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Safe Dividend Stocks in the Age of Covid

Dividend cuts are being announced left and right as Covid-19 has ravaged the global economy. In the face of uncertainty many companies have opted to conserve cash by cutting or suspending dividend payments. However, there still exists a select few that have strong underlying fundamentals, allowing them to weather these quotidian hardships.

Coca-Cola ($KO)

Coca-Cola is one of the most recognizable household brands. As one of the most popular consumer goods across the globe, Coca-Cola has retained a dividend yield of 3.14% in 2019, roughly three times the amount paid by other consumer stocks. In 2020 $KO raised its dividend yield to 3.6% resulting in a $1.64 for every share owned per year. Quarter two of 2020 is set to be one of the hardest-hit quarters due to the impact of COVID-19. 2019 was an excellent year for $KO as its net profit margin increased to 23.933 billion versus 18.771 billion in 2018.

As society is preparing to reopen, many consumer habits have changed. The way we consume, and purchase goods has drastically transformed. Business operations are being revolutionized all over the globe. In an attempt to cut down cost and increase profit, $KO focused heavily on its bottling operation.

Japan was a major focal point for $KO as their two biggest bottlers merged into one, cutting down cost and driving up revenue by four to five times per drink sold. $KO is adamant about reducing capital intensive and low margin operations and branching into new markets such as Europe and Asia. Historically speaking, $KO has seen steady growth in revenue and branding, which has allowed it to dominate the global carbonated drink market. With a stable outlook on future earnings, $KO will continue to pay steady dividends from its free cash flow. 

Coca Cola Dividend History
Coca Cola Dividend History

KeyCorp ($KEY)

KeyCorp is the holding company for KeyBank National Association. Like many other banks, KeyCorp is involved in personal and commercial loans. It comprises 1,420 ATMs in 15 states, as well as many branches throughout the United States. It was founded in 1849 and is headquartered in Cleveland, Ohio. As of 2020, $KEY is set to have a dividend yield of 5.08%, which means that the yearly dividend for every share owned is .74 cents. COVID-19 had a significant impact on its stock price as it fell more than 40%, but analysts still have a very positive outlook on the company and its growth potential.

    Titans in the industry like JP Morgan securities, Morgan Stanley and Baird R W have all rated this stock as a buy within the past three months. Looking at its history, in 2014 $KEY had an annual dividend of .26 cents per share, as of 2020 it has increased its annual dividend to .74 cents due to a robust business model that is risk averse. A payout ratio of 10.88% is a clear indicator that $KEY will not cut dividends and will continue to apply the rest of its income for sustainable growth in the coming years.

A keen member of American communities with over $155 billion in assets, $KEY is poised to be a strong contender in rebuilding communities across the United States. Since the Community Benefits Plan that was introduced in 2017, $KEY has committed over $12 billion in helping small business owners, and various communities across the United States thrive during challenging times. 

KeyCorp Dividend History
KeyCorp Dividend History

As investors feel ambivalence about the future of financial markets, these two companies show that even in such uncertain times, strong fundamentals, community involvement, and adapting to the new way products are consumed are keys that set them apart from their competitors. Investors can be confident that even in this time, these companies are not going to marginalize investors; instead, they are improving their business models to serve the investors in the best possible way.

Written by: Armand Bogdan
Published on: Thursday, June 11, 2020 2:00 PM

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