The ongoing coronavirus outbreak spurred another massive downturn on Monday. The Dow Jones dropped nearly 3,000 points - or 12.7%.
This was the market's worst single day since 1987. Meanwhile, the S&P 500 fell to its lowest level since December 2018.
Right now, the S&P 500 is sitting at 2,386. That figure is roughly 18 times earnings and is getting very close to reaching fair value.
The pullback has brought the S&P 500 down to a critical support level near 2,350. And now many investors are seeing this as an opportunity to slowly begin buying stocks with strong balance sheets and dividends.
If you're looking for guidance and are eager to put money to work, it's important to be cautious.
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But you can start by purchasing solid companies that will thrive during the coronavirus outbreak or will be the key survivors once the pandemic passes.
Here's why you should consider dollar-cost averaging into the following top dividend stocks...
Dividend Stocks to Buy, No. 3: CVS Health Corp.
On Monday, CVS Health Corp. (NYSE: CVS) surprised investors with a strong forward guidance and earnings report that topped expectations.
I paid very close attention to the earnings call. CVS's pharmacists will be on the front lines of the war against coronavirus as they are preparing to offer tests for COVID-19.
Drive-thru testing centers will allow customers to remain in their vehicles and would not expose other customers inside the stores.
CVS is poised to be a safe bet in this current market as prescriptions must remain filled, and patients plan to rush for testing at a moment's notice.
The company has $8 billion of cash on hand and a relatively low debt to equity ratio of 1.
Shares of CVS pay a stable dividend of 3.8%. And investors can anticipate increasing demand around the country regardless of the broader economic downturn that investors face.
Here are the top two dividend stocks I'm targeting now...
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Dividend Stocks to Buy, No. 2: KKR & Co. Inc.
The private equity industry has taken a series of body blows from this coronavirus as it exposed a lot of bad deals and ugly valuations in the mid-market.
We will likely see a lot of private equity deals implode in the year ahead due to leverage. And they will likely take small, newer private equity companies with them in the process.
That said, KKR & Co. Inc. (NYSE: KKR) is the best buyout shop in the business and is sitting on an incredible cash hoard to snap up companies on the cheap once the market stabilizes.
KKR currently pays a 2.29% dividend and trades at a ridiculously low valuation of 6.19 price/earnings.
When the smoke clears, the top private equity firms like KKR and Carlyle Group Inc. (NASDAQ: CG) will be among the first to rally.
Shares could easily rebound 50% from their trough in as little as 12 months.
Dividend Stocks to Buy, No. 1: Medical Properties Trust
Medical Properties Trust Inc. (NYSE: MPW) is a real estate investment trust that centers on one thing: acute care hospitals.
The coronavirus downturn is pricing the stock as if hospitals are somehow going to see a decline in admissions in the months (if not years) ahead.
That's obviously not going to happen.
The REIT currently pays a 7.87% dividend and is effectively one of the few coronavirus-proof plays in the industry.
It will also benefit from the fact that the U.S. Federal Reserve isn't going to raise interest rates any time in the foreseeable future.
This would allow the REIT to borrow money for practically nothing and invest in new medical properties.
On Monday, the stock fell 23%, and it could continue to dip. The downturn of this magnitude signals forced selling by funds and that no buying pressure existed.
This is a REIT to keep your eye on in the coming months. I expect the broad coronavirus sell-off will push this stock down further in the short term.
But realistically, that will only lead to more profits for this business. Expect a fast swing to the upside when it reports earnings next and the rest of the market catches on.
Action to Take: Dollar-cost averaging into these dividend stocks may be painful in the short term. But if you have a long enough time horizon, these should outperform the broader market when stocks finally rebound. In the meantime, you can collect above-average dividends while holding these three top dividend stocks. And if you want a complete guide to how we're managing the crisis here at Money Morning, just click here.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.