3 Reliable Dividend Stocks for Uncertain Times: Coca-Cola, AbbVie, and McDonald’s

NYSE: KO | Coca-Cola Company (The)  News, Ratings, and Charts

KO – Coca-Cola (KO), AbbVie (ABBV) and McDonald’s (MCD) have paid attractive dividends consistently over the years. Even amid the rising unemployment wrought by the COVID-19 pandemic, we think these companies should continue to be a safe bet dividend-payment wise considering their financial strength and industry dominance. Let us discuss.

Prior to the pandemic, only retired people and Trusts and Foundations generally preferred investing in dividend-yielding stocks. But this stereotype no longer holds. With millions of people unemployed now due to a pandemic-driven global recession, dividend stocks have gained popularity as investors seek alternative sources of income.

This environment, accompanied by Fed’s near-zero interest rate policy, has propelled many investors, seeking stability and income, to divert capital towards dividend stocks. The Vanguard High Dividend Yield ETF (VYM) has gained 13.4% over the past six months reflecting investors’ move toward high dividend-yielding stocks.

The Coca-Cola Company (KO), AbbVie Inc. (ABBV) and McDonald’s Corporation (MCD) have been able to deliver regular dividends over the years and should be good bets now.

The Coca-Cola Company (KO)

The world’s largest beverage company needs no introduction. Operating worldwide, the company markets more than 500 non-alcoholic beverage brands including Coca-Cola, Diet Coke, Fanta, Thumbs Up, and Sprite.

KO pays $1.64 in dividends annually, yielding 3.1% at its current price. It has a payout ratio of 86.5% of the net income. The company’s dividend payments have grown at a CAGR of 5.6% over the past five years.

KO’s Non-GAAP operating margin has increased 230 basis points year-over-year to 30.4% in the third quarter ended September 30, 2020.

Analysts expect KO’s EPS to rise 11.6% to $2.12 for the next year ending December 31, 2021. The company has an impressive earnings surprise history; it beat the Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $36.55 billion for the next year indicates a 10.5% rise. KO has gained 14.4% over the past six months.

How does KO stack up for the POWR Ratings?

A for Trade Grade

B Buy & Hold Grade

B for Peer Grade

A for Industry Rank

B for Overall POWR Rating.

It is currently ranked #10 of 29 stocks in the Beverages industry.

AbbVie Inc. (ABBV)

ABBV is a research-based biopharmaceutical company. It manufactures and sells a range of pharmaceutical products around the world. Its product line includes: Oncology products, Virology Products, Additional Virology products, Metabolic/Hormones products, Endocrinology products, HUMIRA, and others.

ABBV entered a strategic partnership with Frontier Medicines, Corp. this month to discover, develop and market a pipeline of innovative small molecule therapeutics. The partnership will enable ABBVto utilize Frontier’s proprietary chemo proteomics platform to develop the required drugs.

ABBV pays $5.20 in dividends annually, yielding 4.96% at its current price. It has a payout ratio of 49.6% of the net income. The company’s dividend payments have grown at a CAGR of 20.9% over the past five years.

ABBV’s revenues have increased 52.1% year-over-year to $12.9 billion in the third quarter ended September 30, 2020. Operating profit increased 24.4% from the year-ago value to $3.26 billion, while its Non-GAAP EPS rose 21.5% from the same period last year to $2.83. Its free cash flow has increased 27.5% year-over-year to $5.61 billion.

The consensus EPS estimate of $2.86 for the current quarter ending December 31, 2020 indicates a 29.4% rise year-over-year. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $13.73 billion for the current quarter represents a 57.7% improvement from the year-ago value. ABBV has gained 16.4% over the past year.

ABBV’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade, Buy & Hold Grade and Industry Rank. Among the 240 stocks in the Medical – Pharmaceuticals industry, it’s ranked #3.

McDonald’s Corporation (MCD)

MCD operates and franchises approximately 38,695McDonald’s restaurants around the globe. Its target market includes primarily the United States as well as, high growth markets, foundational markets, and corporations.

In early November, MCD announced a new growth strategy: Accelerating the Arches. With the strategy, the company is focused on updating its actions and behaviors, and growth pillars by leveraging its competitive advantage. This will help MCD increase its market reach and customer base further.

MCD pays $5.16 in dividends annually, yielding 2.41% on its current price. It has a payout ratio of 83.16% of net income. The company’s dividend payments have grown at a CAGR of 7.6% over the past five years.

MCD Net Income has increased 9.3% year-over-year to $1.76 billion in the third quarter ended September 30, 2020. Operating profit increased 5% from the year-ago value to $2.53 billion, while its Non-GAAP EPS rose 5.2% from the same period last year to $2.22. Its free cash flow increased 900.2% year-over-year to $428.1 million.

Analysts expect MCD’s EPS to rise 34.1% to $8.34 for the next year ending December 31, 2021. The consensus revenue estimate of $5.39 billion for the current quarter ending December 31, 2020 represents a slight rise year-over-year. The stock has gained 9% over the past year.

MCD is rated a “Buy” in our POWR Ratings system. It has a “B” for Trade Grade, Buy & Hold Grade, and Industry Rank. In 49-stock Restaurant Industry, it is ranked #2.

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KO shares were unchanged in after-hours trading Friday. Year-to-date, KO has gained 0.41%, versus a 16.35% rise in the benchmark S&P 500 index during the same period.


About the Author: Rishab Dugar


Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...


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