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Though they may seem inconsequential to some investors, dividend stocks are pivotal to building a portfolio to increase wealth despite the previous bear market in this economy changed by the coronavirus. This TradingSim article will help investors find the best dividend stocks of 2020 to buy and hold in order to rebalance their portfolios. This article will also help investors determine the best stocks to help them improve their investment strategies.

What are dividend stocks?

Dividend stocks are shares from corporations that offer extra payouts every quarter to investors. With many dividend stocks, investors can purchase low-risk value stocks. With companies giving dividends, corporations pay investors in shares instead of cash.

How are dividend stocks beneficial to investors?

Because they offer tax benefits, corporations that offer dividends are beneficial to investors. With corporations offering dividends, the IRS doesn’t usually collect capital gains taxes. The IRS doesn’t collect capital gains taxes unless investors sell the shares at a profit. In addition to that tax advantage, corporations with dividends have special tax perks.

If an investor buys stock before the reinvestment date, there is a benefit. That benefit increases if investors keep the stock for 60 days. If an investor holds a stock for two months or longer, the IRS treats the dividend as a qualified dividend. In that case, the IRS taxes the dividends at low tax rates between 5-15%.

If investors are looking for the best stocks that offer dividends, here are 10 of the top choices for investors.

1. AT&T

AT&T is one of the best dividend stocks of 2020

If investors are looking for the best companies offering dividends, AT&T (NYSE:T) is a good choice. Because the company has been around for over a century, AT&T’s dividend yield of 6% is great for investors.

The telecommunication’s stock is a dividend aristocrat. With dividend aristocrats, investors are buying stocks that consistently pay high dividends to investors for at least 25 years. Because AT&T is a dividend aristocrat, the company is a great dividend stock in 2020 and beyond.

AT&T Q2 2020 earnings deliver strong results

In addition to strong dividends, the telecommunications giant also had a robust Q2 earnings report. AT&T reported revenue of $41 billion. In the last quarter, The company’s profits took a hit. AT&T’s revenue slightly dropped because its movie division was stalled during the nationwide quarantine. Even though profits were down, they still beat Wall Street expectations. John Stankey, the company’s CEO, spoke about the results.

“Our solid execution and focus in a challenging environment delivered significant progress in the quarter, most notably the successful launch of HBO Max, resilient free cash flow and a strengthened balance sheet,” said Stankey.

The chief executive officer also spoke about AT&T’s positive cash flow.

“Our resilient cash from operations continues to support investments in growth areas, dividend payments and debt retirement. We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the center of everything we do,” added Stankey.

AT&T chief financial officer John Stephens also touted the success of its HBO Max streaming service.

“One month after launch, HBO Max had about 3 million retail subscribers. 4.1 million subscribers had ‘activated’ their Max account. Of those, more than 1 million are wholesale subscribers through AT&T,” said Stephens.

AT&T stock gets buy ratings from analysts as one of the best dividend stocks of 2020

Even though AT&T’s Q2 2020 revenue beat expectations, two different financial analysts have different takes on the stock. Bernstein analyst Peter Supino said that AT&T stock is a buy because of its increased mobile service during COVID-19.

“Critically, mobility service revenues, adjusted for roaming, grew by more than 1%,” noted Supino.

Morningstar analyst Mike Hodel also rates AT&T as one of the best dividend stocks for 2020 and beyond.

“Looking at AT&T’s businesses individually, we believe the firm still deserves a narrow moat based primarily on cost advantages within the wireless business and intangible assets acquired with Time Warner. These advantages should enable the firm to maintain relationships with customers and increase free cash flow,” said Hodel.

Some analysts see AT&T as a weaker dividend stock

While Peter Supino rates AT&T stock a buy, other analysts are bearish on the telecom company’s site. MoffettNathanson analyst Craig Moffett wrote in a note to clients that he is skeptical that AT&T can compete with other wireless companies.

“Their loss of postpaid phone subscribers owes, in part, to the necessity of prioritizing free cash flow over growth in order to mitigate the weakness in their media and wireline businesses. And, perhaps more importantly, it is unclear whether AT&T has the balance sheet to vigorously compete in the FCC’s upcoming auctions for mid-band spectrum,” wrote Moffett.

Even though analysts are split on whether to buy AT&T stock, the company’s strong dividend makes the stock a good long-term buy for investors.

2. Microsoft

Microsoft stock is one of the best dividend stocks for investors

In addition to AT&T, tech giant Microsoft (NASDAQ:MSFT) has one of the best dividend stocks of 2020 for investors. Microsoft’s dividend yield is small at 1%, but offers a robust dividend. In addition to a reliable dividend, Microsoft’s last earnings report was better-than-expected as well.

Microsoft has positive Q3 2020 earnings as one of the best dividend stocks

In its Q3 2020 earnings report, Microsoft had a strong Q3 2020 earnings report. The company’s CEO Satya Nadella, spoke about the positive results.

“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning to sales and customer service to critical cloud infrastructure and security — we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything. Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead,” said Nadella in a statement.

Microsoft’s quarterly revenue grew to $35 billion. The corporation’s revenue increased because of “cloud usage increased, particularly in Microsoft 365, including Teams, Azure, Windows Virtual Desktop, advanced security solutions, and Power Platform, as customers shifted to work and learn from home”, noted Microsoft in its earnings report.

Microsoft is a buy for some financial experts

Wedbush analyst Dan Ives noted that Microsoft stock is a buy because of its successful cloud technology. He also thinks that the tech company is benefiting from many workers working more from home.

He also noted “this current remote work from home (WFH) environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft the main beneficiary as evidenced by the solid results.”

“In a nutshell, Nadella & Co. continue to lead a transformational cloud story narrowing the gap vs. Bezos and AWS into 2021,” added Ives.

Amana Mutual Funds also is bullish on Microsoft stock because of its cloud technology.

“Microsoft has done an excellent job building its Azure cloud services business, while we believe a strong period of semiconductor demand will arrive in the new decade supporting Microchip and Taiwan Semiconductor. Whether the rally starts in 2020 or 2021 remains to be seen but recent signs have been positive.”

Because of Microsoft’s strong Q3 2020 results and bullish analysis from experts, Microsoft has a dividend stock that investors should choose.

3. Johnson & Johnson

Like AT&T, Johnson & Johnson (NYSE:JNJ) is another high-yield dividend aristocrat that is a good choice for investors. The company’s dividend yield is a healthy 2.76%.

The healthcare company overcame controversy for allegedly producing toxic baby powder. The corporation is moving beyond that tumultuous period as the corporation develops a COVID-19 vaccine.

Paul Stoffels, M.D., Vice Chairman of the Executive Committee and Chief Scientific Officer, is supervising the project. He spoke about the potential treatment in a statement.

“We are excited to see these pre-clinical data because they show our SARS-CoV-2 vaccine candidate generated a strong antibody response and provided protection with a single dose. The findings give us confidence as we progress our vaccine development and upscale manufacturing in parallel, having initiated a Phase 1/2a trial in July with the intention to move into a Phase 3 trial in September,” said Stoffels.

Johnson & Johnson is a top dividend stock in 2020

“Based on the strength of the preclinical data we have seen so far and interactions with the regulatory authorities, we have been able to further accelerate the clinical development of our investigational SARS-CoV-2 vaccine, Ad26.COV2-S, recombinant,” said Stoffels.

“Simultaneously, we are continuing our efforts to build important global partnerships and invest in our vaccine production technology and manufacturing capabilities. Our goal is to ensure we can deliver a vaccine to the world and protect people everywhere from this pandemic,” added Stoffels.

Johnson & Johnson stock rises on promising coronavirus vaccine trial

Mathai Mammen, M.D., Ph.D., is the global head of Janssen Research & Development, LLC at Johnson & Johnson. He noted that the potential for the vaccine can have a great impact on the world.

“As we collectively battle this pandemic, we remain deeply committed to our goal of providing a safe and effective vaccine to the world. Our pre-clinical results give us reason to be optimistic as we initiate our first-in-human clinical trial, and we are excited to enter the next stage in our research and development toward a COVID-19 vaccine,” said Mammen.

“We know that, if successful, this vaccine can be rapidly developed, produced on a large scale and delivered around the world,” added Mammen.

Financial analysts say Johnson & Johnson is one of the best dividend stocks of 2020

CNBC financial analyst Jim Kramer thinks that Johnson & Johnson stock is a buy because of its strong dividend and its vaccine development.

“J&J has the best pipeline of these drug companies,” said Cramer. “Their vaccine could fail and the stock wouldn’t even go down. That’s how cheap this thing is. I think it’s a buy right here,” said Cramer.

In addition to Cramer, Merrill Lynch analyst Bob Hopkins is bullish on Johnson & Johnson stock. He believes that the company can overcome its past troubles if the coronavirus vaccine is effective.

“We continue to like the risk reward in JNJ. While visibility remains low with litigation, Covid’s impact on the economy could well bring names like JNJ back into favor and goodwill from a successful vaccine could limit drug pricing risk,” wrote Hopkins in a note to clients.

Because of its healthy dividend and promising vaccine, investors can pick Johnson & Johnson stock.

4. Altria

While Johnson & Johnson wants to be a dividend stock that promotes health, Altria (NYSE: MO) is a “sin” dividend stock. The tobacco company has an impressive 8% dividend yield. In Altria’s Q2 2020 earnings report, chief financial officer Sal Mancuso spoke about Altria raising its dividend payout.

“We are pleased to announce that yesterday, our board declared the quarterly dividend ahead of our normally scheduled declaration date. The board declared a quarterly dividend of $0.86 per share, representing a new annualized dividend rate of $3.44 per share,” said Mancuso.

“This represents an increase of 2.4% from the previous annualized rate of $3.36 per share and marks the 55th dividend increase in the past 51 years. Our balance sheet is strong, and our core tobacco businesses continue to generate significant cash,” added Mancuso.

Altria stock rises as Q2 2020 earnings beat expectations

Despite the slowdown in tobacco sales, the tobacco company had an increased earnings per share in its latest earnings report.

“Despite the challenges of the COVID-19 pandemic in the U.S., our employees continue to execute against our 10-year vision with strong focus and commitment,” said Altria in a statement.

“Over the first-half of 2020, we believe Altria showed resilience in volatile market conditions, growing adjusted diluted earnings per share by 8.5%, ” said Altira. The company’s earnings were “driven by the outstanding financial performance of our core tobacco businesses. We’ve also hit key milestones and made steady progress behind our noncombustible product portfolio,” added Altria.

Financial analysts bullish on Altria as one of the best dividend stocks of 2020

Morningstar analyst Phillip Gorham rates Altria as an underrated stock. He notes that the overall robust cigarette industry makes the stock a buy.

“Underlying trends in the U.S. cigarette industry appear to be intact following Altria’s first-quarter results, which included very strong shipment numbers, with comparability affected by a number of technical issues,” he said.

“Aside from adjusting for the timing of some of the company’s shipments that were brought forward into the first quarter, we are making only modest tweaks to our estimates for the remainder of the year and our longer-term outlook is unchanged. We are reiterating our wide-moat rating and $54 fair-value estimate,” added Gorham.

Stifel analyst Christopher Growe noted that Altria had controversy because of its vaping products.

“The tobacco stocks, especially Altria, seem to find controversy at every turn, with investors increasingly focused on the negatives and the risks, which have always been ever-present for this industry, and not rewarding the improvement in the fundamentals,” said Growe.

However, during the pandemic, people have been buying more tobacco products in bulk during the quarantine. Because of an increase in tobacco use, Growe rates Altria one of the best dividend stocks of 2020 to buy.

“We remain confident in Altria’s ability to lead a price increase again this fall, in line with our estimate (+6% price per pack growth this year) supporting the 4% profit growth we estimate for Altria’s Smokeable division,” said Growe.

If investors want to pick a dividend stock with a strong customer base, Altria is a good choice.

5. Exxon

Even though oil prices have dropped, gas giant Exxon (NYSE:XOM) is still one of the best dividend stocks of 2020. In its latest earnings report, Exxon had a decline in revenue, but still maintains its hefty 8.27% dividend yield.

“Second-quarter results included a $1.9 billion noncash benefit from inventory valuation, largely reversing the first-quarter impact due to the improvement in commodity prices relative to the end of March and resulted in a second-quarter U.S. GAAP loss of $1.1 billion,” noted Exxon.

ExxonMobil is one of the best dividend stocks of 2020 to buy and hold

“Excluding identified items, there was a $3 billion loss in the second quarter,” noted Exxon.

The oil giant noted that its revenue was “down $5.3 billion from the first quarter driven by the effects of COVID-19, including the unprecedented decline in oil and product demand, resulting in significant declines in prices.”

ExxonMobil is still one of the best dividend stocks of 2020 despite earnings miss

Because of the global shutdown, many cars stayed off the road and the need for gas declined greatly. As a result, oil company Exxon had a whopping net loss of $1.08 billion in Q2 2020. Exxon chief executive officer Darren Woods explained that the coronavirus caused a decline in the corporation’s profits.

“The global pandemic and oversupply conditions significantly impacted our second quarter financial results with lower prices, margins, and sales volumes,” said Woods.

Exxon vice-president Neil Chapman noted that despite the revenue drop, Exxon remains one of the best dividend stocks.

He noted that the oil company has “a long history of providing a reliable and growing dividend. A large portion of our shareholder base has come to view that dividend as a source of stability in their income,” said Woods.

“We take that very seriously,” added Woods.

Chapman also noted that reducing expenses will help Exxon maintain its high dividend.

“The plans will include further reducing operating expenses and identifying additional opportunities to efficiently defer more capex. Doing so will enable us to maintain the dividend and hold debt at its current level,” said Chapman.

Financial analysts rate ExxonMobil as one of the best dividend stocks of 2020

Because of Exxon’s spending reduction, Cowen & Co. analyst Jason Gabelman rates Exxon as one of the best dividend stocks of 2020. He commented that Exxon’s asset sales could help reduce

“It has fallen a bit behind schedule but there have been reports there are several packages out,” said Gabelman.

“Given the current environment, XOM[Exxon] will likely need to continue defending its long-term view of energy growth that underpins its counter-cyclical capex [capital expenditure] program that could ramp back up next year,” added Gabelman.

Morningstar strategist Allen Good also rates Exxon as one of the best dividend stocks of 2020. He noted the company’s low expenditure costs.

“We[Morningstar] continue to rate Exxon Mobil as one of the higher-quality integrated firms, given its ability to capture economic rents along the oil and gas value chain. While its peers operate a similar business model with the same goal, they fail to do so as successfully, as evidenced in the lower margins and returns. Exxon generates its superior returns from the integration of low-cost assets combined with a low cost of capital; this combination produces excess returns greater than those of its peers,” said Good.

“Additionally, its decision to increase investment relative to peers during the next five years is also likely to narrow the gap in returns with peers,” added Good.

Other financial experts think investors should sell ExxonMobil stock

While some analysts are bullish on Exxon stock, others think that the dividend aristocrat is still a pass for investors. Citi analyst Alistair Syme doubts that the oil corporation can maintain its high dividend with declining oil sales.

“The dividend is undoubtedly the real question, or maybe more correctly the forward scenario that the company is adopting to underpin shareholder returns,” said Symes.

RBC Capital Pavel Molchanov wrote in a note to clients that Exxon’s high dividend yield can withstand extra debt.

“While we see the dividend as safe — if for no other reason than management’s desire to maintain S&P Aristocrat status — the cash flow outspend is colossal under current conditions,” wrote Molchanov.

ExxonMobil is undergoing a lot of turbulence, but is still one of the best dividend stocks of 2020 to buy and hold.

6. Chevron

In addition to ExxonMobil, Chevron is an oil giant that is struggling with the COVID-19 pandemic fallout. Despite diminished sales, Chevron’s dividend yield is still a healthy 6.15%.

Chevron Q2 2020 earnings down because of COVID-19

The oil company had a staggering $8.3 billion loss in the past quarter. Chevron CEO Pierre Breber spoke about the corporation’s disappointing Q2 2020 revenue report.

“Second quarter was a challenging one for the company. Financial results included $4.9 billion in special item net charges and a foreign exchange loss of over $400 million. Excluding special items and FX, the quarter resulted in a $3 billion loss or $1.59 per share,” said Breber.

Crude Oil Futures Price levels 1987 through2017 — Crude Oil Futures Price levels 1987 through 2017 before coronavirus hurt Chevron as a dividend stock

Morningstar rates Chevron as one of the best dividend stocks of 2020

Morningstar analyst Allen Good noted that Chevron is one of the best dividend stocks of 2020 because of its expanded natural gas production.

“Although Chevron is an integrated energy company, its narrow economic moat rests on the quality of its upstream portfolio. Chevron’s upstream segment holds a low-cost position based on an evaluation of its oil- and gas-producing assets, using our exploration and production moat framework. Its greater exposure to liquids and liquids-linked natural gas production has produced peer-leading cash margins during the past five years,” said Good.

Good also noted Chevron’s expanded global oil exploration. The growth makes Chevron stock attractive to the financial expert.

“New production from its LNG projects Gorgon and Wheatstone, offshore oil developments in the Gulf of Mexico and West Africa, and tight oil growth should preserve this exposure. We forecast that Chevron can deliver a midcycle cash operating margin of nearly $30 per barrel of oil equivalent, the highest in its peer group,” said Good.

Some analysts see Chevron stock as a sell despite dividend

While some analysts are bullish on Chevron stock, others are bearish on one of the best dividend stocks of 2020. Goldman Sachs analyst Neil Mehta was pleased with Chevron’s oil production.

“Production came in above our expectations, with volumes primarily beating our estimates on U.S. (both liquids and gas) and International liquids,” wrote Mehta in a note to clients.

While Mehta notes Chevron’s increased oil production as a plus, he thinks Chevron stock isn’t a buy.

“We [Goldman Sachs] see the absolute decline in [the] share price as a function of the collapse in oil demand and oil prices,” said Mehta.

Citi analyst Alistair Syme also doubts that Chevron’s worse-than-expected results mean that the corporation’s stock may tumble.

“2Q results show a picture that is perhaps not as resilient as the market thought it might be,” said Syme.

Chevron stock may be volatile because of COVID-19. However, Chevron is still one of the best dividend stocks of 2020.

7. Pfizer

Pfizer (NYSE: PFE) stock has an impressive dividend of 3.95%. The pharmaceutical company’s stock rose because of a promising COVID-19 vaccine. Pfizer’s $11.8 billion revenue beat Wall Street expectations. The company’s CEO, Albert Boula, spoke about the potential coronavirus vaccine.

“We remain fully committed to confronting the public health challenge posed by the COVID-19 pandemic by collaborating with industry partners and academic institutions to develop potential approaches to prevent and treat COVID-19,” said Boula.

“Our researchers and scientists have made important progress toward developing an effective vaccine though significant additional work remains,” added Boula.

Some financial analysts rate Pfizer as one of the best dividend stocks of 2020

Because of Pfizer’s coronavirus vaccine and high dividend, some financial experts rate the company’s stock as a buy.

Edward Jones analyst Ashtyn Evans noted that Pfizer’s other successful medications make the stock a buy. She said that Edward Jones’ “positive view of the stock is driven by the company’s extensive pipeline and lower valuation relative to peers.”

Morningstar rates Pfizer stock as a buy

Morningstar director Damien Conover cited Pfizer as one of the best dividend stocks of 2020 because of its impressive cash flow.

“Pfizer’s operating structure allows for cost-cutting following patent losses to reduce the margin pressure from lost high-margin drug sales. Overall, Pfizer’s established product line creates the enormous cash flows needed to fund the average $800 million in development costs per new drug. In addition, the company’s powerful distribution network sets up the company as a strong partner for smaller drug companies,” said Conover.

“Pfizer’s entrenched consumer and vaccine franchises create an added layer of competitive advantage”, added Conover.

Conover also noted that Pfizer is one of the best dividend stocks “stemming from brand power in consumer healthcare and manufacturing cost advantages in the vaccines division. Pfizer recently created a consumer healthcare joint venture with GlaxoSmithKline that could lead to an eventual divestment of the unit.”

Pfizer’s impressive cash flow and potential profits from its COVID-19 vaccine make Pfizer one of the best dividend stocks of 2020 and beyond.

8. Coca-Cola

While Coca-Cola(NYSE:KO) stock dropped because of the coronavirus crisis, the beverage company has one of the best dividend stocks of 2020. Coke’s dividend yield of 3.47% should be impressive to investors.

Coke’s chief financial officer, John Murphy, spoke about Coke’s net profit decline to $1.78 billion.

“Organic revenues declined 26%, driven by a 22% decline in concentrate shipments and a 4% decline in price/mix,” said Murphy.

Financial experts rate Coke stock as a buy

Morningstar analyst Nicholas Johnson believes Coca-Cola can withstand the current economic volatility.

“At a high level, we believe there are characteristics endemic to the nonalcoholic beverage industry more generally, as well as Coca-Cola’s specific positioning within this industry, that result in a competitively advantaged business,” said Johnson.

Coca-Cola stock is one of the best dividend stocks of 2020

“While the company is disproportionately exposed to beverage categories that are in secular decline, we believe it has the brand equity to induce demand for reformulated variants of its most popular trademarks, the resources to reorient its portfolio toward drink categories that are more consistent with the consumer ethos, and the scale to fulfill these endeavors profitably,” added Johnson.

In addition to Morningstar, HSBC analyst Carlos Laboy said that Coke stock is undervalued. He also believes that Coke bottlers are “poised to accelerate their growth contribution [to Coca-Cola’s profits] as they grow into market developers with better tools and a richer service culture.”

Coca-Cola is one of the best dividend stocks of 2020 because of its cash flow and resilience through economic downturns.

9. Home Depot

As the coronavirus pandemic hurt many corporations, Home Depot’s (NYSE:HD) sales rose. The corporation’s stores helped many people who were homebound in the spring. Home Depot’s Q1 2020 revenue jumped 7% to $28.26 billion. The company’s 2.27% dividend yield makes it a good divident stock to buy for investors. Home Depot’s CEO, Craig Menear, spoke about the company’s results.

“As the COVID-19 pandemic evolved, we anchored to the core values of our Company by focusing on two key priorities: working to ensure the safety and well-being of our associates and customers, and providing our customers and communities with essential products,” said Menear in a statement.

“We took early and decisive action to intentionally limit customer traffic in our stores which we believe had a significant impact to sales in many markets,” added Menear.

Home Depot is one of the best dividend stock to financial experts

Brian Nagel is the senior equity research analyst at Oppenheimer. He believes that Home Depot is one of the best dividend stocks of 2020. He thinks that Home Depot benefited from the recent nationwide quarantine.

“I think Home Depot is one of the companies that is benefiting or really capitalizing, performing well through this Covid-19 crisis and is likely to perform well as the crisis headwinds abate,” said Nagel.

“More people are spending more time in their homes, and you’re seeing that increase spend as more people spend more time working on their houses,” added Nagel.

Jefferies equity analyst Jonathan Matuszewski noted that Home Depot should improve in its next earnings report because of Memorial Day sales.

“Given HD’s commentary, it will be key to understand the maintenance or potential loosening of such actions heading into the typically-promotional Memorial Day Weekend,” said Matuszewski.

“If the home improvement centers can constrain incremental expenses to meet outsized traffic while still protecting customers/employees, EPS[earnings per share] should improve,” added Matuszewski.

Home Depot is one of the best dividend stocks of 2020 because of its service to customers through the COVID-19 pandemic.

10. Merck

In addition to Pfizer, Merck is a pharmaceutical company that is one of the best dividend stocks of 2020. Mercks’s dividend yield of 3.16% is impressive to investors.

Merck’s Q2 2020 revenue dropped to $10.87 billion because of the COVID-19 crisis. CEO Ken Frazier spoke about the results.

“As expected, social distancing measures in many regions negatively impacted second-quarter volumes for many of our products. However, customer access to care is steadily improving, including in our portfolio of vaccines, which was hit particularly hard this quarter,” said Frazier.

Merck expects revenue to improve as it develops a COVID-19 vaccine.

“Both vaccine candidates will soon enter the clinic and we have begun investing to facilitate our ability to manufacture hundreds of millions of doses,” said Frazier.

Financial experts say Merck stock is a buy

Morningstar director Damien Conover is bullish on Merck stock. He noted that Merck’s patents make the company one of the best dividend stocks of 2020.

“Patents, economies of scale, and a powerful intellectual base buoy Merck’s business and keep it well shielded from the competition. Patent protection should continue to keep competitors at bay while the company strives to introduce the next generation of drugs,” said Conover.

Conover also commented that Merck’s cash flow makes the pharma company’s stock a buy.

“Further, the company’s enormous cash flows support a powerful salesforce that not only sells currently marketed drugs but also serves as a deterrent,” said Conover.

“As a result, Merck offers a powerful partnership opportunity for externally developed drugs. The cash flows also put the company in the rare position of supporting the approximately $800 million in research and development,” added Conover.

For investors that want a strong pharma stock with good dividends, Merck is an excellent choice.

The best dividend stocks of 2020 show resilience

While 2020 has been a brutal year for many stocks, dividend stocks have proven resilient. With strong cash flows and reliable quarterly payouts, investors can rest assured with these stocks in their portfolios. With TradingSim’s blogs and charts, investors can find the best dividend stocks of 2020 to buy and hold.

Value stocks can seem like a bargain to investors, but can become a valuable part of an investor’s portfolio. This article will explain what value stocks are, how they differ from growth stocks, and how TradingSim can help investors find the top 10 value stocks to invest in.

What is a value stock?

A value stock is a bit like a stock on sale. Value stocks tend to trade at lower prices than other stocks. In addition to being cheap, value stocks tend to have less-than-average growth than other stocks. They also tend to have low valuations in relation to earnings and cash flow.

Value investing can be a great choice for risk-averse investors who want to slowly wade into the investing waters. Value stocks also tend to have dividend payments to investors every quarter. Also, with the Dow Jones in such volatility, these value stocks could be a safer alternative to faster-paced growth stocks.

How is a value stock different from a growth stock?

Here are some differences between growth stocks and value stocks. The comparison of value stocks versus growth stocks shows vast differences.

Growth stocks usually

have high valuations. Tech stocks, like Amazon (NASDAQ:AMZN), often have a sky-high valuation in the billions. Amazon has a record-shattering $1 trillion valuation.
have high P/E ratios. Growth stocks usually have a P/E ratio of 16 and higher. Netflix’s ( NASDAQ:NFLX) P/E ratio has skyrocketed to trading for 86 times its earnings.
steadily rising stock prices. Growth stocks like Zoom ( NASDAQ:ZM) have stock prices that surged 200% above its listed IPO price of $ 36 per share.
strong growth rate. Many growth stocks have better-than-average projected future earnings. Growth stocks also tend to outperform the overall S&P 500.
more available cash flow. Easily available cash flow is usually a sign that a company has a growth stock.
don’t pay dividends to investors. Growth stocks from corporations tend to reinvest money back into corporations. They don’t usually offere quarterly dividends to investors.
many growth stocks are in tech or other growing industries. Teledoc (NYSE: TDOC) is a growth stock that rose 18% just over the past month. The telehealth company is successful because of its innovation in medicine. Teledoc’s stock is also performing well because of its timely use by patients during the coronavirus crisis.
riskier for investors. Growth stocks can rise higher than the overall market, but can fall faster into a bull trap when the market declines into a bear market as well.

Value stocks are less volatile than growth stocks

In contrast to growth stocks, value stocks usually

have low price-to-earnings ratios (P/E). Value stocks, like MetLife(NYSE:MET) have a rock-bottom P/E ratio of 5.10. Life insurance stocks often have a low P/E ratio below 16.
have a slower growth rate in more established industries. Growth stocks tend to increase quickly in innovative new fields. Tech stocks, like Tesla (NYSE: TSLA) especially, may have wild swings on the stock market because of production issues ( or Elon Musk’s comments). However, value stocks usually grow at a slower pace and are in industries that have been around for decades. BP(NYSE:BP) is a giant in the oil industry and is a value stock with less drastic change in its stock price.
pays dividends to investors. In addition to BP, another oil stock, Chevron (NYSE: CVX) is a high-paying dividend stock. Chevron pays investors a 7.5% dividend to investors.
are undervalued. Semiconductor maker Qualcomm(NYSE: QCOM) has undervalued stock because it’s overlooked, but will be vital to the future. Even though Qualcomm stock is in the $66 range, the stock should rise soon. Since Qualcomm is making chips that will be used in 5G technology, the corporation’s stock will likely benefit from this in the future.
are less risky than growth stocks. Value stocks are usually less volatile and have steady returns for investors. Even though IBM (NYSE:IBM) stock has dropped, the stock is still a solid value stock. IBM is moving into cloud computing with its acquisition of software company Red Hat. The stock will likely remain a safe bet for investors who are looking for value stocks.

Top 10 Value Stocks for Investors

For investors that want low-risk investing , this value stock list has venerable stocks that have high-yield dividends. Here are 10 stocks that are some of the top value stocks to add to a portfolio.

1. Berkshire Hathaway

Warren Buffett is the OG investor and his Berkshire Hathaway (NYSE:BRK-A) and (NYSE:BRK-B) is the top value stock on Wall Street. The Oracle of Omaha has been choosing stocks since the Beatles were a new group. His conglomerate has chosen some of the best value stocks to invest in, and Buffett’s corporation itself is a must-pick stock.

Berkshire Hathaway started in 1929, but didn’t become a viable company until Buffett took over the corporation in 1965. His investment strategy was to buy undervalued companies, then let them grow. As a result of value investing, Buffett’s fortune has grown to almost $70 billion.

Former hedge fund manager Whitney Tilson says Berkshire Hathaway is a top value stock because of Buffett’s wise choices.

“I’m being even more conservative because I’m not factoring in the value Warren Buffett will likely create as he puts his $128 billion cash hoard to work amidst this chaos: buying back his own stock in size, buying other stocks, and negotiating deals with desperate companies,” said Tilson.

“It’s an incredible collection of high-quality businesses… it’s run by the greatest investor of all time… and it has the ultimate, Fort Knox-like balance sheet: $128 billion in cash and short-term investments, $19 billion in bonds, and roughly $200 billion in liquid, blue-chip stocks,” added Tilson.

This TradingSim chart shows Berkshire Hathaway’s trajectory the week of March 19, 2020.

Berkshire Hathaway has a low P/E ratio of 5.46, which makes the company’s undervalued shares a value stock for investors. While most value stocks offer dividends, Berkshire doesn’t. Buffett noted that he’d rather reinvest in his companies to improve the efficiency of his investments. For investors interested in value investing, Berkshire Hathaway is a must.

Buffett only buys stocks he likes for the long haul

Berkshire Hathaway is a value stock because of its investment in other blue-chip stocks. Buffett is known for his quotes about cautious, long-term investing. One quote about long-term investing is especially timely with the stock market slowing down now:“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

Buffett also loves to quote Benjamin Graham, the father of value investing. “Long ago, Ben Graham taught me that price is what you pay; value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down,” said Buffett.

Buffett doesn’t just chase trading trends. He only invests in companies he believes in for a long time. Even though his stock picks may seem too safe, they pay off in the long run. His recent $549 million investment in Kroger grocery stores in February has been very savvy. The recent run on grocery stores like Kroger during the COVID-19 pandemic has made Berkshire Hathaway’s investment a good buy. Buffett has the Midas touch when it comes to picking stocks. His time-tested value investing in top corporations make Buffett’s Berkshire Hathaway a top value stock.

2. Apple

One of the value stocks that Berkshire Hathaway invests in is Apple (NASDAQ:AAPL). The tech giant is a value stock because of its lower-than average P/E of 20. For the largest tech company in the world, Apple is ironically undervalued compared to other tech stocks like (NASDAQ:FB). Even though Apple is a tech company, it’s also seen as a hardware company since it produces iPhones and Apple Watches.

The company has a hallmark of a value stock, strong earnings reports. Apple’s last earnings report saw the company earn a record- shattering $91.8 billion. Apple’s ample cash glow gives the stock a characteristic of a growth stock. However, the company’s $58.9 billion in cash flow in fiscal year 2019 helped pay its $14.1 billion dividend payout to investors. That’s an impressive 6.5% yield. Apple is a reliable value stock that investors should add to their portfolio.

Coronavirus will impact Apple, but stock will bounce back

The COVID-19 crisis has hit every corporation, especially Apple. Many Chinese factories that make Apple devices have been shut down in February. However, the pandemic is slowing in China and factories are starting to reopen. Apple is also set to launch its 5G iPhone in the fall, which should help Apple stock recover from its current losses. Apple recently noted that even though iPhone sales are down in China, there is still growth in sales in other countries. This TradingSim chart shows the volatility in Apple’s stock.

“Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations, ” said Apple.

Wearables make Apple a value stock

Even though Apple stock is currently down, Apple devices are still going strong. Many homebound people are Facetime on their iPhones and iPads to stay connected to each other (and to the games they’re addicted to playing). Apple Watches and other wearable device sales rose 17% in 2019. The ability of Apple to innovate in technology gives value investing in Apple a benefit to investors.

Craig Johnson, chief marketing technician at Piper Sandler, said Apple is still a value stock because of customer loyalty. He noted that even through the last economic downturn 10 years ago, customers still bought iPhones.

“People are still going to step up and they’re going to buy the iPhone. You know, when this gets relaunched and gets released for the 5G iPhone, they’re going step up and buy it. We saw the iPhone get released in 2007 and 2008 in the middle of the crisis there. Consumers still were able to open their wallet and buy these things,” said Johnson.

Apple can withstand the current market volatility and COVID-19 crisis because of its ample cash flow, innovative new products, and a devoted customer base.

3. Coca-Cola

Another value stock Buffett believes in is Coca-Cola( NYSE:KO). Buffett owned the stock since hip-hop was a new category of music. The soft drink company is a value stock because of its high dividend and its steady cash flow. Coca-Cola made billions by selling its soda. Then the corporation pivoted to sales from water and low-calorie drinks and increased sales. The beverage company’s earnings for Q4 2019 were $9.07 billion and the stock rose 22% over the past year. However, CEO James Quincey noted that Coca-Cola has been negatively impacted by the coronavirus pandemic.

“The supply chain is creaking around the world. There are flash points when it’s getting a little harder to get ingredients through, whether it’s delays at the borders, the big changes in channel mix,” said Quincey.

The corporation also noted that the 2020 guidance would be impacted by restaurant closures and sport events cancellations. Coca-Cola sells many of its beverages in dining establishments and during games.

“[S]ince our last guidance update, local market policies and initiatives to reduce the transmission of COVID-19 have significantly increased. These initiatives include the direction to refrain from dining at restaurants,” said Coca-Cola.

However, Quincey noted that Coke’s workers are “doing a great job at adapting” to the changes brought on by COVID-19.

Coca-Cola dividend consistent for investors

The company’s dividend may be small at 3.5%, but it’s very consistent. The dividend has risen for an astonishing 57 straight years. For a value stock that proves that slow and steady investment pays off, investors should choose Coca-Cola.

4. ExxonMobil

In addition to Coca-Cola and Apple, ExxonMobil ( NYSE:XOM) is an established value stock for investors for many reasons. One reason investors can pick ExxonMobil to implement their value investing is its well-paying dividend. ExxonMobil had $6.6 billion in free cash flow last year. The oil corporation paid $14.6 billion in dividends to investors in 2019. Like many value stocks, ExxonMobil is an undervalued stock that has a high-yield dividend of $3.48 per share. That’s an impressive 9% dividend for investors.

ExxonMobil will survive oil crisis

ExxonMobil has been hit by two crises. The ups and downs of the stock market has affected the Dow Jones overall. However, oil companies have been rocked by the decline in oil prices. Saudi Arabia is overproducing oil to drive down prices and spite rival producer Russia.

As a result, the volatility of the stock market and oil prices have dropped to about $30 a barrel. ExxonMobil CEO Darren Woods announced that ExxonMobil will reduce capital expenditures to reserve its cash flow.

“Based on this unprecedented environment, we are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term. We will outline plans when they are finalized,” said Woods. This TradingSim chart shows ExxonMobil’s stock trajectory over the past few weeks.

Despite the reduction in spending, Woods said ExxonMobil will survive the current uncertainty in the oil industry. With refinery expansion around the world, ExxonMobil is poised to recover from this current setback.

“We are confident that we will manage through these challenging times by taking deliberate action to keep our people safe, our environment protected and our company strong,” said Woods.

ExxonMobil is a value stock before oil companies recover

ExxonMobil is a bargain value stock for investment. Investors could buy the stock while the oil industry is in turmoil. Then they could reap the benefits when the economy and oil industry recovers. Oil will likely bounce back above $30 a barrel if Saudi Arabia compromises with Russia and other oil-producing countries in OPEC ( Organization for Petroleum Exporting Countries) to reduce its oil output. If the economy recovers, the oil company will rebound and ExxonMobil will remain a value stock.

5. Johnson & Johnson

Just as ExxonMobil has been an established stock for almost a century, Johnson & Johnson (NYSE:JNJ) is another value stock with longevity. The multinational corporation has been around for a century and has been a reliable stock for value investors. The company’s stock pays a healthy 2.6% dividend and increases every year. The corporation has survived a scandal about asbestos in their talcum powder to remain a value stock. For investors that want a safe value stock, Johnson & Johnson is a safe pick-especially in the wake of the coronavirus outbreak.

Johnson & Johnson stock rises on coronavirus vaccine hopes

The world’s biggest healthcare product producer is racing to create a vaccine for COVID-19. The company has signed a $1 billion deal with the U.S. government to create 1 billion doses of a possible vaccine for the respiratory disease. Johnson & Johnson CEO Alex Gorsky expressed optimism that the company can create an effective vaccine to slow the disease.

“We have very good early indicators that not only can we depend on this to be a safe vaccine base but also one that will ultimately be effective based on all the early testing and modeling we’ve been doing. This is a bit of a moonshot for J&J going forward, but it’s one we feel is very, very important for use to be doing at this period in time,” said Gorsky.

Johnson & Johnson stock the week of March 19

Johnson & Johnson said in a statement that it “is committed to bringing an affordable vaccine to the public on a not-for-profit basis for emergency pandemic use.”

The hope of a vaccine has raised investors’ confidence in the stock. Johnson & Johnson stock has jumped 8% as a result of the news. Johnson & Johnson’s stock shows that an established company can weather any storm and persevere. By providing medical devices and other badly needed products during this health crisis, Johnson & Johnson has proven to be a value stock that will withstand Wall Street volatility.

6. JP Morgan Chase

Just as Johnson & Johnson is a health product institution, JP Morgan Chase (NYSE:JPM) is a banking institution that has a value stock. Chase’s P/E ratio is 8.68, making it an undervalued stock that’s perfect for value investing. Chase had a positive earnings report in Q4 2019 with profits of $8.52 billion. CEO Jamie Dimon said in a statement that the company can withstand Wall Street’s ups and downs.

“While we face a continued high level of complex geopolitical issues, global growth stabilized, albeit at a lower level, and resolution of some trade issues helped support client and market activity towards the end of the year,” said Dimon. This TradingSim chart shows the volatility of Chase stock during the week of March 19.

Chase stock has also been helped by the Federal Reserve injecting $1 billion into banks as part of the Fed trying to revive the economy. With that security, Chase can loan more to customers. Customers themselves will need to take out loans more than ever with the struggling economy. Before the coronavirus crisis, Chase was opening more branches and investing more in banking apps. Now the bank can be an option for consumers during this time of economic uncertainty. Chase is a top value stock for investors looking for a solid bank stock to add to their portfolios.

7. Walmart

While many banks have value stocks, the nation’s biggest retailer also has a reliable value stock. Walmart(NYSE:WMT) has succeeded by selling many essential products and become a value stock because of its strength during the COVID-19 crisis. The nation’s largest big-box store was a top stock to financial experts like Jefferies analyst Christopher Mandeville. Even before the coronavirus pandemic, Mandeville praised Walmart for its financial strength.

“WMT[Walmart] exhibited just how well the company is leveraging its physical scale/digital presence and financial stamina to push the boundaries of retail, using innovative tech and learnings from abroad. With clear momentum in grocery and a sustainable productivity loop in place, WMT[Walmart] now pivots to better general merchandise, one item alongside enhanced fulfillment practices that is critical to long-term e-com success,” said Mandeville.

Walmart thrives during COVID-19 outbreak

After the COVID-19 outbreak,Walmart has become an essential resource by staying open during the pandemic.

Walmart CEO Doug McMillon noted that the corporation has seen e-commerce sales grow by 35% over the last few months.

“We continue to see good traffic in our stores. We’re growing market share in key food and consumables categories, especially with its online grocery delivery service. including fresh,” said McMillon.

Goldman Sachs analyst Kate McShane noted that Walmart will help customers by keeping stores open and by delivering groceries as well.

“In the short term, we expect demand to remain robust, even if panicked buying subsides, given the companies’ mix of essential/grocery. Further, these stores will likely remain open (versus over half of retail in the U.S. that is currently closed), even in states that have “shelter in place” rules,” said McShane.

Walmart dividend makes stock attractive to investors

Like many value stocks, Walmart has a well-paying dividend for investors. Walmart’s payout to investors tops 2% and has steadily increased for an impressive 47 years. Walmart’s consistent dividend payouts make the retailer’s stock a stable value stock for investors.

8. AT&T

AT&T(NYSE:T) is another top pick for value investors. The telecommunications company has been a great value stock. The corporation is a “dividend aristocrat” that consistently raises dividend for investors every year. The current yearly payout to investors is a hefty 6.5%.

AT&T also will keep many of its stores open during the coronavirus pandemic. The corporation said that it’s critical for customers to stay connected during the quarantine orders nationwide.

“Connectivity is always essential to our customers — doctors and nurses, first responders, governments, banks, grocery stores, pharmacies, and others delivering vital services.”It’s even more critical during a public health crisis that’s challenging everyone. In fact, as a critical infrastructure provider, AT&T views it as our civic duty to step up and keep our customers and communities connected,” said AT&T.

5G technology and streaming could help AT&T stock

The lastest Wi-fi technology could also help boost AT&T stock. 5G technology will soon come to many phone customers that subscribe to T-Mobile ( which is owned by AT&T) could benefit from having 5G devices. With faster streaming on devices, AT&T could have a lock on the 5G market once the technology takes off.

In addition to 5G technology, AT&T stock could rise once it enters the streaming wars. The corporation plans to launch HBO Max, which will fan favorites like Friends and The Boondocks. When the service debuts in May, HBO Max could help AT&T stock grow if gains a lot of viewers. AT&T stock could rise after launching the streaming service. AT&T stock could be ideal for value investors looking for a long-established stock pick.

9. Disney

Just at AT&T is evolving to meet new communications needs, Disney is adapting to new forms of entertainment. The entertainment conglomerate has been struggling during the COVID-19 crisis because of the closure of its theme parks. However, Disney+has been a bright spot for the corporation. The streaming service has attracted 28.6 million subscribers since its launch in November. The international expansion of Disney+ in Europe should help the corporation’s earnings in the long run. Minal Modha, consumer research lead at Ampere Analysis, noted that Disney has to appeal to kids that love Frozen 2 and adults who want to binge watch Star Wars: The Mandalorian.

“It will now be key for Disney to ensure it retains these customers with a mix of new Disney Plus originals and new release movie titles,” Modha said in a statement. “Furthermore, while there is still room for growth among both the two core demographic groups, it will be imperative for Disney Plus in the longer term to broaden out its content offering to appeal to a wider audience.”

Hulu, another Disney-owned streaming service, is also an area of growth for the company with 30 million subscribers. Even though many sports events are canceled, ESPN+ still has 6 million subscribers. With many people being quarantined, Disney’s popular movies can enjoy a greater audience and possibly increase its stock price.

Disney dividend is no Mickey Mouse amount

Disney can be a daily stock pick for investors because of its ability to withstand the current Wall Street volatility. The corporation’s dividend payout is consistent for investors. Because Disney’s net income grew to $10 billion in 2019, its dividend payout to investors is 1.8%. While that figure is smaller than other companies’ yields, it’s still a steady increase year after year. Disney stock is a top stock pick for value investing.

10. Weight Watchers

Another value stock may be the least likely. Weight Watchers(NYSE:WW) isn’t just for your fluffy Aunt Margaret anymore. The company has grown from a weight-loss company predominately for women to a wellness company for all genders. Since Oprah purchased 5 million shares of Weight Watchers, the company has added 6 million more subscribers. “The Oprah effect” of her magic touch helping businesses has helped Weight Watchers.

Weight Watchers has also evolved because of its new marketing campaigns to reach more male customers. DJ Khaled has become a spokesperson and another one- big male superstar, that is- is aligning with the brand. The Rock joined Oprah on her Weight Watchers tour to promote the rebranding of the corporation. The revamp to focus more on holistic health instead of weight loss appears to have worked. Chief Financial Officer Nick Hotchkin, said that tour helped drive Weight Watchers awareness up with potential customers. The success also drove the corporation’s earnings up to $29 million in its last earnings report.

“We believe this high visibility has had a halo effect well beyond those who are in the audience.In addition, the tour helped reinforce our brand transformation, showing how WW is your partner in both weight loss and wellness. Member recruitment so far in 2020 has been well above the prior year, as expected, and is reflected in revenue and earnings growth guidance for full year 2020,” said Hotchkin.

Weight Watchers may benefit after quarantine

With many people cooped up inside and stress eating during the quarantine, Weight Watchers could benefit after the nationwide quarantine ends. When the COVID-19 crisis passes, people will be eager to be more active and become healthier. Morgan Stanley analyst Lauren Cassel says that Weight Watchers could add more subscribers after the end of the nationwide quarantine.

“Once the ‘cocoon’ phase ends and shelter in place measures are raised, we[Morgan Stanley] see WW as a potential beneficiary of changes in consumer behavior. We anticipate a heightened focus on health, wellness, and weight loss after weeks of gym closures, stress eating, and limited physical activity.”

In addition, Cassel said that “the extent to which existing subscribers are currently showing greater interest and spending more time engaging with the app during the cocoon phase could lead to better retention curves for these subscribers over the medium term, which we incorporate into our $47 Bull case valuation. Bottom line, we think WW’s value proposition is actually stronger post-COVID-19 than it was before,” Cassel said.

“WW’s value proposition is actually stronger post virus than it was before”, said Cassel.

Weight Watchers stock the week of March 19

The wellness company has had its stock rise 17% last week while the S&P only gained 11%. Weight Watchers can be an affordable option for investors who want to cash in on wellness.

Weight Watchers stock is a bargain for investors

The wellness company is undervalued and is selling for only 8 times its earnings. The stock will likely continue to rebound and be a great pick for value investing. Unlike other value stocks, Weight Watchers stock doesn’t pay a dividend. However, Weight Watchers stock is a value stock that investors can choose if they want a stock that is capitalizing on the wellness trend.

Value stocks are safe stocks in volatile stock market

Value investing may seem boring, but can pay off in the long run. In this time of economic instability, value investing can be a great way for investors to build a slow and steady growth in their portfolios. Growth stocks and cryptocurrencies may get more attention, but value stocks can stand the test of time. For investors taking a long-term view and that can exercise patience, value stocks are a safer option.

Diversification is key in value investing

Even though many value stocks are in similar established fields, there is still room for diversification. Value investing can consist of investing in life insurance stocks, bank stocks, and even tobacco stocks. Altria (NYSE:MO) is a long-established stock that offers a strong dividend. By diversifying a value stock portfolio, investors can get bigger returns in their investments. If the bank industry is struggling, diversification in another field can help create a healthier portfolio.

Conduct research before investing in value stocks

Research is important to find the best stock for investors. By using TradingSim’s analysis and trading simulations, investors can find the best value stocks for them. Investors can take advice from Warren Buffett, but ultimately have to decide for themselves what value stocks are best for them. With TradingSim’s charts and guidance, value investing can be rewarding- and maybe even profitable.

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