At first glance, the concept of dividend stocks to buy on the dip might clash with your instincts. Right now, the combination of robust employment and soaring energy prices may have put the brakes on strategies designed to lower the benchmark interest rate.
Should rates move higher, U.S. government bonds – about as safe of a debt security class as you can get – may compete with the passive income provided by private enterprises. As good of an organization as top-tier blue chips may be, nothing beats the security of Uncle Sam. Nevertheless, given the tense environment, policymakers might not want to rock the boat.
Should the monetary policy environment more or less remain muted, then corporate-backed passive income may look attractive. In that case, investors should consider these dividend stocks to buy on the dip.
IBM (IBM)
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Superficially, legacy technology juggernaut IBM (NYSE:IBM) seems an awfully risky idea for dividend stocks to buy on the dip. Recently, the company disclosed its first-quarter earnings report. On the bottom line, it produced adjusted earnings per share of $1.68, beating the consensus target of $1.60. However, it could only muster sales of $14.46 billion, below the projected view of $14.55 billion.
As well, investors didn’t seem to appreciate Big Blue’s acquisition of cloud software maker HashiCorp (NASDAQ:HCP). IBM announced that it intends to pay $35 per share in cash for HashiCorp. Still, CNBC reports that the deal would be accretive to adjusted EBITDA in the first full year following the closing of the transaction. It will also be accretive to free cash flow in the second year after the closing.
Further, it doesn’t seem that analyst are respecting the significant acumen that IBM brings to the table, including artificial intelligence. While they start to catch on, you can acquire shares and benefit from the forward annual dividend yield of 3.61%.
ConocoPhillips (COP)
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As mostly an upstream hydrocarbon specialist, ConocoPhillips (NYSE:COP) fundamentally clashes with modern energy sensibilities. These days, the political and scientific framework is increasingly pushing adoption and integration of renewable energy solutions. However, the geopolitical flashpoints that have sprouted in multiple parts of the world have articulated the importance of hydrocarbons.
Whether we like it or not, the world continues to run on oil. Further, when global supply chains of this vital commodity are disrupted, it could easily spike prices higher. At the same time, the upstream component of the value chain – the exploration and production cycle – becomes particularly crucial. Essentially, impacted nations must look for new sources of crude.
For the current fiscal year, covering experts project ConocoPhillips’ sales to hit $59.39 billion on average. That’s only a 1.4% increase from last year. However, the high-side estimate calls for $70.31 billion. That seems far likelier given the geopolitical backdrop.
For speculators, COP is off from its early April highs. With a forward yield of 2.77%, it could be one of the dividend stocks to buy on the dip.
Pfizer (PFE)
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At one point, Pfizer (NYSE:PFE) ranked among the most important pharmaceutical companies in the world. I speak of course of the company’s contributions in forwarding a Covid-19 vaccine. However, fears of the SARS-CoV-2 virus dramatically faded since early 2022. You can see it in the charts. It’s almost as if the rug was pulled underneath PFE stock.
To be fair, the descent continues. Since the start of the year, PFE has lost 15% of equity value. In the trailing month, it’s down more than 8%. Now, I don’t necessarily like the idea of catching falling knives. However, the downturn in Pfizer may be overdone – or close to reaching that point.
After all, the company gained valuable insights and experience working with messenger-RNA. It could then springboard the tech to address other critical needs. For now, though, the Covid fallout remains the talking point. Analysts anticipate a 4.1% decline in fiscal 2024 sales to $56.07 billion.
Still, while you’re waiting for the narrative to possibly turn right-side up, Pfizer offers a forward yield of 6.4%. It’s awfully tempting.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
