3 Dividend Stocks For Yield-Hungry Investors In This Low-Rate Environment

 | Aug 27, 2020 04:58

For long-term income investors, the post pandemic environment has made it difficult to find safe, high-yielding dividend stocks.

Many blue-chip dividend stocks were forced to cut or freeze their payouts to preserve cash as the COVID-19 pandemic turned their businesses upside down in a matter of days.

In the second quarter, according to a recent report in the Wall Street Journal, US companies unveiled their steepest dividend cuts since 2009. Shareholders were notified of a net $42.5-billion reduction in dividends on common stock during the period, according to S&P Dow Jones Indices. In total, 41 companies in the S&P 500 have suspended their dividends this year to conserve cash during the pandemic, including American Airlines Group (NASDAQ:AAL) Carnival Corporation (NYSE:CCL) and Marriott International (NASDAQ:MAR), the report said.

Increasing the negative impact for income investors, as companies slashed dividends, the Federal Reserve pushed interest rates to a rock-bottom level to fight the pandemic-triggered economic downturn. So, in the search for yield, investors are pushing up share prices on stocks that pay a respectable dividend.

Even in this tough environment for investors in search of fixed income, there are some pockets of the market that offer a reasonable return. Below, we look at three high-yielding stocks. These names offer a starting point for further research.

h2 1. Toronto-Dominion Bank/h2
  • Yield: 4.81%
  • Quarterly payout: $0.59

Banks are considered cyclical stocks and tend to perform badly when interest rates are very low. But if you’re a long-term investor and looking to earn steady dividend income, Canada’s top lenders are still appealing.

In Canada, banks operate in an effective oligopoly, where their domestic business is well protected from external competition and regulation is much tougher than in many other developed markets.

To get exposure to one of the best banking systems in the world, Toronto-Dominion Bank (NYSE:TD), (TSX:TD) seems to be a good bet with its almost 5% dividend yield. The nation’s second largest lender generates hefty cash flows and distributes about half of its income in dividends each year.

The current economic crisis has certainly hurt TD’s earnings and it has set aside more funds to deal with any credit losses. But its $0.59-a-share quarterly payout is a safer bet than buying riskier US bank stocks.