In this article, we will take a look at the 15 best dividend stocks right now.
The COVID-19 pandemic highlighted the importance of steady and predictable income. In the course of the global pandemic, many investors turned to dividend stocks to cope with the economic downfall. According to a December article that cited research from S&P Global, in 2020, dividend payments for S&P 500 rose to 0.7% to $58.28 per share compared to the previous year. In a 12-month study published by S&P Global, companies paying dividends post higher returns than those which don’t offer dividends.
Dividend Stock Strategy
Various expert investors and hedge fund managers pay a lot of attention to dividend stocks, including legendary Warren Buffett. The billionaire investor enjoys buying dividend stocks at a discounted price and holds these stocks with the aim of value generation and returns. As of January 2021, Berkshire Hathaway’s portfolio has 31 securities that pay dividends.
While most beginner investors believe in investing in high-paying dividend stocks because of their low risk and greater potential for capital gains, the best strategy is to invest in dividend stocks for the long term to generate income. In income investing, it’s recommended to prefer those dividend-paying companies that have a history of steady dividend hikes. For instance, dividend aristocrat Procter & Gamble (NYSE: PG) has consistently been paying its dividends for 130 years and has been increasing its dividends for 64 years. Despite the global pandemic, in February 2021, PG reported a dividend yield of 2.45%. Investing in P&G would be more feasible than to invest in a high-yield dividend stock with a weak dividend history. This is especially true in times of financial volatility.
Copyright: mozakim / 123RF Stock Photo
Why Invest In Dividend Stocks?
The COVID-19 pandemic resulted in massive job losses in different industries across the world. According to a study by the International Labor Organization (ILO), in 2020, the worldwide unemployment rate grew by 33 million. Most investors started relying on dividend stocks as a steady source of income. This is because most dividend-paying companies often reward their shareholders despite the overall financial market underperforming and capital appreciation from other stocks is hard to foresee. In a report published by S&P Global, in 2011, dividend income accounted for 6.12% of per capita personal income in 2011.
Risk in Investing in Dividend Stocks
During an economic crisis, companies may decrease or even cancel payouts. In a report published by Reuters, from April to December 2020, numerous companies were forced to cut back on their dividends. However, as the world starts to come back to normal, companies are beginning to reinstate their dividends.
Dividend and value stocks are back into the limelight, thanks to the rising financial volatility, which is also clobbering the hedge fund industry. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its 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 124 percentage points since March 2017. Between March 2017 and February 26th, 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 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 16th. 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.
To identify the 15 best dividend stocks right now, we ranked the top 30 holdings from the Schwab U.S. Dividend Equity ETF using the hedge fund sentiment data and listed the 15 most popular hedge fund dividend stocks. Let’s start our list of the 15 best dividend stocks right now.
15. Amgen, Inc. (NASDAQ:AMGN)
No of HFs: 49
Total Value of HF Holdings: $1.03 Billion
We start our list of the 15 best dividend stocks right now with Amgen, Inc. (AMGN). The company is one of the leading biotechnology companies worldwide. Based in California, the company is behind top-selling drugs like XGEVA, Aranesp, and Enbrel. AMGN began paying its shareholders quarterly dividend in 2011 and they currently offer a dividend yield of 2.83% with a market cap of close to $144 billion. The company’s revenue in the full year 2020 came in at $25.4 billion. Shares of AMGN jumped 19.31% over the past twelve months.
In March 2021, the company acquired Rodeo Therapeutics Corporation, a small-molecule therapies company that specialized in the repair of multiple tissues.
With a $239 million stake in AGMN, Cliff Asness’ AQR Capital Management owns 1.05 million shares of the company as of the end of the fourth quarter of 2020. Distillate Capital mentioned that AMGN was one of the biggest additions to their portfolio in their Q4 2020 investor letter:
“One of the biggest additions to the portfolio in the rebalance was Amgen Inc. The company underperformed the S&P 500 Index last quarter even though its free cash flow estimates increased. Because the portfolio’s weighting methodology is linked to free cash flow, position sizes increased to reflect improving fundamentals relative to prices, and the more attractive valuations that result.”
14. Newmont Corporation (NYSE: NEM)
No of HFs: 50
Total Value of HF Holdings: $1.21 Billion
The Colorado-based Newmont Corporation ranks 14th in our list of the best dividend stocks right now. They operate different mines located in Nevada, Colorado, Quebec, Mexico, Peru, and Suriname. NEM started publicly trading in 1925 and currently offers a quarterly dividend yield of 3.50%. The company also focuses on mining essential metals such as silver, lead, and copper.
Last month, the company announced their full acquisition of GT Gold Corporation’s common shares at $2.58 per share, totaling $312.28 million. The company’s revenue in the full year 2020 came in at $11,497 million.
First Eagle Investment Management mentioned that NEM has been taking initiative in supervising its mines to protect local communities while reducing COVID-19 impacts on their company in its Q2 2020 investor letter:
“Given what we view as a high-quality management team and robust balance sheet, Colorado’s Newmont is a prime example of a miner that was prepared to meet the challenges of Covid19. With rigorous protocols already in place, the company has been proactive in managing its mines to protect local communities and infrastructure while at the same time mitigating the pandemic’s impact on its business. In contrast with broad market trends that have companies cutting or suspending dividend payments, Newmont recently increased its quarterly dividend by 79%.”
13. International Business Machines Corp (NYSE: IBM)
No of HFs: 51
Total Value of HF Holdings: $998 Million
Ranking 13th in our list of the 15 best dividend stocks right now is International Business Machines, Corporation. New York-based computer giant IBM has been in the industry since 1911 offering computer hardware, middleware, and software. The tech company has consistently rewarded its shareholders with a dividend for a total of 21 years. As of April 7, the company offers a dividend yield of 4.86% with a market cap of $119.94 billion. In the full year 2020, the company reported a revenue of $73.6 billion.
In 2020, the company announced its plans to diversify its operations with a cloud computing company. The company will temporarily be named NewCo. The new cloud company will focus on infrastructure and begin operations in late 2021.
Shares of IBM surged 16.77% over the past twelve months. The biggest stakeholder of the company is the hedge fund run by Peter Rathjens, Bruce Clarke and John Campbell with 2.7 million shares, worth $344 million.
12. BlackRock, Inc. (NYSE:BLK)
No of HFs: 53
Total Value of HF Holdings: $1.15 Billion
Ranking 12th on the list of best dividend stocks right now is BlackRock, Inc. The New York-based investment firm is one of the world’s largest firms operating in over 30 countries worldwide. BLK offers access to mutual funds and investments related to college funds and retirement income. The company currently offers a dividend yield of 2.11% and has a market cap of $119.32 billion.
The company’s revenue in 2020 surged 11.46% to $16.2 billion. Shares of BLK climbed 76.41% over the last twelve months. Tom Gayner’s Markel Gayner Asset Management is the biggest stakeholder of the stock with 220 thousand shares, worth $158 million.
11. Lockheed Martin Corporation (NYSE: LMT)
No of HFs: 53
Total Value of HF Holdings: $2.52 Billion
Maryland-based defense giant Lockheed Martin Corporation ranks 11th on the list of the 15 best dividend stocks right now. LMT continues to influence the aerospace and military equipment market with four main segments including Aeronautics, Missiles and Fire Control, Rotary, and Mission Systems and Space. The company was recently awarded by the Missile Defense Agency a $3.7 billion contract to create the Next Generation Interceptor (NGI), an advanced missile defense system. LMT currently offers a dividend yield of 2.74% and has a market cap of $106.15 billion.
In RiverPark Advisors, LLC’s Q4 2020 investor letter, they mentioned that LMT shares were weak for the quarter. Here is what they had to say:
“Despite better-than-expected third-quarter results, LMT shares were weak for the quarter as defense spending is expected to be flat for the coming year. With a record $150 billion backlogs and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year in 4-5 years (3Q’s revenue upside was from the F-35), we believe LMT should grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions (LMT acquired AJRD for $4 billion in late December), debt paydown, a 3% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.”
10. Texas Instruments Incorporated (NASDAQ: TXN)
No of HFs: 56
Total Value of HF Holdings: $2.49 Billion
The semiconductor manufacturer Texas Instruments Incorporated ranks 10th on the list of the 15 best dividend stocks right now. The company has been paying a dividend since 2004 with a growth rate of 26% from 2004-2020. As of April 7, the company offers a dividend yield of 2.10%. TXN regularly holds an annual contest for students to create innovative AI solutions relevant to the world. This year is the fourth year of the contest and the company decided to focus on solutions relating to health, wellness, or medicine that will enhance the way we live today.
The company’s revenue in the fourth quarter of 2020 came in at $4.09 billion, owing to higher revenue from electronics, industrial, and automotive.
9. PepsiCo, Inc. (NASDAQ: PEP)
No of HFs: 56
Total Value of HF Holdings: $4.28 Billion
New York-based food and beverage corporation PepsiCo, Inc. ranks 9th in our list of the best dividend stocks right now. The firm creates food and beverage with an excellent brand base such as Pepsi-Cola, Quaker, and Tropicana. The company started paying dividends regularly in 1965. In 2020, PEP rewarded its shareholders with their 48th consecutive annual dividend increase. They currently offer a dividend yield of 2.85% and have a market cap of $198.27 billion.
The company’s overall net revenue for 2020 was $70.37 billion, up 4.8% year-over-year. Shares of PEP grew 8.34% over the past twelve months. With a $1.43 billion stake in PEP, Terry Smith’s Fundsmith LLP owns 9.6 billion shares of the company as of the fourth quarter of 2020.
8. Broadcom, Inc (NASDAQ: AVGO)
No of HFs: 59
Total Value of HF Holdings: $3.34 Billion
Global semiconductor leader Broadcom, Inc. ranks 8th in our list of the 15 best dividend stocks right now. AVGO offers networking, software, wireless, and storage products to data centers. The company currently offers a dividend yield of 2.98% and has a market cap of $197.57 billion. During the COVID-19 pandemic, demand for semiconductor chips grew as a result of increased remote work and entertainment at home. As a result, in the fourth quarter of 2020, the company’s revenue came in at $6.5 billion, up 12% compared to the same period from 2019.
The biggest stakeholder of the stock is Cantillon Capital Management, which had 1.2 million shares, worth $505.7 million. Shares of AVGO jumped 85% over the past twelve months.
7. Cisco Systems, Inc. (NASDAQ: CSCO)
No of HFs: 60
Total Value of HF Holdings: $4.97 Billion
The IT and networking company Cisco Systems Inc. ranks 7th in our list of 15 best dividend stocks right now. CSCO is one of the most valuable cloud computing companies worldwide that offers IP-based networking products such as web security and access points. The company has been consistently increasing its dividends for the last 10 years. Currently, CSCO offers a dividend yield of 2.84% and has a market cap of $219.83 billion. Recently, the company partnered with Intel to deliver products such as the Cisco USC B200 M6, C220 M6, and C240 M6 servers that allow enhanced performance in complicated hybrid cloud environments.
The company’s total revenue in the full year 2020 decreased 5% year over year to $49.3 billion. With a $1.04 billion stake in Cisco Systems, David Blood and Al Gore’s Generation Investment Management owns 23.3 million shares of the company as of the end of the fourth quarter of 2020.
6. US Bancorp (NYSE: USB)
No of HFs: 60
Total Value of HF Holdings: $8.13 Billion
Ranking 6th on the list of the 15 best dividend stocks right now is US Bancorp. Founded in 1968, the company operates various financial services such as lending, cash management, and investment management services among others. USB has been around for quite some time with over 18.7 million customers, with its largest market in California. The company currently offers a dividend yield of 2.96% and has a market cap of $85.36 billion.
The company’s net revenue in 2020 came in at $23.3 billion, up 1.5% year over year. One of the biggest hedge funds having stakes in the company is Warren Buffett’s Berkshire Hathaway which had 131 million shares, worth $6 billion at the end of December.
Mairs & Power mentioned that USB was affected by the difficult interest rate environment and credit cycle concerns in its Q4 2020 investor letter:
“On the negative side, one of the Fund’s biggest detractors in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”
5. Coca-Cola Corporation (NYSE: KO)
No of HFs: 62
Total Value of HF Holdings: $24.6 Billion
The beverage company Coca-Cola Corporation ranks 5th on the list of 15 best dividend stocks right now. Founded in 1892, the corporation has established a good consumer base with over 700,000 employees. KO focuses on the manufacturing and marketing of over 500 brands of beverages such as the company’s most valuable brands, Sprite, Fanta, Costa Coffee, Honest Tea, and Vitaminwater. Legendary billionaire Warren Buffett served on the company’s board of directors for around 17 years and is now one of the largest shareholders of the company with 400 million shares, worth $21 billion.
Coca-Cola has bought many beverage brands such as Minute Maid and Fuze Beverage. However, the company has also acquired different production brands such as Columbia Picture. The acquisition of the company was priced at $692 million which was later sold to Sony (NYSE: SONY) in 1989 for $3 billion.
KO currently offers a dividend yield of 3.15% and has a market cap of $229.60 billion. The company’s net operating revenue in the full year 2020 was $33.01 billion.
4. Pfizer, Inc. (NYSE: PFE)
No of HFs: 63
Total Value of HF Holdings: $1.84 Billion
Ranking 4th on the list of the 15 best dividend stocks right now is Pfizer, Inc. Founded in 1849 by Charles Pfizer and Charles F. Erhart, the Pfizer is one of the biggest biopharmaceutical companies in the world. Pfizer is one of the few companies creating vaccines in the fight against the COVID-19 virus. The company’s revenue in 2020 came in at $42 billion, which made the company one of the most remarkable biotech firms based on market capitalization. The company currently offers a dividend yield of 4.34% and has a market cap of $200.31 billion.
Ken Griffin’s Citadel Investment Group is one of the top hedge funds having positions in PFE, with 12 million shares worth $466 million. The stock gained 9.56% over the past twelve months.
Amana Mutual Funds mentioned that they expect better performance from PFE in its Q4 2019 investor letter:
“Pfizer was engaged in its corporate restructuring. During the year it merged its consumer health business with that of GSK, forming a joint venture, while also merging its generics business with Mylan. We expect the leaner Pfizer to demonstrate better performance going forward.”
3. Verizon Communications, Inc. (NYSE: VZ)
No of HFs: 67
Total Value of HF Holdings: $10.5 Billion
Holding the 3rd spot on the list of the 15 best dividend stocks right now is Verizon Communications, Inc. The tech giant focuses on voice, data, and solutions for networks and platforms with products such as Fios Home Internet, LTE Home Internet, Fios TV, among others. In 2020, internet users in the US alone were a total of 83% of the total population, according to data from Statista. The company currently offers a dividend yield of 4.25% and has a market cap of $244.15 billion.
The company’s revenue in the full year 2020 came in at $31 billion. The stock gained 2% in the last twelve months. Mott Capital Management mentioned that VZ has been one of the stocks that the firm has been struggling with in its Q4 2020 investor letter:
“Verizon finished the year lower by around 4.3% and has been a hard holding over the past 6 years. It has gone nowhere and has been the one stock I struggle with. However, 5G has finally arrived. If 5G can deliver on the promise I think it can, then Verizon should eventually come around. I remain hopeful.”
Pixabay/Public Domain
2. Home Depot (NYSE: HD)
No of HFs: 79
Total Value of HF Holdings: $4.92 Billion
Ranking 2nd on the list of the 15 best dividend stocks right now is Home Depot. Founded in 1978, the company operates the biggest online and brick and mortar home improvement needs such as appliances, automotive, building materials, electricals, and alike. In 2020, the company reported a net sales total of $132.1 billion with over 2,000 stores globally. Topping the company’s sales was the garden product category with over $14 billion in worldwide sales. The company currently offers a dividend yield of 2.11% and has a market cap of $335.97 billion.
Ken Fisher’s Fisher Asset Management is one of the biggest funds having positions in Home Depot with 6 million shares, worth $1.8 billion at the end of the fourth quarter. An insider purchased 4,745 shares worth $210 in March 2020. The stock is up 48% since then.
Madison Mid Cap Fund mentioned that HD is a much stronger company in its Q4 2020 investor letter:
“At the very end of the year, we received cash for our shares of HD Supply, which had agreed to be acquired by Home Depot. We initially invested in the summer of 2019, so it was a short but successful investment. It’s full circle for Home Depot, as this was a business that it used to own (no prize for guessing what the “HD” in HD Supply stood for) but had divested in 2007 when a new CEO took over and was intent on simplifying the company to clean up the mess created by his predecessor. Today, Home Depot is a much stronger company, and HD Supply is a much stronger and more focused company, having itself shed many businesses to concentrate on its crown jewel, the facilities distribution business. While we certainly contemplated that it might get acquired at some point given that there were a handful of logical buyers, our investment didn’t rely on that happening. We would have been happy to hold on for a longer ride. But we’re not going to complain about a bird in hand.”
1. Merck & Co, Inc. (NYSE:MRK)
No of HFs: 82
Total Value of HF Holdings: $7.12 Billion
Topping the list of the 15 best dividend stocks right now is Merck & Co, Inc., known as one of the world’s leading pharmaceutical health care companies with a current dividend yield of 3.42% and a market cap of $192.68 billion. The company has established its operations in several countries such as Europe, Africa, Asia, and America. MRK has been in the market since 1891 producing medicine, vaccine, and animal healthcare products. Earlier in the year, the company acquired Pandion Therapeutics, a therapeutics company with a total offer of $1.8 billion. MRK currently offers a dividend yield of 3.42% and has a market cap of $192.68 billion. In 2020, MRK’s cancer drug sales had the highest revenue with a significant increase of around $3.3 billion compared to the previous year.
The company’s net revenue in the fourth quarter of 2020 came in at $12.5 billion. One of the biggest hedge funds having stakes in the company is Warren Buffett’s Berkshire Hathaway which had 131 million shares, worth $6 billion at the end of December.
Saturna Capital Corporation mentioned that MRK benefited from low valuations in its Q1 2020 investor letter:
“Bristol-Myers and Merck benefited from low valuations, strong balance sheets, and attractive dividends going into the crisis, minimizing the negative fallout.”
You can also take a peek at Unknown Billionaire Phill Gross’ Top 10 Stock Picks and Top 10 Food Delivery Stocks to Buy in 2021
Follow Insider Monkey on Twitter
Suggested articles:
- 15 Most Valuable Cloud Computing Companies
- 10 Best Bank Stocks for 2021
- 10 Best Long-Term Dividend Stocks to Buy and Hold
Disclosure: None. 15 Best Dividend Stocks Right Now is originally published on Insider Monkey.
