In this article we will take at 10 best dividend stocks for 2021.
Dividend investing remains one of the best ways to make money off the stock markets, especially during times of trouble. Dividends help create a buffer against portfolio losses when equity prices are declining. Data shows that dividend-paying companies have produced stronger returns when compared to non-dividend stocks. According to a report by Raymond James, since the 1930s through 2010, compounded dividends on average accounted for about 50% of total stock returns. The report also analyzed about 1000 stocks and concluded that high-yield dividend stocks delivered stronger returns with less risk as compared to low-yielding stocks.
Best Dividend Stocks for 2021
Data also shows that dividends are accounting for a decent portion of personal income of Americans. According to a report by S&P Global, as of 2011, dividend income was 6.12% of per capita of personal income, compared to 4.16% in the previous 10 years and 3.58% during 20 years prior. The report also shows that from 1926 through December 2012, dividend income made up 34% of the monthly total returns of the S&P 500. The report quotes a detailed study by Fuller and Goldstein which examined the returns of dividend-paying and non-dividend paying stocks during the period from 1970 to December 2007. The results showed that dividend-paying stocks outperformed non-dividend stocks more during turbulent times.
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Our readers know that when it comes to dividends, we prefer consistency instead of higher yields. A company which is consistent in its dividend payments and hikes has an extremely low chance of initiating a dividend cut. On the other hand, companies with higher yields usually don’t invest in their long-term product growth, and often waver during times of crisis. Based on this criterion we created our popular lists like 30 dividend champions of 2021 and top dividend kings for 2021. However, in this article our criterion sits on a sweet spot that selects for both high yields and strong long-term growth prospects. You will find several dividend stocks for 2021 in our list which have a track record of consecutive years of dividend hikes. The stocks without consecutive hikes in our list still offer promising growth opportunities for the future along with high yields.
In addition, we chose only those dividend stocks which have a yield of over 3%.
Diversifying your portfolio and investing in strong dividend stocks is extremely important, especially during turbulent times like these when even the smart money is struggling. The hedge fund industry’s reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start our list of 10 best dividend stocks for 2021.
10. Holly Energy Partners, L.P. (NYSE: HEP)
Dividend Yield: 7.22%
Number of Hedge Fund Holders: 3
Holly Energy ranks 10th in our list of 10 best dividend stocks for 2021. It is a Texas-based company offering products and services in the petroleum industry, including storage tanks, distribution terminals, rack facilities and refinery processing. In the fourth quarter, the company felt a negative impact of the coronavirus crisis, posting a negative EBITDA of $111.5 million in the period for its refining segment, compared to $171.6 million in the year-ago period. In January 2021, the company declared a quarterly dividend of $0.35 per share, same as the previous quarter.
As of the end of the fourth quarter, 3 hedge funds in Insider Monkey’s database of 887 funds held stakes in Holly Energy. Marshall Wace LLP is the biggest stakeholder in the company, with 33,654 shares, worth $478,000.
9. National Health Investors, Inc. (NYSE: NHI)
Dividend Yield: 5.96%
Number of Hedge Fund Holders: 13
Self-managed REIT National Health Investors Inc offers services like sale-leaseback, JVs, mortgage, mezzanine financing and property transactions. In the fourth quarter, the company increased AFFO per share by 3.7% and its dividend by 5%. It ranks 9th in our list of 10 best dividend stocks for 2021.
The company is also getting the attention of the smart money, as 13 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, up from 12 funds a quarter earlier.
8. Realty Income Corporation (NYSE: O)
Dividend Yield: 4.55%
Number of Hedge Fund Holders: 24
Realty Income Corporation is one of the best dividend stocks to for 2021. The REIT buys and sells properties, and offers services like portfolio management, asset management, credit and real estate research. The company in February said that it expects strong acquisition volume of more than $3.25 billion, or $3.44-$3.49 per share in terms of FFO, in 2021, above the average analyst estimate of $3.43. The company recently bought a 21-asset gas station and convenience store portfolio in Hawaii from Par Pacific Holdings for $109.4 million.
With a $61.4 million stake in Realty Income Corp., Two Sigma Advisors owns 987,364 shares of the company as of the end of the fourth quarter of 2020. Our database shows that 24 hedge funds held stakes in Realty Income Corp. as of the end of the fourth quarter.
7. Enbridge Inc. (NYSE: ENB)
Dividend Yield: 7.24%
Number of Hedge Fund Holders: 28
Energy transportation company is one of the best dividend stocks for 2021, with a dividend yield of over 7% and more than 65 years of dividend payments. In December 2020, the company reaffirmed its outlook for 5%-7% average long-term annual distributable cash flow per share growth.
As of the end of the fourth quarter, there were 28 hedge funds in Insider Monkey’s database that held stakes in Enbridge, compared to 25 funds in the third quarter. Marshall Wace LLP, with 1.3 million shares, is the biggest stakeholder in the company.
6. Enterprise Products Partners L.P. (NYSE: EPD)
Dividend Yield: 7.73%
Number of Hedge Fund Holders: 30
With a dividend yield of 7% and over 20 consecutive years of dividend hikes, oil and gas pipeline company Enterprise Products is one of the 10 best dividend stocks to buy for 2021. The company recently said during a meeting with investors that it is mulling to repurpose several pipelines to handle different commodities while reducing new investments as it waits out the current uncertainty in the market.
Appaloosa Management LP is one of the 30 hedge funds tracked by Insider Monkey having stakes in EPD at the end of the fourth quarter. The fund owns over 3.45 million shares of the company.
5. Altria Group, Inc. (NYSE: MO)
Dividend Yield: 7.20%
Number of Hedge Fund Holders: 37
Altria is one of the safest dividend stocks to buy in 2021, with over 50 consecutive years of dividend hikes. The tobacco and e-cigarette company was listed in Insider Monkey’s list of dividend kings. The company in February declared a quarterly dividend of $0.86 per share, inline with its previous dividend.
A total of 37 hedge funds tracked by Insider Monkey were bullish MO at the end of the fourth quarter, down from 47 funds a quarter earlier.
4. Kinder Morgan, Inc. (NYSE: KMI)
Dividend Yield: 6.48%
Number of Hedge Fund Holders: 42
Texas-based Kinder Morgan ranks 4th in our list of 10 best dividend stocks for 2021. The company’s business has four segments: natural gas pipelines, carbon dioxide production, terminals and products pipelines. Investment firm Bernstein recently downgraded the stock with a price target of $17. However, the firm said that it continues to believe that the company’s dividend is safe. The downgrade was initiated amid a weak guidance for 2021.
The company is also getting the attention of the smart money, as 42 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter.
3. International Business Machines Corporation (NYSE: IBM)
Dividend Yield: 5.13%
Number of Hedge Fund Holders: 51
Computing giant IBM ranks 3rd on the list of 10 best dividend stocks for 2021. The company has increased its dividend for 20 consecutive years. IBM shares have gained about 17% over the last 12 months. The company plans to spinoff its Managed Infrastructure Services business. IBM and Moderna recently announced that they will joins hands to create solutions to increase COVID-19 vaccine management. The companies will use technologies like hybrid Cloud, AI and blockchain to achieve the goal.
According to our database, the number of IBM’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 51 hedge funds that hold a position in IBM compared to 40 funds in the third quarter. The biggest stakeholder of the company is Arrowstreet Capital, with 2.7 million shares, worth $344.9 million.
2. Philip Morris International Inc. (NYSE: PM)
Dividend Yield: 5.54%
Number of Hedge Fund Holders: 52
Philip Morris has over 10 years of consecutive dividend hikes. The company on March 4 declared a quarterly dividend of $1.20 per share, in line with previous dividend. The tobacco company recently reiterated its 2021 EPS guidance of $5.90-$6.00. The company expects about 40% increase in net revenue from smokeless products.
With a $1.6 billion stake in Philip Morris, Terry Smith’s Fundsmith LLP owns 19.4 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 52 hedge funds held stakes in PM as of the end of the fourth quarter, versus 50 funds in the third quarter.
Fundsmith LLP, in their Q4 2020 investor letter, mentioned Philip Morris International Inc. (NYSE: PM).
“We are impressed with Philip Morris’s development of Reduced Risk Products or RRPs, most notably its heat not burn system iQOS. It seems we are not the only ones to view it this way as it was recently included in the Dow Jones Sustainability North America Index for the first time. For the moment the shares are weighed down by COVID related disruption to some of its markets and simple prejudice which seems to prevent some commentators from weighing the benefits the RRPs bring against the obvious fact that it is a tobacco company.”
1. Pfizer Inc. (NYSE: PFE)
Dividend Yield: 4.49%
Number of Hedge Fund Holders: 63
With a dividend yield of 4.4%, Pfizer ranks 1st on the list of 10 best dividend stocks for 2021. Pfizer shares have gained about 20% over the last 12 months. Pfizer is the primary supplier of the COVID-19 vaccine, which has shown 97% effectiveness against the virus. The company in 2021 expects to sell about $15 billion worth of COVID-19 vaccines, with a net profit in the range of 20% of this revenue.
According to our database, the number of PFE’s long hedge funds positions decreased at the end of the fourth quarter of 2020. There were 63 hedge funds that hold a position in Pfizer compared to 66 funds in the third quarter. The biggest stakeholder of the company is Kahn Brothers, with 674,718 shares, worth $24.8 billion.
You can also take a peek at Top 10 Car Company Stocks to Invest In and Ray Dalio’s Top 10 Stock Picks for 2021.
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Disclosure: None. 10 Best Dividend Stocks For 2021 is originally published on Insider Monkey.
