Dividend stocks are slowly making a comeback, so which ones should investors watch for? Michael Farr, president of Farr, Miller & Washington and CNBC contributor, and Jeffrey Kosnett, senior editor at Kiplinger’s Personal Finance, shared their best plays.
“The great opportunity is not only in underpriced stocks, but in underpriced stocks with dividends,” Farr told CNBC.
“But you have to be a little careful, because with tax law changes and Medicare surtax on all types of income coming up, dividends may be a little less attractive in the future.”
However, Farr warned that small investors shouldn’t be focused entirely on dividend stocks.
“In fact, if you see dividends over 10 percent, that’s a real warning sign of risk,” he said. “If you find balance sheets with strong earnings where the dividend is a reasonable part, those companies can hold up longer.”
In the meantime, Kosnett told investors to look for companies with a history of regularly boosting dividends by at least 10 percent annually.
“I think dividends remain a good deal,” he said.
Johnson & Johnson
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No immediate information was available for Farr or Kosnett.