Hey guys, I know I shouldn't try to invest with the intention of simply gaining dividends from it so let me ask you: what are some good stock that have good potential ROI long term (using buy and hold) and are also great dividend-paying companies? I'd love some feedback. Thanks.
If you're just looking for good dividend stocks with good potential growth, you might as well just look at Warren Buffet's portfolio as a sizable amount of this portfolio comprises of exactly these kinds of stocks. I would personally recommend coca cola and mastercard. To get ideas flowing, think of companies or areas that you see can't possibly fail in the near future, like electricity.
When talking about long term investing and dividends the very first thing you should look up is "dividend aristocrat." Also when looking at them remember to keep an eye on the payout ratio and how it has evolved in the past.
Tobacco companies are good for this. Altria (MO) is my favorite, it's paying 5.1% right now which is typical. It's also a defensive stock and able to weather a recession. Be sure when looking at dividend yield to compare that to earnings per share. I don't buy anything where the EPS is not enough to cover the dividend, because that's a sign the dividend will be cut.
Here's a trade for you to consider. Seadrill (NYSE:SDRL), it's an offshore oil drilling company that's paying 11.27% dividend as of today. Write a call option on it with a strike at $38 that expires on Jan 15th and you'll be looking at around %15 including the premium collected. If it rises above $38 and the option is exercised by that date, well even better you just made twice as much. At it's current price I don't think it's likely it can go much lower; dividend seems to be safe for at least the next 1-1.5 years. I put my trade in last month at a slightly lower price, but at $34.77, I think it's still good.
I might be mistaking Seadrill for another company, but are they the ones that had just two drilling platforms? Because if it's that one, then I'd be very careful as one of those platforms had something fishy about it. (needing large reparations soon, or rented from someone else with the rent agreement ending soon etc) Can't remember what it was, or if it was even Seadrill, but keep your eyes open.
Seadrill does have some risk, their dividend is sort of in risk of being cut 2-3 years down the line if things don't improve but hey what kind of stock would be paying 11+ dividend and only a P/E of 6 if it's completely healthy with strong growth prospects. “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” I am a strong believer in that when taken in the right context. This one is sort of one them. I'll update you guys when I sell out, I guess only time will tell if it'll pay off.
Think these are good suggestions. I like UAN...currently yielding close to 9.5% and has historically averaged around 8%. Fertilizer prices have been strong this quarter and a big crop is going into the ground. Stock got beat up some last year and has had a good run so far in 2014. Know the company has made big investments into their plant and has cheap input costs. Worth a look if nothing else.
Just a little updated on the Seadrill trade. Just closed my position today. I initially bought the stock at $32.96 and sold a 3-month call at $38 for $0.34 about 2 months ago. Today just sold the stock at $40.12 and buy the call at $2.45. In addition to that I also collected a $1 dividend in the month of June for a total gain of $6.05 per share. Not too bad, a 18.35% return for a 2-month trade.
Best bet is to fire open the stock screen that's available on Google Finance / Yahoo and input some numbers. Obviously, figure out a dividend threshold then whatever other parameters you consider to symbolize either a stable or growth stock. As for recommendations, I know a few of my American friends jumped on POT https://www.google.ca/finance?q=NYSE:POT&ei=h9SkU-iVJeSCiALsnYGQAQ earlier in the year.