut its expenses and start to move toward highly profitable quarters with the launch of 5G and its favorable demographics in states like Florida, where populations continue to move.

Shares currently trade for just under $12.50 per share.

But over the next 12 months, we have set a price target of $21.50. This represents potential upside of 72% to go with a mouthwatering dividend.

Action to Take: Buy TD, DLR, and CTL for their dividends and potential price appreciation.

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