If you’re a long-term income investor looking for dividend stocks to add to your portfolio, now is a good time to consider. Enterprise Product Partners(NYSE: EPD), Bank of Nova Scotia(NYSE: BNS)I PepsiCo(NASDAQ:PEP). And if you already own them, you might even want to double your investment. Here’s a look at each and why now is an attractive time to buy.
The company’s average distribution yield over its history is approximately 6.2%. The current yield of nearly 6.7% is slightly above the historical average. That suggests you’re getting a fair or slightly reduced price, using yield as a rough indicator of valuation. But the real key here is that Enterprise’s distribution has increased every year for 27 consecutive years, which is about the same amount of time the midstream master limited partnership (MLP) has been around.
What you get when you buy is one of the largest owners and operators of energy infrastructure, such as pipelines, in North America. These are vital assets that customers pay a fee to use, generating fairly reliable cash flows regardless of what is happening with energy prices. Although yield is likely to account for the majority of its profitability over time, conservative income investors should find Enterprise a very attractive opportunity. An investment grade-rated balance sheet adds security, as does the fact that the distribution is covered about 1.7 times by distribution cash flow.
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Bank of Nova Scotia is a story of change, but very low risk. However, an attractive 4.6% dividend yield can still be earned from this Canadian banking giant. Interestingly, the bank has paid dividends continuously since 1833, a streak approaching 200 years. This is not a passing dividend stock.
However, even good companies go through tough times. Bank of Nova Scotia, also known as Scotiabank, is currently restructuring its business to improve its profitability and growth prospects. That means moving away from less profitable operations in Central and South America and refocusing on Mexico and the United States. The good news is that the company’s Canadian banking base remains strong, so there’s a backstop here to keep the business running while the renovation takes place.
If you’re a dividend lover, you shouldn’t overlook this Canadian bank just because its yield is almost double the 2.4% average of a large US bank. Yes, there is more risk due to the business overhaul, but the additional risk is probably more than offset by that high return.
If you’re a truly picky dividend investor who only looks at the crème de la crème, then Dividend King PepsiCo might be your best bet. It has increased its dividend every year for more than five decades, which isn’t something that happens by chance. A streak like that requires a solid business plan that is executed well in good times and bad. The company is one of the largest manufacturers of consumer staples on the planet, with leading positions in the beverage, snack and packaged food sectors.
PepsiCo is on par with any rival when it comes to distribution, brand management skills and innovation. Still, now is not the best time for the company, as its business lags behind some of its peers. That’s why the 3.8% dividend yield is near the highest levels in the company’s history, suggesting the stock is on the discount shelf. However, if you think back decades, high yield is an investment opportunity. Given Dividend King’s strong operating history, it seems very likely that it will overcome the current headwinds and get back on track. To that end, it has already acquired a couple of specific brands that better align its portfolio with current consumer trends.
If you don’t own Enterprise, Scotiabank or PepsiCo, now is a good time to dig deeper. You may find that you add one or more to your portfolio. If you own them, now might be a good time to consider doubling them up. Big dividend stocks don’t come on sale very often, and it’s worth taking advantage of the opportunity when they do.
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Reuben Gregg Brewer has positions in Bank Of Nova Scotia and PepsiCo. The Motley Fool recommends Bank Of Nova Scotia and Enterprise Products Partners. The Motley Fool has a disclosure policy.
3 Dividend Stocks to Double Right Now was originally published by The Motley Fool
