Are These All-American Dividends Safe?

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A Note From Marc: As many of you know, I recently started a YouTube series called State of the Market.

Last week, I dedicated an entire video to what I call “Forever Dividend Stocks.”

In it, I reveal how to generate enough passive income in retirement that you never have to touch your initial investment.

Click here to watch it.

This was the oddest Fourth of July I’ve experienced since I lived in San Francisco many years ago. At that time, we sat on some rocks overlooking the Bay, trying to watch fireworks in the pea soup thick fog and saying to each other, “Oooh, that was probably a good one.”

This year, we were supposed to go to a friend’s condo on the beach to watch fireworks. Then, they closed the beaches.

So instead, we sat on our patio, 6 feet apart from our friends, and watched amateur fireworks set off by neighbors.

There was no baseball to watch, and we didn’t eat hot dogs. But we had apple pie for dessert, so there was that.

In honor of the recent July Fourth holiday, I’m looking at the dividends of three all-American companies to determine if they’re safe or if they should be handled with care like lighting off a bottle rocket after drinking a six pack of Coors.

The Home Depot

The Home Depot (NYSE: HD) was founded 41 years ago with two stores in Atlanta, Georgia. Today, there are more than 2,200 locations in North America and Mexico.

The home improvement retailer pays a $1.50 per share quarterly dividend, which comes out to a 2.4% yield.

The Home Depot’s free cash flow has been steadily rising and is expected to continue to do so this year and next.
It has raised its dividend every year for 10 years.

The company’s payout ratio was a comfortable 54% in 2019 and will likely creep up to 56% in 2020.

With The Home Depot’s rising cash flow, the dividend is safe.

Dividend Safety Rating: B

Johnson & Johnson

My second all-American company is Johnson & Johnson (NYSE: JNJ).

While Johnson & Johnson is now a global company with 130,000 employees, it got its start in 1886 in New Brunswick, New Jersey, where its headquarters remains today. The company makes consumer health products, pharmaceuticals and medical devices.

With a $1.01 per share quarterly dividend, it yields 2.8%. Johnson & Johnson has lifted its dividend for 58 years in a row.

This year, cash flow is forecast to dip to $17.1 billion from $19.9 billion last year.

Its payout ratio last year was a very comfortable 50%. Because of the drop in cash flow, this year’s payout ratio will climb to 61%.

Like The Home Depot, Johnson & Johnson’s cash flow covers the dividend, and it has a strong track record of a sustainable payout to shareholders. So I don’t see anything to worry about here.

Dividend Safety Rating: B


Is there anything more American than cheap tasty food that’s terrible for you?

McDonald’s (NYSE: MCD) has served billions of customers since it …read more

Source:: Investment You