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3 Blue-Chip Dividend Stocks to Buy as Bond Yields Fall & Global Worries Rise

Benjamin Rains

Fears of a global economic slowdown have hung over markets recently. Growing worries about the trade war between the U.S. and China have also helped drag the S&P 500 down roughly 2.7% in the past month. And yields on the 10-year U.S. Treasury note have tumbled as investors pour into one of the world’s safest investments.

By now, many investors might have heard about last week’s yield curve inversion, which saw yields on the 10-year U.S. Treasury briefly slip below 2-year yields for the first time since 2007. Some fear the yield curve inversion could signal a recession, as it has in the past. But even if this proves not to be the case, investors do need to pay attention to the yields on 10-year U.S. Treasury notes because they could make dividend-paying stocks even more valuable.

Yields on 10-year U.S. Treasury notes rested at 1.57% through morning trading Wednesday, down from 2.05% on July 24 and 2.39% three months ago. These low yields could make Wall Street and investors look for higher returns elsewhere, in a phenomenon known as the Tina effect or “there is no alternative” to stocks.

With this in mind, we searched for strong companies that boast impressive, stable business models that wouldn’t likely be impacted too greatly by a possible U.S. economic slowdown. We then added a solid dividend yield to our criteria using the Zacks Stock Screener…

1. Coca-Cola KO

Coca-Cola topped estimates last quarter and raised its full-year organic revenue growth forecast. Coca-Cola Zero Sugar posted its seventh consecutive quarter of double-digit volume growth globally and the firm rolled out its first-ever Costa Coffee ready-to-drink product in Great Britain. KO purchased the British coffee chain for $5.1 billion earlier this year as part of its plan to expand beyond the soda (pop) market. This also includes investments in Gatorade PEP rival BodyArmor, the introduction of its first energy drink under the Coca-Cola brand, and more.

KO’s organic revenue—excluding currency swings, acquisitions, and divestitures—jumped 6% in Q2 2019. The firm now expects its full-year organic revenues to pop 5%. Our Zacks Consensus Estimates call for the company’s fiscal 2019 revenue to jump 15.7%, including acquisitions and divestitures, with the company’s 2020 growth set to come in roughly 5% above our 2019 estimate in a sign of stabilized expansion.

Coca-Cola’s adjusted fiscal 2019 EPS figure is expected to climb 1%, with 2020 projected to come in 8% higher. Plus, KO currently pays an annualized dividend of $1.60 per share, with an impressive 2.97% yield. Coca-Cola is also a Zacks Rank #2 (Buy) that boats a “B” grade for Growth in our Style Scores system. And just so we don’t think KO’s yield is artificially inflated, shares of the beverage power have surged 18% over the last 12 months to outpace the S&P’s sideways movement.

2. McDonald's MCD

Shares of MCD have soared over 37% over the last 52 weeks and are up 10% in the past three months. McDonald's stock has also destroyed the S&P 500 during a three-year stretch, up 91% against the S&P’s 32% expansion. In the second quarter, the global fast-food powerhouse’s same-store sales popped 6.5%, with U.S. comps up 5.7%. Company management noted that higher prices helped boost sales, along with increased delivery offerings and self-ordering kiosks.

The firm announced in mid-July that it added DoorDash as a delivery partner, which ended its exclusive relationship with UberEats. MCD’s delivery push has become the norm in the Amazon AMZN age as rivals such as Starbucks SBUX race to offer consumers more options. McDonald’s also expects to open roughly 1,200 restaurants this year and try to remodel and upgrade stores, while encouraging franchisees to do the same.

McDonald's longer-term earnings estimate revision activity has trended heavily in the right direction following its Q2 earnings release. Our estimates call for the company’s fiscal 2019 earnings to jump 1.4%, with 2020’s figure projected to come in 9.5% higher. MCD is a Zacks Rank #2 (Buy) at the moment, with an annualized dividend of $4.64 per share, up roughly 11% from the previous-year period. Meanwhile, the company’s yield rest at 2.12%.

3. Comcast CMCSA

Comcast stock is up 23% in the past year and 28% in 2019. The communication and entertainment giant’s booming internet business helped offset the industry-wide cord-cutting dilemma. Second-quarter high-speed internet revenue jumped 9.4%, while business services sales surged 9.8%. The company also saw its newer wireless business soar 21%. Xfinity Mobile, which launched in 2017, hopes to challenge the likes of AT&T T.

Comcast’s Sky acquisition is also set to help the firm expand its reach. Plus, CMCSA said it plans to launch its own streaming service through its NBCUniversal unit in April 2020. The platform, which will be home to The Office and much more, expects to compete alongside Netflix, Amazon Prime, and others.

The firm’s full-year revenues are expected to jump 16.6% to reach $112.24 billion. Peeking further ahead, 2020 revenues are projected to climb a solid 5.3% above its Sky-boosted 2019 results. CMCSA’s full-year EPS figure is expected to climb 20%, with 2020’s earnings projected to jump roughly 10.3% above our current year estimate. Like its blue-chip peers, Comcast is a Zacks Rank #2 (Buy) right now that sports an “A” grade for Value. CMCSA currently pays a quarterly dividend of $0.21 per share, up from the prior fiscal year’s $0.19, with a 1.9% yield.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
AT&T Inc. (T) : Free Stock Analysis Report
 
Coca-Cola Company (The) (KO) : Free Stock Analysis Report
 
Pepsico, Inc. (PEP) : Free Stock Analysis Report
 
Comcast Corporation (CMCSA) : Free Stock Analysis Report
 
McDonald's Corporation (MCD) : Free Stock Analysis Report
 
Starbucks Corporation (SBUX) : Free Stock Analysis Report
 
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