In this article we will take a look at the top 30 dividend champions of 2021. This is a three-part series. Before starting our list we analyze some key data points that suggest that investing in dividend champions is one of the best and safest investing strategies, especially in bear markets. You can skip this analysis and go directly to Top 5 Dividend Champions of Champions of 2021 (Part I).
What is a dividend champion? Dividend Champions are companies which have increased their dividends consistently for 25 or more consecutive years.
Dividend investing remains contentious for a variety of reasons. Dividend-paying companies are usually considered as stagnant, with low growth prospects for the future. A company that is consistently increasing its dividend is not investing into its future product growth or pipeline, it is commonly argued. Growth stocks with no dividends often get more attention because of their surprising returns and thrilling product growth. But dividend stocks have always proved their naysayers wrong, especially when things go South and markets tumble. According to a detailed research by Post Oak Private Wealth Advisors, dividends accounted for almost 90% of the S&P 500’s total return during bear markets over a period of 100 years — from 1900 to 2000.
Why Should You Prefer Dividend Champions?
Dividend investors often look out for high yields, but research shows that the right approach to dividend investing is to prefer dividend stocks that have an excellent track record of dividend growth. That’s why in this article we are going to discuss 30 dividend champions of 2021. Why is it important to prefer dividend hikes? Ned Davis Research analyzed various S&P 500 companies over a period of 40 years. Their research suggests that companies that hiked their dividends consistently returned 9.4% on an average annual basis, compared to 7% returns by companies that did not increase their dividends.
We prefer dividend stocks with strong track records of growth because once a company has increased its dividend for over 20 years, chances of it not raising its dividend decline enormously. We cited a detailed survey in our dividend kings list of 2021 that showed that companies go to extra lengths to maintain their dividends. Therefore, investing in dividend champions of 2021 would be a great way to minimize risks and increase your liquidity, especially when economic uncertainty, job losses and volatility are rising.
Data also shows that investing in dividend champions is profitable. The Post Oak report said that The S&P Dividend Aristocrats Index outperformed the S&P 500 Index over the last 10 years by nearly 3% per year. For those who are not aware, a dividend aristocrat is a stock that is a member of S&P 500 and has increased its dividend consistently for 25 consecutive years. Dividend champions are virtually similar to dividend aristocrats since they have the same number of consecutive dividend hikes.
Dividends have become even more relevant following the market volatility that is hammering investors worldwide. Even the smart money is not safe from this global flux. Hedge funds’ 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 111 percentage points since March 2017 (see the details here). Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. 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.
We also like dividend champions of 2021 because that data suggests that dividend champions have more safety to them as compared to those companies that have not increased their dividends and prefer to maintain a stable payout. Post Oak report said that dividend stocks with increasing payouts have outperformed those with stagnant/stable payouts by 2.4% per year from 1972-2013.
With this data-based evidence in mind, let’s start our list of top 30 dividend champions of 2021. We ranked the list based on dividend yields, from lowest to highest.
30. Badger Meter, Inc. (NYSE: BMI)
Dividend Yield: 0.68%
Wisconsin-based Badger Meter sells products related to flow measurement, control and communication solutions, mainly for water services companies, commercial sector and industrial players worldwide. Over the last 12 months, BMI shares have gained over 54% in value. As of the end of the third quarter, 18 hedge funds tracked by Insider Monkey were bullish on BMI. The total value of these shares is $165.1 million.
29. Brown & Brown, Inc. (NYSE: BRO)
Dividend Yield: 0.82%
Florida-based Brown & Brown offers insurance, reinsurance products and federal programs services. In the fourth quarter, Brown & Brown posted a non-GAAP EPS of $0.32, above the Street forecasts by $0.03. Revenue in the period jumped over 10% to reach $642.1 million.
At the end of 2020, Jean-Marie Eveillard’s First Eagle Investment Management reported owning 8.35 million shares of BRO.
28. Cintas Corporation (NASDAQ: CTAS)
Dividend Yield: 0.88%
Ohio-based Cintas provides corporate identity uniforms, entrance mats, restroom cleaning services and supplies, carpet and tile cleaning services and fire protection products and services to businesses. In its fiscal second quarter, the company posted an EPS of $2.62, beating the analysts’ forecasts by $0.43. Revenue in the period slid over 4% but still surpassed the Wall Street consensus.
At the end of the third quarter, 38 hedge funds tracked by Insider Monkey held long positions in CTAS.
Diamond Hill Capital said in their investor letter that Cintas is likely to see a negative impact of the pandemic. Here is what Diamond Hill Capital stated:
“Cintas Corp. provides U.S. businesses with uniform rental services and restroom cleaning, first aid, safety, and fire protection goods and services. We re-initiated a short position in Cintas as we believe the stock price does not reflect the likelihood its results will be hard hit by increases in unemployment caused by the COVID-19 pandemic.”
27. Ecolab Inc. (NYSE: ECL)
Dividend Yield: 0.89%
Water purification technology company Ecolab is one of the top 30 dividend champions of 2021. In November 2020, the company joined the Dow Jones Sustainability World Index. The index tracks the top sustainability-driven companies worldwide.
At the end of the third quarter, 52 funds out of 816 tracked by Insider Monkey were bullish on ECL. At the end of 2020, William Von Mueffling’s Cantillon Capital Management owned 2.19 million shares of the company.
26. Albemarle Corporation (NYSE: ALB)
Dividend Yield: 0.96%
Chemical giant Albemarle is one the prominent members of the top 30 dividend champions of 2021 list. The company operates in various chemical segments, including lithium, bromine, refining and performance catalysts. The company recently said it will launch a public offering of about $1.3 billion worth of stock. The company plans to use the proceeds of the offering for growth spending, including expansion projects in Australia, Chile and Nevada.
Click to continue reading and see Top 5 Dividend Champions of 2021 (Part I).
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Disclosure: None. 30 Dividend Champions of 2021 (Part I) is originally published at Insider Monkey.