5 Dividend Stocks CRASHING Right Now (Buy The Dip?)

[00:00:02]There is a lot of comfort to be had in knowing that your stock portfolio can cover your monthly expenses with just the dividends. That juicy, wonderful passive income leading to this massive growth in people searching out dividend stocks and dividend ETFs. And in my youth here, I'm somebody that more or less focuses on income and growth, but I understand as people [music] age, they want more security in their accounts and less volatility. And today, I'm going to share with you the top dividend stocks I would personally be buying if I was looking for the best deals out there where the best growth potential is with the higher starting yields. I mean, some of these companies are paying the highest yields they paid in decades, and I think that's a window of opportunity right now. So, if you guys want to join me, my name is Kyle. I'm documenting a path to financial independence in hopes that you'll hit that subscribe button, that we'll do this together, and we're going to kick it off with number one here, my top pick out of all of them, which is McDonald's. I worked at McDonald's for 2 years uh when I was a teenager. When I travel, this is a staple, and I love how McDonald's around the world offer different menu items.

[00:01:01]It's really unique and interesting experience overall. And right now, McDonald's is trading off its uh 52-week highs quite dramatically, actually. It's down 22% just this year alone, and it's wiped out 5 years of gains with a starting yield of almost 3%. This is of the highest starting yield McDonald's has basically paid. You have to go all the way back 10 years ago and to see a 3% or higher yield, you'd have to be basically in the early 2010s, so sometime around 2013-2014.

[00:01:30]And that has led a lot of investors to asking why. Why is McDonald's crashing right now? And that's because they're seeing a slowdown in volume. Less people, less traffic going to the stores, yet they're still growing revenue at about 9-10%, and with the recent marketing around FIFA, um I mean, they're making better value meal items. I think they're doing the right things to start stirring up some more traffic in the stores, but I still think if you're going out, you're on the road, you're just looking for a cheap snack. Like, you're going to go to McDonald's, right? I still think this holds a special place in my heart, even though it doesn't sit individually in my accounts. I think this is one of those rare opportunities that you can take advantage of. I mean, I've been diving down into it. Their payout ratio is exceptional at 59%. They've been growing the dividend at a 7% clip. They've got lots of room to continue to grow it nicely. And analysts right now have a median price target of $326 with a high of 407. And we're getting to the lowest end of analyst price target. So, I would definitely put this at the top of my average into. Like I would start buying this monthly if I was looking for a good stabilized yield that is going to grow exceptionally over time and outpace inflation. Leading us into the second sector, I'm going to basket three stocks here in the sin stock sector. And I wouldn't put these on my buy list, but I wanted to talk about them today because I haven't talked about them in a while and they're growing exceptionally right now. And these tobacco giants are proving something to investors that they were able to shift into the uh non-combustible market, the vaporizers.

[00:02:57]And Philip Morris just posted earnings proving that over 40% of the revenue right now is coming from IQOS. That is their vapor market. And they're still seeing some growth segments in traditional combustion, traditional cigarettes, but more or less in Middle Eastern markets. You're talking like Egypt, uh Turkey. Uh whereas the rest of the world, especially in the West here, when like America, we're seeing a massive decline by double digits in smokers and and alcohol drinkers. But Philip Morris, I still think these are very incredible dividend stocks. They didn't do much for well over a decade and have gone on this historic bull run. And again, showing kind of good double-digit growth here.

[00:03:32]Yeah, I was kind of scrolling through this. And for the first time, they hit $11 billion in revenue. Just unbelievable for the the sin stock realm. My favorite of the bunch and one my mom actually bought in her retirement accounts back in 2023, which is like the bottom of this stock. Oh my god, the rally has been insane. This thing was once yielding almost 12% and now it's gone on this historic rally and it kind of sits in the same growth rates of Philip Morris. My least favorite of the bunch that is still growing with the sector is Altria Group.

[00:04:00]This one yielding currently 5.8% and is more dedicated to the American side of the business. And you can see it in the growth rates and they're mainly just raising prices to keep up with the loss of demand from cigarettes, but still really interesting what's going on in the tobacco sector as a whole. So again, are you buying sin stocks right now? Is this on your radar in your portfolio?

[00:04:18]I'd love to know what you think about it. But moving more into the consumer staple side of things when you're talking about just confectionery treats, chocolate, baby, my favorite, Hershey.

[00:04:26]When Halloween comes around, Hershey makes a lot of money off me. But this one is on my radar because again, double-digit growth rates. I need to see in almost any stock I'm buying at least a 10% year-over-year growth for me to get excited about buying a discount in a company with a 3.3% starting yield. I'd almost put this in the basket of um McDonald's. I mean, this company owns Kit Kat, Reese's Pieces, you name it.

[00:04:50]You're probably using some of their products here and there, but I was really kind of shocked because they're still able to grow revenue on the back of cocoa prices completely destroying them. I always said that if cocoa prices were to come back down, buy Hershey because their margins would start to expand again cuz they're primarily a chocolate company. Recently, they've been trying to expand away from chocolate and they've actually been buying into like salty snacks and some other segments to try and diversify their business away from this volatility. Unfortunately, uh recently, there's still a lot of volatility in weather patterns and diseases that eat the plants and trees and things that just produce cocoa, right? So, we've seen this massive spike up again that's going to eat into Hershey's margins, but still Hershey's proving that they can grow and the stock is still trading at 5-year lows. I think for a good yield from a company that will, I believe, eventually recover. I I think this is a great one that I would put second to McDonald's. Uh but moving a little bit deeper into this and firstly analysts cuz analysts have Hershey at like 255 high, average of 211 and we're at 171.

[00:05:49]Really in line with McDonald's sitting at those really low end of analyst price targets. I think a lot of people would put Nestle in a similar basket to Hershey, but Nestle's one of the largest food companies in the world and I honestly am just not the biggest fan of it. It's really trading off its five-year high right now with a starting yield of 3.6% and I think this is an exemplifier of why just because the yield's high doesn't mean you should just buy it and I would be a little concerned about the growth rates that have been stagnating. I mean in 2022 they did 94 billion and now they're at like 89 billion. Very much a stagnating business here and the stock really kind of shows it, right? I mean they've just been kind of stuck in this the sideways trend for a little while. Again, you have to really understand the core fundamentals of what you're buying if you're picking individual dividend stocks over broader-based ETFs that are managed through passive weighted systems or management's dealing with it because the shift in tide is quite insane. Like I mean if you just bought a broad ETF like the S&P 500 or Canadian ETF, any ETF really, it would pretty much outperform Nestle here, up 9%. You don't want to be collecting a 3% yield while your stock is going down. You still want to take into consideration total returns. If typically you're getting a double-digit revenue growth rate on a good 3% starting yield, you're going to continue to see inflation being outpaced just in dividend increases, which is what we want to see. But if there's no growth, stagnation, eventually that yield at 3%, but it's not going to grow as fast as it historically did, right?

[00:07:19]So I would just be a bit careful with Nestle. Let's just take a look at what analysts have on this one, analyst insights here.

[00:07:25]Yeah, their average price target's around 113 and we're sitting right in the middle range of that price target based on their current fundamentals. And again, that's my concern right now with a lot of the telecom giants in the US and Canada.

[00:07:38]A lot of attention on telecom because these are very traditional infrastructure companies that can't be really disrupted. In Canada, they were disrupted by the the federal government that stepped in and basically stopped price gouging, which really took these guys for a dive over the last year already after going on a massive crunch because of the higher interest rate environment. And this one's just been on my radar like Telus here, Bell. We've been watching all of these quite closely. So, I'm curious to if they ever find a bottom because as much as people like to argue this, their dividend is currently affordable based on free cash flow. They're at about a 70% payout.

[00:08:13]But, I mean, you know, I don't think people would be upset if they cut it to continue to clean up the balance sheet.

[00:08:18]So, are you buying into the US or Canadian telecom giants? I think the only thing you're going to get out of this is a potential recovery if operational efficiency and margins expand cuz again, there's no revenue growth at all. So, you're basically just looking for a recovery in fundamentals.

[00:08:31]But otherwise, I don't know. It's a hard sector to hold right now and I understand people's frustrations with it in total. But I was asking AI like what are the top stocks people are paying attention to on the dividend side and it said Pepsi, Procter & Gamble, McDonald's, and a bot. And I was actually shocked to see some of these stocks because they are trading at wicked lows right now. Like Pepsi as an example here with a 4.3% starting yield.

[00:08:53]And it's actually still growing revenues at about 6% clip. Pepsi's always been a really intriguing company and it's trading at some of the highest dividend yields in its entire history right now.

[00:09:02]I love looking up these charts just to show you. Actually, apparently, this is the highest historical dividend Pepsi's ever paid out going all the way back to Oatly. So, something definitely to pay attention to here if you're a dividend investor getting into like the staple side. If you're into chips and just drinks in general item like Pepsi's owns Bubly. They own so many things that are sitting in my closet right now. So, for stabilized dividends, this might be again, I I put this up there with McDonald's, I think. I think, you know, McDonald's, Pepsi, Hershey, those are the three stocks that I would be deeply analyzing right now if I wanted to just buy like very traditional stabilized dividend stocks that still have good growth rates behind them. But otherwise, I can't touch the healthcare space. I don't understand healthcare. If you don't understand it, I don't know why you'd be buying it. It's incredibly volatile. Drugs coming in and out of favor. Drugs have expirations on patents that open up, you know, to the global markets that drop those prices significantly and you see that volatility throughout the entire history of a company like Pfizer here that is now growing kind of in the single digits, but with a 7% starting yield. I don't know, are you guys interested in this one? If you look at revenue, I mean, you can see they went from 101 billion back in 2022 down to 62 billion, which is quite a material drop-off. And on the Procter & Gamble side, I again, this is more of your traditional toilet paper kind of company and its growth is 7.3%.

[00:10:24]Again, very interesting company. I would say Procter & Gamble you can almost add to your list, but again, you've gotten five years of just absolute stagnant growth, which is what concerns me, right? Like I need to really see the potential for recovering from these lows to ensure that I can keep up with market average returns. Cuz in my view, there's just no point in buying these if they can't at least get same to similar returns of VOO. If VOO is going to make 14% a year, which it's been doing, you could easily just sell 4% of your S&P 500 VOO position and that could be your annual yield and you'd still have 10% of growth behind you that you didn't pull out. And I want people to understand, that's what she said. I want people to understand that you need to always ensure that you see some form of growth.

[00:11:08]You're not just buying these for the yield. Now, my I'm not a financial advisor, obviously. These are just one man's opinion, but I'd love to know what you think in that comment section below.