Market crashes often present golden opportunities for long-term investors. When the stock market experiences a sharp downturn, panic selling ensues, and high-quality dividend stocks often get caught in the turbulence. However, for savvy investors who maintain a disciplined approach, market crashes can provide some of the best buying opportunities for income-generating stocks at a discount.
In this blog, we will analyze some of the best dividend stocks that would have been fantastic buys during the last major market crash—the COVID-19 market crash of March 2020. We will examine their price movements, dividend yields, and overall returns since that time to determine how much investors would have gained by purchasing these stocks at their lows.
Understanding Market Crashes and Dividend Stocks
Why Do Market Crashes Occur?
A market crash occurs when stock prices drop significantly over a short period, typically due to a financial crisis, economic downturn, or external shocks such as a pandemic. Investors panic, selling off stocks and driving prices lower, often creating an opportunity for those with a long-term perspective to buy stocks at deep discounts.
Why Dividend Stocks?
Dividend stocks are particularly appealing during downturns because they offer a steady stream of income even when share prices are volatile. Companies that consistently pay dividends tend to be financially strong, with stable business models that can weather economic turmoil. Moreover, when stock prices decline, dividend yields increase, making them even more attractive for investors seeking passive income.
Top Dividend Stocks to Buy During Market Crashes
Let's explore some of the best dividend stocks that would have delivered stellar returns if bought during the March 2020 crash.
1. Johnson & Johnson (JNJ)
March 2020 Low: ~$109
Current Price (2024): ~$155
Dividend Yield in 2020: ~3.5%
Current Dividend Yield: ~2.9%
Johnson & Johnson is one of the most reliable dividend-paying stocks in the market. As a Dividend King with over 60 years of consecutive dividend increases, it has proven resilient even in economic downturns. Investors who bought JNJ at its low in 2020 have enjoyed both capital appreciation and steady dividend income.
2. Procter & Gamble (PG)
March 2020 Low: ~$94
Current Price (2024): ~$160
Dividend Yield in 2020: ~3%
Current Dividend Yield: ~2.4%
Procter & Gamble is a consumer goods giant that sells essential products, making it relatively recession-resistant. Its stock fell during the COVID-19 market crash but rebounded quickly due to strong demand for household products. Long-term investors who bought PG at the dip have benefited from consistent dividend increases and significant price appreciation.
3. Coca-Cola (KO)
March 2020 Low: ~$38
Current Price (2024): ~$60
Dividend Yield in 2020: ~4%
Current Dividend Yield: ~3%
Coca-Cola is another Dividend King that has maintained strong brand power and pricing ability despite economic downturns. During the 2020 crash, its stock plummeted as restaurants and sporting events shut down. However, those who invested at the low have seen excellent returns and a reliable income stream.
4. PepsiCo (PEP)
March 2020 Low: ~$101
Current Price (2024): ~$175
Dividend Yield in 2020: ~3.2%
Current Dividend Yield: ~2.7%
PepsiCo, like Coca-Cola, proved resilient after the crash. The company’s diverse product portfolio, including snacks and beverages, helped it recover quickly. Investors who bought PEP at its low have enjoyed strong capital appreciation and a rising dividend.
5. Realty Income (O)
March 2020 Low: ~$38
Current Price (2024): ~$55
Dividend Yield in 2020: ~6%
Current Dividend Yield: ~5.2%
Realty Income, known as "The Monthly Dividend Company," is a real estate investment trust (REIT) that owns retail and commercial properties. The stock plummeted in 2020 due to fears of rent non-payment but rebounded strongly as the economy recovered. It remains a favorite among income-focused investors.
6. AbbVie (ABBV)
March 2020 Low: ~$65
Current Price (2024): ~$155
Dividend Yield in 2020: ~6%
Current Dividend Yield: ~3.9%
AbbVie, a pharmaceutical company known for its blockbuster drug Humira, was an excellent buy in 2020. With strong cash flows and a commitment to dividends, the company has rewarded investors with significant capital appreciation and robust dividends.
7. McDonald's (MCD)
March 2020 Low: ~$148
Current Price (2024): ~$280
Dividend Yield in 2020: ~3%
Current Dividend Yield: ~2.1%
McDonald’s, a global fast-food leader, saw its stock price tumble during the COVID-19 crisis due to restaurant closures. However, it quickly bounced back as drive-thru and delivery sales surged. Long-term investors have enjoyed strong dividend growth and capital appreciation.
8. Home Depot (HD)
March 2020 Low: ~$140
Current Price (2024): ~$340
Dividend Yield in 2020: ~3.5%
Current Dividend Yield: ~2.2%
Home Depot benefited from the pandemic-era home improvement boom. Investors who bought HD at its 2020 low have seen impressive returns, along with consistent dividend growth.
9. Apple (AAPL)
March 2020 Low: ~$56 (split-adjusted)
Current Price (2024): ~$180
Dividend Yield in 2020: ~1.2%
Current Dividend Yield: ~0.6%
Apple is not traditionally known as a high-dividend stock, but it remains a solid choice for dividend growth investors. Those who bought Apple at its pandemic low have enjoyed incredible capital appreciation and steady dividend increases.
10. Microsoft (MSFT)
March 2020 Low: ~$135
Current Price (2024): ~$400
Dividend Yield in 2020: ~1.5%
Current Dividend Yield: ~0.8%
Microsoft continues to be one of the most dominant technology companies in the world. While its dividend yield is relatively low, its consistent dividend growth and massive price appreciation have made it a fantastic long-term investment.
Lessons Learned from Buying Dividend Stocks in a Market Crash
Patience Pays Off: Investors who stayed calm and bought strong dividend stocks at their lows in 2020 have seen substantial returns.
Dividend Income Provides Stability: Even during downturns, dividend income can provide a steady cash flow.
Buy Quality Companies: Blue-chip companies with strong financials and resilient business models tend to recover quickly from crashes.
Time in the Market Beats Timing the Market: Instead of trying to predict the bottom, consistently investing in quality dividend stocks is a winning strategy.
Conclusion
Market crashes are daunting but present incredible opportunities for long-term investors. If you had invested in any of these dividend stocks during the last major market crash, you would have enjoyed significant capital gains and a steady stream of passive income. The key takeaway is that disciplined investing in high-quality dividend stocks, especially during downturns, can lead to substantial long-term wealth generation.
Are you prepared for the next market crash? Keep a watchlist of strong dividend stocks and be ready to act when the opportunity arises!
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