If you are a long-term income investor looking for dividend stocks to add to your portfolio, now is a good time to consider Enterprise Products Partners(NYSE: EPD), Bank of Nova Scotia(NYSE: BNS)and/or PepsiCo(NASDAQ: PEP). And if you already own them, you may even want to double your investment. Here’s a look at each and why now is an attractive time to buy.
The Enterprise’s average distribution yield over its history is approximately 6.2%. The current yield of almost 6.7% is a touch above the historical average. This suggests that you are getting a fair to slightly discounted price, using the yield as a rough measure of valuation. But the real key here is that Enterprise distribution has increased every year for 27 consecutive years, which is about as long as the midstream master limited partnership (MLP) has existed.
What you are getting 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 the yield is likely to make up the bulk of your return over time, conservative income investors should find Enterprise a very compelling opportunity. An investment grade balance sheet adds to the safety, as does the fact that the distribution is covered at approximately 1.7x by distribution cash flow.
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Bank of Nova Scotia is a turnaround story, but one that is very low risk. However you can still collect an attractive dividend yield of 4.6% from this Canadian banking giant. Interestingly, the bank has paid a dividend continuously since 1833, which is a streak spanning 200 years. This is not a fly-by-night stock dividend.
However, even good companies go through hard times. Currently, the Bank of Nova Scotia, also known as Scotiabank, is reinvigorating its business to improve its profitability and growth prospects. This involves a transfer away from less profitable operations in Central and South America and a refocus on Mexico and the United States. The good news is that the company’s Canadian banking foundation remains strong, so there’s a backstop here to keep the trucking business together while the revamp plays out.
If you’re a dividend lover, you shouldn’t overlook this Canadian bank just because its yield is almost double the 2.4% average for a large US bank. Yes, there is more risk due to the business review, but the added risk is likely more than offset by that high yield.
If you’re a really finicky dividend investor who only looks at the creme de la creme, then Dividend King PepsiCo might be your best bet. It has increased its dividend every year for more than five decades, which is not something that happens by accident. A streak like that requires a strong business plan that executes well in good times and bad. The company is one of the largest producers of consumer staples on the planet, with leadership positions in the beverage, snack, and packaged food spaces.
PepsiCo goes toe to toe with any peer in terms of distribution, brand management skills, and innovation. Still, now is not the best of times for the company, with its business lagging behind some of its peers. That’s why the dividend yield of 3.8% is close to the highest levels in the company’s history, and hints that the stock is on the discount rack. If you think in decades, however, the high yield is an investment opportunity. Given the strong operating history of the Dividend King, it seems very likely that it will disrupt the current spirits and get back on track. To that end, it has already acquired a pair of target brands that better align its portfolio with current consumer trends.
If you don’t have Enterprise, Scotiabank, or PepsiCo, now is a good time to do a deep dive. 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 up. Big dividend stocks don’t go on sale very often, and it’s good to take advantage of the opportunity when they do.
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Reuben Gregg Brewer holds positions at 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
