Finance

The Smartest Dividend Stocks to Buy Now with $400


Whether you have $400 or $400,000 to invest, it would be wise to consider putting that money into some healthy and growing areas dividend-paying stocks. Why Dividend Payer? Well, they can appreciate like any other good stock, but while doing so, they regularly send you cash – cash that can be used to fund your retirement or purchase additional shares and best of all, healthy and growing Dividend payers also typically increase their dividends over time.

Here’s the kicker: People who pay dividends also tend to perform better than those who don’t! Check out the table below, adapted from the Hartford Fund Report:

Dividend status

Average annual total return, 1973-2022

Dividend growers and promoters

10.24%

dividend payer

9.18%

No change to dividend policy

6.60%

people who don’t pay dividends

(0.60%)

Dividend reduction and elimination

3.95%

Source: Ned Davis Research and Hartford Funds.

So, here are three dividend stocks worth considering for your portfolio. All three stocks have recently traded at attractive valuations and attractive dividends.

1. Medtronic

Medtronic (NYSE:MDT) is a healthcare giant with a recent market capitalization of $111 billion. The company provides medical devices such as implantable pacemakers, aortic valves, mesh implants, suturing devices and technology used in robot-assisted surgeries. The company employs nearly 100,000 people in 150 countries and its products treat more than 70 health conditions, including diabetes.

Medtronic’s most recent dividend yield was 3.3%, and the payout has grown at an average annual rate of 7% over the past five years (and increased spending Now for 46 consecutive years). Its business is also growing, with third-quarter revenue rising 4.7% year-over-year and earnings per share (EPS) growing 8%. Medtronic will likely continue to grow as it develops new treatments and products. The company spent $2.7 billion on research and development in fiscal 2023 and recently had more than 200 active clinical trials underway.

At the same time, the company is shedding less profitable businesses, such as its line of ventilators. Its shares look attractive at recent levels, with a recent forward price-to-earnings (P/E) ratio of 15.6, well below its share price. The five-year average is 18.1.

2.Starbucks

Starbucks (Nasdaq: SBUX) It needs no introduction as it has more than 38,000 stores in more than 80 markets around the world and has products on the shelves of many retailers. Starbucks’ most recent dividend yield is 2.5%. The dividend has grown at an average annual rate of 10% over the past five years, and another rate hike is likely to be announced this fall.

Stable and growing dividends are great, but you should also want the underlying company to grow at a decent rate. In the first quarter, Starbucks’ net revenue grew 8% to a record $9.4 billion, and sales at new stores exceeded global year-on-year growth of 5%. Earnings per share soared 22%. One particularly successful initiative for Starbucks is its rewards program, which saw member numbers grow 13% year-over-year in the first quarter to 34.3 million.

All is not 100% rosy for the company—overall inflation is causing many consumers to cut back on spending, and Starbucks is growing at a slower rate than in years past, in part because of competition. But it still improved operating margins, and Starbucks has several advantages for growth, such as offering delivery and drive-thru service. There’s a lot to like about Starbucks’ prospects, and its stock appears to be undervalued, with its most recent forward price-to-earnings ratio of 22.3 well below its five-year average of 28.4.

3. Pepsi Cola

Pepsi (NASDAQ:PEP) Another familiar name is the $237 billion soft drink and salty snack giant whose brands include Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream. 2.9%, with an average annual increase of 6% over the past five years. It also has a long history of dividends, with the last increase of 7% being the 52nd consecutive year of increases.

PepsiCo’s fourth-quarter net revenue decreased by 1% year-on-year, but its full-year revenue in 2023 will grow by 5.9%, and its full-year EPS will grow by 2%. PepsiCo’s stock valuation also looks attractive, as its outlook P/E ratio of 20.0 is well below the five-year average of 23.5.

These are just three of many attractive dividend payers. Also keep in mind that if you’re not willing to pick stocks yourself, you can always choose one or more dividend-focused exchange-traded funds (ETFs), and you can do it with just $400 or more.

Should you invest $1,000 in Medtronic right now?

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Selena Malanjian Worked at Medtronic and Starbucks. The Motley Fool works at and recommends Starbucks. “Motley Fool” recommends Medtronic. “Motley Fool” in disclosure policy.

The Smartest Dividend Stocks to Buy Now with $400 Originally published by The Motley Fool



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