6 Safe Dividend Stocks for Beginning Investors

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Experts say dividend stocks can be an excellent investment with U.S. interest rates currently low. Here are six dividend stocks with low payouts that are safe investments.

What makes certain dividend stocks safe investments?

As a rule of thumb, the dividend on a stock is only as safe as the company paying it.

According to the experts, the lower the payout ratio on a dividend stock, the safer investment.

A measure of high versus low-yielding stocks is the U.S. 10-year Treasury yield, considered a high-yielding stock. Therefore, any company with a trailing 12-month dividend yield greater than the U.S. treasury yield is regarded as a high-yielding stock, Investopedia reports.

One way to look for safe dividend stocks is to look at the company’s payout ratio – a portion of its profits committed to repaying dividends. While this might sound like a bad thing, it’s a good thing. Why? When a company gets into financial trouble, one of the first things it starts doing is to stop paying dividends.

Investopedia offers this guideline: “A company that pays out greater than 50% of its earnings in the form of dividends may not raise its dividends as much as a company with a lower dividend payout ratio. Thus, investors prefer a company that pays out less of its earnings in the form of dividends.”

6 dividend stocks rated the safest bets by experts

According to financial services company Morningstar, U.S. News reports the following six dividend stocks.

  1. Atmos Energy Corp. (ticker: ATO)

Atmos Energy is a U.S. natural gas distribution, transmission and storage company. Atmos pays a 2.6% dividend and has a 39% payout ratio. Morningstar gives Atmos a “buy” rating and $108 fair value estimate for ATO stock.

  1. Conagra Brands Inc. (CAG)

While not a household name, Conagra Brands is the second-largest frozen foods producer in the U.S. Conagra pays a 3.4% dividend and has a 37% payout ratio. Morningstar has given Conagra a “buy” rating and a $42 fair value estimate for CAG stock.

  1. CVS Health Corp. (CVS)

CVS Health is the largest U.S. pharmacy and health care provider with 10,000 retail locations. CVS pays a 2.4% dividend and has a 37% payout ratio. Morningstar has given CVS a “buy” rating and a $95 fair value estimate for CVS stock.

  1. FMC Corp. (FMC)

FMC is one of the leading suppliers of insecticides, herbicides, fungicides and other crop protection chemicals. FMC pays a 2.1% dividend and has a 44% payout ratio. Morningstar has given FMC a “buy” rating and a $108 fair value estimate for FMC stock.

  1. Lockheed Martin Corp. (LMT)

Lockheed Martin is an aerospace and defense contractor. Lockheed pays a 2.9% dividend and has a 40% payout ratio. Morningstar has given Lockheed Martin a “buy” rating and a $425 price target for LMT stock.

  1. ViacomCBS Inc. (VIAC)

ViacomCBS is the owner of the CBS network and is making gains with its free, ad-supported Pluto TV service. ViacomCBS pays a 2.4% dividend and has an 18% payout ratio. Morningstar has given ViacomCBS a “buy” rating and a $61 fair value estimate for VIAC stock.