If you are a bond and income investor now, times are grim. The benchmark 10-year U.S. Treasury bond comes with a paltry 0.60% yield. The 30-year U.S. Treasury bond checks in at an incredibly low 1.29%. While these low rates are great for those looking to get a mortgage and buy a house, or buy a new car or boat, they are the bane of fixed income investors.
[in-text-ad]

The spread between U.S. stock dividend yields and bond yields is the widest in 65 years, and this applies to government, corporate and municipal debt. In fact, the analysts at Bernstein pointed out this week that the best income portfolio very well may be a collection of high-quality stocks that pay dependable dividends, as they feel there is much better visibility on equity dividends.

We screened the 2020 Dividend Aristocrat list for stocks rated Buy in the BofA Securities research universe and found five that looked solid and safe for investors looking to generate higher income. The 2020 S&P 500 Dividend Aristocrats list includes 66 companies that have increased dividends for 25 years straight. Keep in mind, just because they are on this list now doesn’t mean in the future they won’t be forced to reduce their dividend. And it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AT&T

This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.

While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.

The company said recently it would immediately abandon Venezuela’s pay-TV market as U.S. sanctions prohibit its DirecTV platform from broadcasting channels that it is required to carry by the socialist administration of Nicolas Maduro. AT&T is the largest player in Venezuela’s pay-TV market and was one of the last major American companies still operating in the crisis-wracked country.

Investors receive a healthy 6.90% dividend. BofA Securities has a $36 price target for the shares, while the Wall Street consensus target is $33.88. AT&T stock closed trading on Wednesday at $30.16.

Coca-Cola

This remains a top Warren Buffet holding and offers not only safety but also an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

On Tuesday, Coca-Cola posted quarterly earnings that beat the Wall Street consensus estimate, even if they were lower than a year ago.

Investors receive a 3.38% dividend. The BofA Securities price target is $53, and the consensus target is $52. Coca-Cola stock closed at $48.48 on Wednesday.

Exxon

This is another safer long-term play for conservative investors. While the energy giant is trading above the March lows, it remains incredibly cheap. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

Earlier this year, Exxon announced plans for spending cuts amid the coronavirus outbreak price slide, which was significantly aggravated by Saudi Arabia’s ill-fated decision to start raising oil production. Exxon’s budget for this year and every year until 2025 was set at between $30 billion and $35 billion. Many on Wall Street feel that could be cut 10% to 20% or more, depending on the benchmark pricing levels. Note that Exxon has one of the highest paid American CEOs.

[in-text-ad]
The company pays investors a 7.98% dividend, which probably will be defended. The stunning $77 BofA Securities price objective is well above the $47.27 consensus figure. Exxon Mobil stock closed most recently at $43.61.

General Dynamics

This company, like other major defense prime contractors, continues to offer investors some safety and long-term potential. General Dynamics Corp. (NYSE: GD) is engaged in business aviation, land and expeditionary combat vehicles and systems, armaments, munitions, shipbuilding and marine systems, and information systems and technologies.

Major products include Virginia-class nuclear-powered submarine and Ohio class replacement, Arleigh Burke-class Aegis, Abrams M1A2 tank, Stryker eight-wheeled assault vehicle, medium-caliber munitions and gun systems, tactical and strategic mission systems.

The company’s Gulfstream division recently made a few executive changes, including the appointment of Josh Thompson to serve as chief financial officer and promotions of sales team members. Thompson succeeds longtime company executive Dan Clare, who is retiring at the end of September. Clare has spent more than two decades with Gulfstream and General Dynamics, serving in roles including corporate vice president of the parent company and president of its Jet Aviation business.

Investors receive a 2.90% dividend. BofA Securities has set a $175 price target. The consensus target is $173.67, and General Dynamics stock closed at $151.53.

Johnson & Johnson

With a diverse product base and a very popular and solid brand, this is among the most conservative big pharmaceutical plays as it trades at 20-year valuation lows. Johnson & Johnson (NYSE: JNJ) is one of the top market cap stocks in the health care sector and raised its dividend this year for the 56th consecutive year.

With everything from medical devices to over-the-counter health items and prescription drugs, Johnson & Johnson remains one of the most diversified health care names on Wall Street. It is also among the top companies helping Americans to fight the COVID-19 pandemic.

The health care giant also has one of the most exciting pipelines of new drugs in the sector. That combined with the solid over-the-counter product business makes the stock an outstanding holding for conservative accounts with a long-term investment outlook. The company generates a little over half of its sales in international markets, which are expected to see higher spending on health care over the next 10 years and beyond.

The dividend was raised in the spring from $0.95 per share to $1.01, which is a 2.70% yield. The analysts at BofA Securities have a $175 price target. The consensus target is $164.17 and Johnson & Johnson stock closed at $150.01.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

These five very conservative Dividend Aristocrat members rated Buy at BofA Securities are solid stocks now for investors concerned about another leg down and dwindling bond yields. It is important to remember that while the rally off the lows has been incredibly impressive, the economy remains the wildcard, especially over the second half of 2020. These five companies may offer some shelter from the storm if we do indeed head south again.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.