Looking for dividend stocks that have outperformed during the 2020 pullback?
We found 3 stocks which have had positive returns since Feb. 20, 2020, when the market started falling.
Not surprisingly, 2 of the 3 are in the food industry, selling such long-lasting items as frozen veg and canned foods, but the third one is a Tech REIT, which serves the biggest names on the internet. While sheltering in place, greater internet usage and more frozen veg/canned food are definitely all on the table:
1. Con Agra Brands (CAG)
Founded in 1919, ConAgra Foods (NYSE:CAG) operates through Grocery & Snacks, Refrigerated & Frozen, International, Foodservice, and Pinnacle Foods segments. Some of its best-known brands are Birds Eye, Marie Callender’s, Banquet, Healthy Choice, Slim Jim, Reddi-Wip, Vlasic, Angie’s BOOMCHICKAPOP, Duke’s, Earth Balance, Gardein, Frontera, Banquet, and Chef Boyardee.
2. Hormel Foods (HRL)
Hormel Foods (NYSE:HRL) was founded in 1891 and operates through 5 segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other. It offers various perishable meat products, refrigerated meal solutions and shelf-stable products.
3. CoreSite Realty (COR)
CoreSite Realty (NYSE:COR) delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,350 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads.
2020 Performance:
CAG is up 8.63%, COR is up 4.71%, and HRL has gained 4.41% since the start of the 2020 market pullback, vs. -17.41% for the S&P 500 and -16.17% for the Dow Jones Industrial Average. All 3 stocks have also outperformed the major indexes by a wide margin since the July 2019 and Sept. 2018 market highs:
However, we don’t want to give you the impression that it was all smooth sailing for this group. Quite the contrary, they all dipped during the 2020 crash – CAG dipped the most, while COR and HRL had the strongest rebounds:
Dividends:
COR has the highest dividend yield of the group, at 4.04%, and should go ex-dividend near the end of April. HRL has the lowest yield, 1.96%, but is a Dividend Aristocrat, having raised its dividends for at least 25 straight years. COR and HRL have the best 5-year dividend growth rates of the group.
CAG yields 2.62%, but you can improve upon that yield quite a bit, by selling options.
Selling Options For More Income:
Selling Covered Calls is an increasingly popular way to ramp up your short or near term income on a dividend stock. With all of the extreme volatility in 2020, you have the benefit of selling at the highest options yields in years.
As of the week ending 4/9/20 close, CAG’s mid-May $34.00 call strike had a bid of $.80, almost 4X its $.21 quarterly dividend. The nominal yield is 3.11% in ~5 weeks, or 33.49% annualized.
Selling Cash Secured Puts below a stock’s price offers you the attraction of a lower breakeven entry point. In essence, you’re getting paid to wait.
CAG’s mid-May $32.00 put strike pays $1.45, nearly 6X the $.21 dividend. The nominal yield is 4.46% in just ~5 weeks, or 48.64% annualized.
Price Targets:
Selling cash secured puts below a stock’s price can come in handy when the stock is close to or past its average price target. Such is the case with CAG, which only 2.8% below its average $33.40 price target. COR and HRL are both above their respective price targets.
Valuations:
CAG and HRL both have P/E’s on the high side, due to their better-than-market performance. COR is a REIT, and uses Funds From Operations, FFO, as its earnings metric.
