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Should you Buy Big Dividend Paying Stocks?

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  • (1:15) - Finding Stocks With Big Dividends
  • (6:00) - Making A Good Strategy: Is Oil A Good Play Right Now?
  • (20:30) - The Big Takeaway’s From The Oil Industry: CVX, XOM, BP, PFE, BAC
  • Podcast@Zacks.com

 

Welcome to Episode #243 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is going solo to talk about the big dividend paying stocks, with a spotlight on Big Oil.

Some dividend paying companies have seen their yields rise in 2020.

For those looking for income, it’s a lure to see yields of 4% or 6%.

Big Oil Slide

The energy stocks got crushed in the March coronavirus sell-off as crude plunged to multi-decade lows as the economic lock downs hit around the globe.

But they also had one of the largest rallies off those lows, with many stocks doubling and tripling into June on the recovery hopes.

Since June, however, the sector has been in another slide. And that slide picked up speed during the stock market’s September correction.

The Energy SPDR ETF fell 17% over the past 3 months and is now down 49% year-to-date.

Still Paying Dividends

The Big Oil companies, however, have one thing going for them.

Dividends.

They continue to pay dividends despite a steep decline in earnings for 2020 and a slow recovery expected in 2021.

Those dividends look pretty juicy for those looking for ways to generate income in an era with the 10-year treasury under 1%.

Chevron (CVX - Free Report) , which was just upgraded to a Buy at Bank of America, is paying a dividend yielding 7.2%. Shares have fallen 16% over the past month which has pushed the yield even higher.

ExxonMobil (XOM - Free Report) is currently yielding nearly 10% but the shares have fallen 21% over the past 3 months and are threatening to test the March 2020 lows again.

BP (BP - Free Report) is another Big Oil company whose shares have taken a hit. They’ve sunk 22% over the past 3 months and are staring at the March lows again as well. It pays a dividend yielding 6.8%.

Looking Outside of Energy

There are other sizable dividends outside of energy as well.

Pfizer (PFE - Free Report) is paying a dividend yielding 4.2% but long-term investors haven’t made out. The 5-year return is just 9%, which is well under the return of the S&P 500 for the same time period, of 71%.

Shares are also down 8% year-to-date.

The big banks get a lot of criticism for being “bad” investments compared to hot technology but Bank of America (BAC - Free Report) has a 5-year return of 54%.

That’s still under performing the S&P 500, but it had been beating the index before COVID hit.

It’s back to paying more sizable dividends as well, with a yield of 3%.

Can it pay to buy the companies with really high dividend yields or will investors get burned?

Find out the answer to this and more on this week’s podcast.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>