Dividend stocks can be a great way of generating passive income. Buy the stock, hold onto it, and watch the dividends flow in. Literally making money while I sleep. Reinvest the dividends and the passive income compounds over time. I’m always on the lookout for stocks that pay dividends to add to my portfolio. Here are three that I’m looking at in March:
Kellogg
The first dividend stock that I’m watching in March is Kellogg (NYSE:K). The stock has a dividend yield of around 3.5% at the time of writing, but dividend isn’t just about looking at yields. It’s about looking at the underlying business, and I think the business at Kellogg’s is in decent shape. Rising input costs due to high commodity prices and supply chain shortages are a threat at the moment, but I think that Kellogg can weather the storm and provide a reliable dividend.
Kellogg is best known for its cereal brands, but about half its revenue these days comes from its range of snacks (Pringles being the most prominent). The company has entrenched relationships with retailers, which helps protect its competitive position and its management has been investing in its brands, which I view as wise. I’m very interested in buying this stock, priced at around $60.
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British American Tobacco
The second dividend stock on my radar is British American Tobacco (LSE:BATS). The usual view on stocks like this one is that they have attractive economics but a diminishing market. So an investment comes down to whether or not there’s enough left in the market to justify the current price. I agree with half of this. I agree that the economics of smoking are attractive, but I don’t think that the market is diminishing. While it’s true that smoking is less prevalent, the number of people who smoke has increased steadily since 1990.
The drawback to British American Tobacco is that it generates the majority of its revenue outside the geographic regions where the number of smokers is increasing the fastest. But I think the global growth of smoking goes some way toward explaining the company’s steady revenue growth over the last decade. The company currently pays a dividend with a 6.5% yield and I think it might well continue to do so.
Polaris
The last stock on my dividend stock list for March is Polaris (NYSE:PII). The company designs and manufacturers off-road vehicles. With a 2.1% yield, this isn’t the most obvious stock to include here. But I think the company’s investment proposition might be attractive to me as an investor seeking passive income going forward.
At the moment, Polaris is battling a collection of headwinds. Supply chain disruption, cost inflation, and a slowing global economic environment are all pushing against the company’s sales. But I think that this is reflected in the stock price and these headwinds won’t last forever.
The risk for this investment comes from uncertainty around how long these headwinds will persist. I think, however, that the market is currently overreacting to a difficult macroeconomic situation for Polaris, so this might be a good time to pick up shares in a strong company that is a reliable source of passive income.
