Other than being dividend stocks, what do Pepsi (NASDAQ:PEP) and Fortis (TSX:FTS)(NYSE:FTS) have in common?
The dividend stocks have resilient earnings. They are Dividend Aristocrats with a track record of dividend increases. Pepsi and Fortis pay dividends that are sustainable. They offer nice yields of about 3-4%
I use a method that suggests good stock price ranges to buy this type of dividend stocks at. Recently, I have used exactly this method to buy shares of Pepsi and Fortis. I’ll explain the method later in this article. First, let’s go through the above commonalities in more detail.
As you may know, I’ve been investing in stocks for about 13 years. I surely love it when my stocks provide outperforming returns. Of course, there are laggards, too.
What more can stock investing be about if it’s not just about returns? Every stock investor wants to get rich, right?
I discuss below why earnings quality and dividend income could be important to you.
Since I delved into growth investing, including in small caps, I’ve become more deeply appreciative of stocks with underlying businesses that have superb earnings quality.
I hate to break the news. Stocks with high earnings quality won’t give you the greatest returns. However, they give you something else — a defensive, low-risk holding. These kinds of stocks should provide reassurance to any stock investor when the macro environment is in turmoil.
The more conservative you are as a stock investor, the bigger percentage of these types of stocks you should hold in your stock portfolio.
Let’s cut to the chase. Here are the four types of stocks that you’ll want to be invested in 2020 and beyond.
Tech stocks: e-commerce, cloud
Too many businesses have been impacted by the COVID-19 pandemic — some more so than others. Restaurants, tourism, and retailers have been more greatly impacted. On the contrary, the tech space has outperformed, as most tech companies operate in a growing pie.
Particularly, you’ll want to invest in tech stocks that have exposure to e-commerce, cloud, or growing markets. Many of these stocks don’t pay a dividend, but investors should consider them for growth.
Here are some examples: Alibaba (NYSE:BABA), Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), Amazon (NASDAQ:AMZN), JD.com(NASDAQ:JD), Microsoft (NASDAQ:MSFT), Tencent (TCEHY), etc. They have greatly outperformed the U.S. stock market in different time frames, but the chart below shows the past five years.
Healthcare is also another growth area you’ll want to stay invested in. There’s the megatrend of an aging population. Additionally, healthy people want to stay healthy and sick people cannot go on without their drugs or medical devices.
The most conservative investors would look into adding Johnson & Johnson (NYSE:JNJ) opportunistically as a core holding. Bristol-Myers (NYSE:BMY) is another quality dividend payer. JNJ yields 2.6%, while BMY yields 2.9%.
Abbott Labs (NYSE:ABT) and Medtronic (NYSE:MDT) are also A-grade healthcare stocks to consider on dips.