The best dividend stocks to buy for 2021.
The year 2021 has been much more stable than its tumultuous predecessor, but with growth stocks now far more abundant as the economic recovery gets underway in earnest, a steady rotation to value appears to be in motion. And, despite the narrative of growing worry surrounding the steady rise of the 10-year Treasury yield, it still sits under 1.7%, which is, historically speaking, remarkably low. That means that stocks with strong dividend yields still have greater-than-average appeal. That’s reflected in this list of the best dividend stocks to buy for 2021 — an annual list U.S. News & World Report comes up with every December for the year ahead. Only two of the following 15 dividend stocks have fallen year to date.
Target Corp. (ticker: TGT)
First on the list is Target. Perhaps its dividend yield of 1.3% leaves something to be desired for most income investors, but rest assured, as it’s one of only two out of 15 picks yielding less than 2%. Target is coming off an impressive 2020, during which its stock continued reaping the rewards of its renewed focus on digital sales. In 2017, Target announced a $7 billion, multiyear investment plan to make itself more digitally minded, and those investments are paying off big-time. Last quarter, digital comparable sales rose 118%, following up the prior quarter’s 155% pace. The percentage of TGT earnings used to pay its dividend, known as its payout ratio, is quite low at just 31% — indicating the dividend is safe and has room to grow.
Year-to-date return (through 5/14/21): +20%
As the smallest company on this list, with a market capitalization of around $3 billion, industrial packaging and container company Greif can provide some midcap diversity to a dividend portfolio. This is a modest grower, but with a dividend of 2.7% and analysts expecting earnings per share (EPS) to grow 10% annually over the next five years, GEF offers a nice mix of income and steady growth. With the global economy picking back up, this maker of steel and plastic drums, corrugated sheets, container liners and other behind-the-scenes packaging products is already benefiting from improving demand. Greif’s products are used by all sorts of industries, with customers in the pharmaceuticals, petroleum, food and beverage, and chemicals sectors, to name a few.
YTD return: +38.6%
Pharma giant AbbVie is a repeat pick among the 15 best dividend stocks roundup, having made the list in 2020 as well. ABBV stock earned its superlative last year, adding about 28% in 2020. With a market cap of more than $200 billion, AbbVie currently sells the highest-grossing blockbuster drug in the world in Humira, which treats several ailments, including arthritis, Crohn’s disease and plaque psoriasis. The company’s acquisition of Botox maker Allergan, which closed in mid-2020, helps further diversify its portfolio. ABBV pays an enviable dividend of 4.5%.
YTD return: +11.3%
JPMorgan Chase & Co. (JPM)
For banks, 2020 was a down year. Interest rates plunged, narrowing the all-important spread between what a bank pays to borrow money and what it charges for loans. Even JPMorgan Chase & Co., the most valuable bank in the U.S., wasn’t immune from those headwinds, falling about 6% in 2020. This offered a good buying opportunity for patient investors seeking a safer asset with a decent yield. With interest rates moving fiercely higher in the early parts of 2021, JPM and other financial stocks have benefited; JPMorgan shares are handily beating the market so far this year, and the company still pays a 2.2% dividend. Last quarter, JPMorgan reported a 25% increase in trading revenue, deposits rose 32% and assets under management rose 28%, as the company beat both revenue and earnings estimates. The payout ratio of 29% indicates plenty of room to grow the dividend.
YTD return: +31%
Johnson & Johnson (JNJ)
Another one of the few picks from 2020 repeated on the list of best dividend stocks to buy for 2021 is health care giant Johnson & Johnson. JNJ shares didn’t do quite as well as AbbVie’s did in 2020, gaining about 11%. Johnson & Johnson, a poster child blue-chip stock for decades, operates through three divisions: medical devices, consumer and pharmaceuticals. The consumer side, which sells everything from Listerine and Tylenol to Pepcid and Band-Aids, is essentially bulletproof and humming along just fine. Its medical devices division is where the shortcomings fell in 2020, with segment sales down 10.5% as hospitals scaled back on surgeries amid the pandemic. That has already started to rebound in the first quarter, and JNJ’s largest division, pharmaceuticals, rose 7.4% last quarter.
YTD return: +8.8%
Iron Mountain (IRM)
The first real estate investment trust, or REIT, on this list, Iron Mountain specializes in storage and information management services. The company claims to store and protect billions of dollars in assets from more than 225,000 organizations globally. IRM’s legal structure as a REIT allows it to avoid double taxation. It must pay out 90% of taxable income to its shareholders, but in exchange, it pays no corporate taxes. Investors willing to prioritize steady income over meaningful growth potential should consider Iron Mountain. Shares, which tended to trade within a relatively narrow range heading into 2021, are the best performers among all 15 stocks on this list and currently yield 5.9%. The company is thriving as it increasingly embraces the digital era.
YTD return: +46.7%
Another of the best dividend stocks to buy for 2021 is beverage and snack giant PepsiCo, a company with impressive diversification across geographies and business segments. In the 12 weeks that ended March 10, PEP’s Frito-Lay North America division made up 28.6% of total revenue, not far behind its PepsiCo Beverage North America segment, which made up 34.3% of the top line. A dominant food and snacks division is something its biggest rival, The Coca-Cola Co. (KO), lacks. And while Coca-Cola saw EPS fall 19% last quarter, PepsiCo’s EPS actually advanced 29%. PEP pays a 2.9% dividend. A steady, solid long-term holding, Pepsi is a best-in-class stock compared to the larger Coca-Cola, despite a lackluster performance thus far this year.
YTD return: -0.4%
Discover Financial Services (DFS)
The credit card company Discover Financial Services makes the list of the top 15 dividend stocks to buy for a second straight year. At about $35 billion, DFS is the smallest of the big four credit card companies, which include Visa (V) ($497 billion), Mastercard (MA) ($357 billion) and American Express (AXP) ($125 billion). In a way, this gives DFS more to gain than these other companies, with more market share on the table left to seize. DFS also pays the highest dividend of these four companies, at 1.5%, and with more commerce moving online and away from cash, credit cards, in general, should continue to grow market share against other payment methods in 2021. DFS has an incredibly low 20% payout ratio.
YTD return: +29.6%
Cisco Systems (CSCO)
Cisco, a $223 billion blue-chip stock and component of the Dow Jones Industrial Average, pays a 2.8% dividend with a 60% payout ratio. The company has raised its dividend for nine straight years and remains a veritable cash cow throughout the pandemic. Non-GAAP operating cash flow last quarter alone rose 2% year over year to $4.1 billion. Also last quarter, Cisco returned $2.3 billion to shareholders through stock buybacks and dividends. The communication equipment company, which essentially creates much of the plumbing that makes the internet possible, should be a stable dividend stock you can count on for years.
YTD return: +20%
Mondelez International (MDLZ)
This $87 billion snack food titan is one of the best dividend stocks to buy for 2021 for several reasons. First, the company is eminently stable, which is what most income investors want to see in their dividend stock picks. With a portfolio of brands that includes Oreo, Cadbury, Toblerone, Halls candies, Trident gum and Tang powdered beverages, Mondelez enjoys wide brand recognition and loyalty. And second, Mondelez is a great way to add some international exposure to your portfolio, as 73% of its revenue came from outside North America last quarter. MDLZ pays a 2% dividend and has a 46% payout ratio.
YTD return: +7.2%
Crown Castle International Corp. (CCI)
The second REIT among the best dividend stocks to buy for 2021, Crown Castle International Corp. operates in an increasingly important niche of the market, either owning, operating or leasing more than 40,000 cell towers in the U.S. Its properties span every major U.S. market, and CCI represents an investment in vital telecommunications infrastructure that keeps Americans connected to data, information and each other. CCI’s towers will also be a key part of the 5G — or fifth-generation technology — rollout as those efforts pick up in coming years. CCI pays nearly a 3% dividend.
YTD return: +14.7%
You can’t talk about the major telecom giants in this country without mentioning AT&T. At around $230 billion, it’s not only the second-largest telecom company in the U.S., behind Verizon Communications (VZ), it also owns a sprawling media empire that includes Warner Bros., HBO, CNN, TBS, TNT, Cinemax and DC Comics, among others. While AT&T will also play a pivotal role in the rollout of 5G tech, the company’s unprecedented decision to offer all 17 of its 2021 theatrical releases — including “Space Jam: A New Legacy,” “The Matrix 4,” and “The Sopranos” prequel film, called “The Many Saints of Newark” — simultaneously for streaming on its HBO Max platform should drive up subscribers. The company recently reached a deal to merge its media assets with Discovery (DISCB) into what will be a separate publicly traded company. AT&T pays a juicy 6.5% dividend.
YTD return: +16%
Antero Midstream Corp. (AM)
Whenever you see a dividend as high as Antero Midstream’s — the stock yields roughly 9.8% — alarm bells should go off. There’s usually something wrong with that picture. Either the dividend stands to get cut, the company is in free fall or some other risk looms. That’s one reason Antero Midstream looked like one of the riskiest stocks on this list to begin the year. At $4.7 billion, it’s the second-smallest company on the list; it also wasn’t profitable in 2020, as the hit to natural gas prices that spanned much of last year was only beginning to reverse course. A global recovery from the pandemic has brought a bull market for energy prices and AM’s stock price as well.
YTD return: +34%
Newmont Corp. (NEM)
Named as one of U.S. News’ 10 Best Stocks to Buy for 2021, Newmont Corp. clearly earned a spot on this list as well. The gold, silver and copper miner yields a modest 3.1%, but it has vowed to reward shareholders with special dividends should its mining operations churn out unexpected windfall profits. Newmont’s value as a hedge in recessionary environments makes it an attractive member of a larger portfolio as it has a low correlation to the broader market. NEM’s beta — a measurement that shows perfect correlation to the market at 1 and no correlation to the market at zero — is extremely low, at 0.29. Newmont projects its all-in cost to mine an ounce of gold will be between $800 and $900 by 2025. Gold is currently worth more than $1,800 an ounce.
YTD return: +19.3%
Kimberly-Clark Corp. (KMB)
Kimberly-Clark is a classic consumer defensive stock — a relatively boring business that can be expected to reliably churn out steady profits. KMB’s everyday household products include diapers, baby wipes, tissues, toilet paper, paper towels, soaps and more. One of the most time-tested stocks on this list, Kimberly-Clark has been around since 1872 and pays a 3.4% dividend. Its payout ratio is a modest 64%, and in November, KMB raised its dividend for the 48th consecutive year. That means KMB is one of the S&P 500’s dividend aristocrats, a list of companies that have raised their dividends for 25 straight years or more. One of the few lackluster picks on this list, KMB is flat so far in 2021.
YTD return: +0%
Top dividend stocks for 2021:
— Target Corp. (TGT)
— Greif (GEF)
— AbbVie (ABBV)
— JPMorgan Chase & Co. (JPM)
— Johnson & Johnson (JNJ)
— Iron Mountain (IRM)
— PepsiCo (PEP)
— Discover Financial Services (DFS)
— Cisco Systems (CSCO)
— Mondelez International (MDLZ)
— Crown Castle International Corp. (CCI)
— AT&T (T)
— Antero Midstream Corp. (AM)
— Newmont Corp. (NEM)
— Kimberly-Clark Corp. (KMB)
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Update 05/17/21: This story was published at an earlier date and has been updated with new information.