As the stock market continues to hover at sky-high levels, some investors are eyeing the prospect of a market dip with anticipation. These investors relish the chance of a market downturn as it presents an opportunity to acquire shares of esteemed companies at more affordable prices.
In the last significant market downturn triggered by the Covid-19 pandemic, the S&P 500 tumbled, losing a third of its value within a mere month. However, this period of market distress paved the way for an extraordinary recovery, with the benchmark index ballooning by 144%. Intriguingly, those who dared to buy when others were hastily selling have reaped sizeable rewards, with an investment of $1,000 on March 23, 2020, now being worth $2,442.
Adding dividend stocks to the mix can offer a considerable advantage. Even in periods of market slump, dividend stocks continue generating income. Therefore, your investments still pay you while you wait for the market to bounce back.
The impact of dividends becomes more apparent when we consider that the S&P 500, with dividends factored in, grew by 161%. This means that an initial position of $1,000 would have burgeoned to $2,613, giving a 7% boost to the investor’s bottom line.
Fortunately, you don’t have to wait for a market crash to buy quality dividend stocks. Below are three income stocks to consider adding to your portfolio immediately.
“MSCI (NYSE:MSCI) is a data and analytics firm for institutional investors that also operates the MSCI family of stock market indexes.” Despite being down 14% year-to-date and having seen only a modest 2.5% growth in the past year, MSCI is worth considering. Although its Q1 results fell below analyst expectations, causing its stock price to plummet, the company remains in a favorable position for future growth.
Even though MSCI saw a 14% rise in revenues from the previous year, totaling $680 million, it missed analyst forecasts by $6 million. Moreover, a significant portion of this was driven by recent acquisitions, leading to an organic revenue growth of just 10%. Nevertheless, MSCI continues to increase its dividend payout, which has expanded at a compounded annual growth rate (CAGR) of 43% over the past decade. With more than $1.1 billion in free cash flow (FCF), MSCI’s dividend payout appears secure.
S&P Global (NYSE:SPGI) operates in the same sector as MSCI, and its recent performance has outstripped its competitor. Quarterly revenue rose 10% to a record $3.9 billion. Besides, excluding the sale of its engineering solutions business, revenue was up 14% from the previous year.
S&P Global’s dividends have grown at a CAGR of 11.7% over the past 10 years. With a robust FCF that has grown at nearly an 18% CAGR over the same period, the firm’s dividend payout appears secure and very likely to increase in the future. Also, S&P Global has been consistently raising its payout for the last 51 years, consolidating its position as a Dividend King.
Finally, consider pharmaceutical titan AbbVie (NYSE:ABBV), another Dividend King. AbbVie’s stock has risen by 10% in 2024 and 25% over the previous year, demonstrating its dependable performance in both bear and bull markets. The company outperformed the S&P 500 during the pandemic, providing returns exceeding the 27% in 2020 compared to the 18% offered by the index.
AbbVie has consistently increased its dividend payout over the past decade, boasting a CAGR of 14%, thereby increasing its dividend from $1.60 per share in 2013 to $6.20 today.
With a slew of billion-dollar drugs in its portfolio and an exciting pipeline of potential blockbusters, AbbVie is well positioned. Despite its flagship drug Humira facing competition from biosimilars, it still generates between $4 billion and $5 billion in annual sales. This highlights AbbVie’s potential as a robust dividend stock for income both now and during future market downturns.
Let us know what you think. Please share your thoughts in the comments below.
