My 2 Favorite Dividend Stocks

These companies offer safe, high-yield dividends.

There are plenty of dividend stocks that offer high yields, but those generous payouts often come with big risks. What you want is a high-yield stock that can sustain its dividend under a wide range of scenarios. A fat dividend yield doesn’t mean much if an eventual dividend cut sends the stock plummeting, more than erasing all that dividend income.

My two favorite dividend stocks, both of which I own, are International Business Machines(NYSE:IBM) and General Motors (NYSE:GM). These stocks have been knocked down by pessimism, pushing the dividend yields above 4% in each case. And those high-yield dividends are well covered by earnings, meaning that the chance of a dividend cut is slim. Here’s why dividend investors should consider adding IBM and GM to their portfolios…

International Business Machines

It wasn’t too long ago that IBM was nothing special when it came to dividends. The tech giant has paid quarterly dividends uninterrupted since 1916, and it’s now raised that dividend annually for 23 straight years. But for much of the past two decades, the dividend yield has been severely lacking.

IBM Dividend Yield (TTM) Chart

IBM DIVIDEND YIELD (TTM) DATA BY YCHARTS

That started to change a few years ago when the stock was dragged down by a long period of slumping revenue and profits. As recently as 2014, IBM was talking about earning at least $20 per share in adjusted earnings. This year, the company expects that number to come in at just $13.80 per share. And since peaking in 2011 at $107 billion, IBM’s annual revenue has sunk below $80 billion as a result of divestitures, currency effects, and lost business…

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About the Author: Matt Grossman

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