The following are my best investment ideas for 2018, broken down by various categories, explains Chuck Carlson, dividend reinvestment specialist and editor of DRIP Investor.
Please note that all of the stocks mentioned here offer direct purchase plans whereby any investor may buy the first share and every share of stock directly from the company.
The Best High-Yield DRIPs
I think 2018 will be a better year for dividend-paying stocks versus non-dividend payers, as I suspect investors will want to play a little more defense in the New Year.
To that end, a number of attractive dividend payers are sporting yields of 2.9% or more, a substantial premium to the yield on the S&P 500 Index. In addition to nice yields, these stocks have decent capital-gains potential.
Among the list of the best high-yield DRIPs below, my favorites are Cisco Systems (CSCO) and AbbVie (ABBV). Cisco Systems stock recently broke out from a fairly long sideways trading pattern and looks poised to tack on further gains.
I also like Cisco because it provides exposure to a group — technology — that I think will do well in 2018, yet provides what should be a lower volatility way to play the sector. And the yield of 3.0% is a plus. Cisco’s direct-purchase plan has a minimum initial investment of $500.
The firm will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $50. There is a one-time enrollment fee of $10. The plan administrator is Computershare.
AbbVie is a major player in the pharmaceutical market. The company’s Humira drug is the largest-selling drug in the world in terms of revenue. AbbVie has posted nice gains in 2017. Despite the gains, the shares still yield an attractive 2.9%.
While I don’t expect AbbVie stock to match the returns of 2017, I still believe these shares will outperform the broad market. And the yield provides a nice payoff for income-oriented investors. AbbVie’s direct-purchase plan has a minimum initial investment of $250.
The firm will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $25. There is a one-time enrollment fee of $10. The plan administrator is Computershare.
The Best Turnaround DRIP
I’m a big believer in mean reversion when it comes to Dow stocks. And no Dow stock is better positioned for mean reversion in 2018 than General Electric (GE). The stock’s performance in 2017 was brutal, with these shares down 44%.
The litany of bad news is long — a dividend cut, no support from Wall Street, opaque financial statements, and unattractive industry exposures. However, the company is making the sort of changes you want to see in a turnaround play, such as rightsizing its business portfolio and staffing.
Corporate insiders have been buying, which is a plus. And I think near-term selling — some of which is due to tax harvesting — will subside in the New Year. It wouldn’t take much for the company to beat expectations in 2018. A move back to $20 per share is a reasonable expectation.
And while that may not sound like much, that would be a rise of around 15%. And when you combine that with the dividend yield (based on the reduced payout) of 2.8%, you get an expected total return of around 17%-18% in 2018. I think that sort of return will stack up favorably in 2018. I will be buying some GE stock for the New Year and recommend you do the same.
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GE’s direct-purchase plan has a minimum initial investment of $250. There is a one-time enrollment fee of $7.50. The plan administrator is Wells Fargo Shareowner Services.
The Best Economically Sensitive DRIP
If you buy the idea that global economies will strengthen in 2018, then economically sensitive stocks should be among the market’s leaders. One stock that I find especially intriguing is DowDuPont (DWDP), the entity resulting from the merger of Dow Chemical and DuPont.
The company’s businesses would certainly benefit from economic strength. And the stock provides a special-situations play given that it plans to split into three companies in the next 24 months, though that timetable could be pushed back due to the complexity of the restructuring.
I think the stock is a nice way to play the expected resurgence of value stocks in 2018, and the break-up “kicker” adds another dimension to the stock. DowDuPont’s direct purchase plan has a minimum initial investment of just $50. There is a one-time enrollment fee of $10. The plan administrator is Computershare.
The Best Financial DRIPs
If I had to pick one sector that should outperform in 2018, it would be financials. Rising rates should help net interest margins, a stronger economy should spur loan demand, and tax reform should be especially impactful to the group.
f you could own only one financial for 2018, it should be J.P Morgan Chase (JPM). The company is well leveraged to the economic and interest-rate climates I expect in 2018. The stock’s dividend yield of 2.1% enhances total-return prospects.
J.P. Morgan’s direct-purchase plan has a minimum initial investment of $250. The firm will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $50. There is a one-time enrollment fee of $15. The plan administrator is Computershare.
Another favorite bank is Regions Financial (RF), which is in the Editor’s Portfolio. Recent price action has been excellent. The stock, yielding 2.1%, represents a more aggressive play among the banks, but also one with significant upside.
Indeed, the stock traded for more than double its current price back in 2006. Regions Financial’s direct-purchase plan has a minimum initial investment of $1,000. There is no enrollment fee. The plan administrator is Computershare.
