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2 Excellent Income Stocks to Buy Now

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Dividend investing never gets any respect.

Seen as an ultra boring way to develop wealth, most investors shun higher dividend paying equities in favor of growth securities that are seeing amazing earnings or revenue growth, or those with value characteristics like low PEs or modest valuation ratios.

But with markets near all-time highs and volatility returning to equities, it may be time to look at dividend stocks again right now. Shares here tend to be a bit less volatile than the overall market, while the cash distributions pretty much pay you to wait.

But even if you aren't concerned about the state of the market right now, dividend investing can be great for different reasons too. The idea of dividend reinvestment-where investors use dividend payments to simply buy more shares-can be a great long term strategy too. This can really add up over time thanks to compounding and it is something that is often overlooked by investors.

Where to Look Right Now for Great Dividend Stocks

The main problem with dividend stocks is which ones do you choose? Plenty of stocks pay dividends and you definitely do not want to just focus on the highest yielding ones. A great way to find the best is to look at securities paying more than the market in terms of yield, but have also been seeing rising earnings estimates.

These securities could be the perfect combo of dividend payment and well-positioned stock for price outperformance, so definitely consider any of the names highlighted below if you are looking for excellent income stocks in this environment:

McDonald's ( MCD )

McDonald's hardly needs an introduction but some investors might be surprised to note that this stock is already seeing solid progress from its turnaround plan, at least if you look at its stock price. Shares are approaching 52 week highs while the company pays out a dividend approaching 3.1% making it a good income choice too.

Analysts also seem to be fans of the MCD plan as well, as analysts have been raising their earnings estimates for the stock pretty much across the board. In fact, over the past sixty days this quarter's consensus estimate has risen by over 6% while the full year estimate has gained more than 3.6% in the time frame. This has been enough to earn MCD a Zacks Rank #2 (Buy) making it worthy of closer inspection for investors seeking a great mix of growth and income.

Reynolds American ( RAI )

Tobacco stocks have proven to be resilient and Reynolds' shares have been doing pretty well in 2015, while the company is also expecting double digit EPS growth this year as well. The company also pays a nice dividend to investors, coming out to 3.1% a year thanks to a $1.44/year payout.

Equally important to potential RAI investors should be the rising earnings estimate story as analysts have been pushing the consensus higher for RAI as of late. In the past 30 days three estimates have gone higher in the current year for RAI compared to zero lower, while the current quarter is seeing a 3:1 ratio of positive to negative. Plus, RAI has a great track record when it comes to beating or meeting estimates, making RAI a Zacks Rank #2 (Buy) and a stock that many should definitely check out for either its growth or income characteristics.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MCDONALDS CORP (MCD): Free Stock Analysis Report

REYNOLDS AMER (RAI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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