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As we see selling coming back into the stock market this week, there will be a lot of speculation about what stocks to buy as prices decline.
Overthinking things and trying to get too fancy is one of the greatest mistakes investors can make.
In bad markets, the key to getting rich during the inevitable recovery is to buy great companies at steep discounts.
Finding great companies is easy. Assembling a list of "dividend aristocrats" that have grown their dividends for at least 25 consecutive ways is one of the best places to start.
Once we have that list, I'm targeting businesses with high yields that can survive the pandemic and thrive when the economy regains healthy footing.
All of the dividend aristocrats are great companies. Still, I am bearish on the intermediate-term outlook of companies exposed to energy, traditional retail, or travel-related industries.
Finding the highest yields and applying a modicum of common sense can help us buy exceptional companies that will survive the current crisis and prosper on the other side.
Here are my top three "pandemic-proof" dividend stocks to buy today...
Dividend Stock to Buy No. 3
The stock at the top of the list to buy when selling is intensifying is AT&T Inc. (NYSE: T).
Bear markets are the best time to buy the "big old-line" companies that dominate their industry and have high dividend yields. And AT&T is one of them.
The company is still seeing subscriber growth during the pandemic. It more than doubled the number of new wireless post-paid customers in the first quarter of the year.
Warner Media took some hits as it lost a lot of anticipated ad revenue from March Madness, but that was a drop in the bucket compared to wireless growth.
People are stuck at home, and it looks like we will be for even longer. Even after lockdowns end, not too many people may venture out until we have drugs for the treatment of COVID-19 and a vaccine.
Americans will be home watching HBO and playing on their phones and laptops. And that is a fantastic catalyst for AT&T.
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AT&T yields more than 7% at the current price, and the divided should be fine. Management is committed to the payout and has suspended stock buybacks to protect the cash dividend to shareholders.
The company is too big to grow at a rapid rate. But it will grow. And I expect dividends will continue increasing every year.
Dividend Stock to Buy No. 2
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Amcor Plc. (NYSE: AMCR) operates a pretty basic business. But its dividend is as reliable as they come.
The firm makes plastic packaging products like boxes, bags, and other containers for a broad range of industries. We may all switch our shopping online, but everything will still come in a box.
Prescriptions will still be filled in bottles and bubble packs. In 2019, Amcor bought one of its largest competitors, Bemis Corp.
And now, Amcor is a $12.5 billion business with operations in 43 countries around the world.
This is a resilient business that will not see much of a decline during the crisis and will be well-positioned to regain a growth trajectory when we get back to normal.
Amcor has a strong balance sheet and expects to generate over $1 billion of free cash flow that can be used to grow the business and reward shareholders.
In addition to buying back 3.2% of the outstanding stock last year, Amcor pays a generous cash dividend as well.
Amcor shares yield right around 5% right now, and the company has increased its payout every year for 25 years now. I expect management to continue to raise for many years to come.
Dividend Stock to Buy No. 1
While some banks may experience some difficulties during the crisis, I do not think that People's United Financial Inc. (NASDAQ: PBCT) will experience significant challenges.
The bank has seen its stock price fall by more than 40% so far this year as the crisis has played out, but I think it may be overdone at this level.
The bank has been through several financial declines during its 178 years of existence. And they are still standing and prospering.
People's United operates in the New England region of the country. It has 450 branches in Connecticut, southeastern New York, Massachusetts, Vermont, Maine, and New Hampshire. Total assets are more than $60 billion, making People's one of the largest banks in the country.
The bank is in good shape after the first quarter came to an end. Nonperforming assets were just 0.59% of all assets, so its borrowers were making payments as agreed for the most part.
People's has plenty of capital, so it will be able to withstand the storms the weak economy is likely to kick up during the rest of 2020.
The bank was very busy helping its customers deal with the pandemic in the first quarter. It has accepted approximately 11,000 applications as part of the CARES Act Paycheck Protection Program.
And over 9,600 loans totaling more than $2.1 billion have been submitted to the SBA and approved as of April 21st.
The bank has already funded $1 billion of these loans. Through its foundation, People's has granted more than $3.5 million in support for less fortunate and first responders to their communities.
Like the other "dividend aristocrats," People's United has been very generous with its shareholders.
The firm has raised its dividend for 27 years in a row, and the shares currently yield 6.5%.
At less than 10 times earnings, the stock appears to be an outstanding bargain worth tucking away in your portfolio for the long run.
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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.