In this article we will take a look at the 10 best income stocks to invest in.
Amid the COVID-19 pandemic that has led to massive job losses and financial volatility, investors seek steady and risk-free sources of income. If conducted well, dividend investing is one of the easiest ways to diversify your earnings and guarantee a steady income.
Data shows that dividends account for a big chunk of gains in the stock market. Jeremy Siegel, in his book titled The Future for Investors, mentions that around 97% of the total returns from stocks come from reinvested dividends. According to a report from Advantus, dividends accounted for 40% of the S&P 500 index’s returns between 1926 and 2013. In addition, the report notes that reinvested dividends were less volatile than the broader S&P 500. Stocks with high-growth dividends have continually outperformed the rest of the market in higher inflationary periods since 1972.
Our readers know that we usually recommend stocks with decent yields and a history of consistent dividend hikes. For example, International Business Machines Corporation (NYSE: IBM) is one of the top dividend-paying companies. Along with consistent dividend hikes, the company is also investing in its future. International Business Machines Corporation (NYSE: IBM) recently announced a significant breakthrough in semiconductor design and process following the launch of the first chip with 2 nanometer (nm) nanosheet technology. International Business Machines Corporation (NYSE: IBM) has also partnered with HCL Technologies (HCL) to streamline and improve threat management through a modernized security operation center (SOC) platform.
Microsoft Corporation (NASDAQ: MSFT) is also a decent dividend-paying tech stock. The company has been declaring dividends every year since 2011. The company has been ramping up its operations and expanding in other territories in a bid to tap into the growing demand for cloud solutions driven by the pandemic. Microsoft Corporation (NASDAQ: MSFT)’s expansion into Malaysia, Indonesia, and Taiwan is expected to generate more than $21 billion in new revenue and create an additional 100,000 jobs within those countries.
Visa Inc. (NYSE: V) also has an impressive dividend payment history. The company paid quarterly dividends each quarter since 2013. The card payment processing company also has a strong balance sheet and impressive quarterly earnings with $5.7 billion in net revenues in Q1 2021. Visa Inc. (NYSE: V) has partnered with Airbnb, Inc. (NASDAQ: ABNB) to allow Airbnb hosts in select markets to access their earnings through the Visa Direct program quickly.
Investing in dividend stocks has become extremely important in the current age of financial volatility, which isn’t sparing even the smart money. 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.
In this article we will mention some of the best income stocks to invest in. These stocks have decent dividend yields and strong growth potential. Let’s start the list right away.
Best Income Stocks to Invest In
10. Ares Commercial Real Estate Corporation (NYSE: ACRE)
Dividend Yield: 8.7%
Number of Hedge Fund Holders: 8
Ares Commercial Real Estate Corporation (NYSE: ACRE) is a finance company focusing on investing in and managing middle-market commercial real estate loans plus other real estate-related investments. The stock ranks 10th in the list of best income stocks to invest in now.
Ares Commercial Real Estate Corporation (NYSE: ACRE) recently reported GAAP net income of $15.7 million or $0.45 per diluted common share. Additionally, distributable earnings during by the quarter was $13.9 million or $0.40 per diluted common share. Total revenue during the quarter amounted to $21.2 million and beat projections by $3.44 million.
Ares Commercial Real Estate Corporation (NYSE: ACRE) has declared a quarterly dividend of $0.02 per share. The board also announced a supplemental cash dividend of $0.02/share for Q1 2021. The company has a record of increasing dividends since June 2012.
9. Magellan Midstream Partners, L.P. (NYSE: MMP)
Dividend Yield: 8.48%
Number of Hedge Fund Holders: 22
Magellan Midstream Partners, L.P. (NYSE: MMP) specializes in the transportation, storage, and distribution of crude oil and refined petroleum products. The company has a record of increasing dividends since June 2001. The stock ranks 9th in the list of best income stocks to invest in now.
In its latest earnings report for Q1 2021, Magellan Midstream Partners, L.P. (NYSE: MMP) reported $221.3 million in net income compared to $287.6 million reported in Q1 2020.
Magellan Midstream Partners, L.P. (NYSE: MMP) management has increased its annual project DCF for 2021 by $50 million to $1.07 billion on high Q1 financial results reported by the company. In addition, the company benefited from favorable commodity pricing for its gas liquids blending activities.
Magellan Midstream Partners, L.P. has announced the sale of almost half of its stake in MVP Terminalling, LLC, a joint venture with operations in Pasadena. The deal is valued at $270 million and was completed on April 19. Following the sale, Magellan currently has a 25% holding in MVP Terminalling and is the main operator.
Like BP plc (NYSE: BP), Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V) and International Business Machines Corporation (NYSE: IBM), MMP is one of the best income stocks to invest in now.
Magellan Midstream Partners, L.P. (NYSE: MMP) and Enterprise Products Partners L.P. (NYSE: EPD) have, through their affiliates, reached an agreement for the delivery of crude oil in Houston and its environment. The move is in response to the higher market interest in Houston, price transparency, and flow assurance.
8. Sunoco LP (NYSE: SUN)
Dividend Yield: 9.41%
Number of Hedge Fund Holders: 3
Sunoco LP (NYSE: SUN) has a network of subsidiaries that distributes and retails motor fuels in the United States. The company’s businesses are grouped into segments Fuel Distribution and Marketing. The stock ranks 8th in the list of best income stocks to invest in now.
Sunoco LP (NYSE: SUN) recently reported GAAP EPS of $1.60 and beat projects by $0.97 for Q1 2021. In addition, revenues during the quarter increased by 6.1% to $3.47 billion compared to Q1 2020. Sunoco LP (NYSE: SUN)’s revenue beat analysts’ expectations by $130 million. Like BP plc (NYSE: BP), Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V) and International Business Machines Corporation (NYSE: IBM), SUN is one of the best income stocks to invest in now.
For the full-year 2021, Sunoco LP (NYSE: SUN) projects adjusted EBITDA guidance to range between $725 million and $765 million. During the year, Sunoco LP (NYSE: SUN) also hopes to expand its midstream footprint. The company has a record of increasing dividends since November 2012.
7. MPLX LP (NYSE: MPLX)
Dividend Yield: 9.53%
Number of Hedge Fund Holders: 13
MPLX LP (NYSE: MPLX) is an oil company that owns and operates logistics assets and midstream energy infrastructure in the U.S. It has increased dividend consistently over the last 7 years.
In the Q1 2021finacilal results, MPLX LP (NYSE: MPLX) reported $739 million in net income while adjusted EBITDA was $1.4 billion. The company generated $1.1 billion in net cash from operating activities. MPLX has declared a dividend of $0.6875/share for Q1 2021. Like BP plc (NYSE: BP), Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V) and International Business Machines Corporation (NYSE: IBM), MPLX is one of the best income stocks to invest in now.
According to MPLX LP (NYSE: MPLX) CEO Michael Hennigan, the company is likely to witness excess cash to buy back shares. The decision is yet to be made as the company continues to monitor market conditions.
6. BP Midstream Partners LP (NYSE: BPMP)
Dividend Yield: 9.95%
Number of Hedge Fund Holders: 6
BP Midstream Partners LP (NYSE: BPMP) is a U.S-based oil company that owns, acquires, develops, and operates pipelines and other oil assets. The company is a subsidiary of oil giant BP plc (NYSE: BP).
BP plc (NYSE: BP)’s Midstream Partners LP recently reported strong financial results with $42.0 million or $0.39 per common unit in net income for Q1 2021. During the quarter, BP Midstream Partners LP (NYSE: BPMP)’s cash from operating activities amounted to $48.0 million. GAAP EPS during the quarter was $0.39 and beat projections by $0.01. The company has a record of increasing dividends since June 2018. In Q1 2021, the company recorded a 12% increase in offshore pipeline volumes. In addition, there was an 8% increase in crude oil and refined products shipped during the quarter.
BPMP’s parent BP plc (NYSE: BP) itself has a yield of over 4%. The company paid a dividend in 2020 despite being unprofitable. Barclays recently gave bullish comments for BP plc (NYSE: BP), citing the 10% cash return to shareholders via dividends and buybacks at $60/bbl, which the investment firm said are the best in the sector. Barclays also called BP the most “misunderstood investment case.”
5. Phillips 66 Partners LP (NYSE: PSXP)
Dividend Yield: 9.66%
Number of Hedge Fund Holders: 4
Phillips 66 Partners LP (NYSE: PSXP) is an oil company that owns, acquires, and develops midstream assets. Phillips 66 stock has been on an upward trajectory after the company announced it is seeking merger or partnership deals for its MLP partners. The stock ranks 5th in the list of best income stocks to invest in.
The company finished the first quarter of 2021 with a strong balance sheet with cash and cash equivalents of $3 million. The Partnership declared a quarterly dividend of $0.875/share. The company has a record of increasing dividends since October 2013.
In a bid to expand its capacity, Phillips 66 Partners LP (NYSE: PSXP) is constructing a 16-inch C2G ethane pipeline, which is expected to be complete by the end of 2021. The new pipeline will connect the company’s Clemens Caverns storage facility to Gregory petrochemical facilities in Corpus Christi.
4. Höegh LNG Partners LP (NYSE: HMLP)
Dividend Yield: 11.03%
Number of Hedge Fund Holders: 6
Höegh LNG Partners L.P. (NYSE: HMLP) is an energy company that owns, operates, and acquires liquefied natural gas (LNG) carriers, floating storage, and regasification units (FSRUs), and other LNG infrastructure assets under long-term charters. The stock ranks 2nd in the list of best income stocks to invest in.
In its latest financial results, Höegh LNG Partners L.P. (NYSE: HMLP) reported $36.1 million in revenue for Q4 2020 compared to $38.5 million reported in Q1 2019. The company generated operating income amounting to $25.5 million during the quarter, while net income totaled $18.5 million. The company has a record of increasing dividend since October 2014.
Höegh LNG Partners L.P. (NYSE: HMLP) shareholder Cobas Asset Management recently announced that it would vote against a proposed takeover by Leif Höegh and funds. Cobas Asset Management owns a 13% stake in the oil company. Leif Höegh recently announced that it was partnering with Morgan Stanley Infrastructure Partners to acquire Höegh LNG private for $2.74 billion.
3. USA Compression Partners, LP (NYSE: USAC)
Dividend Yield: 13.82%
Number of Hedge Fund Holders: 2
USA Compression Partners, LP (NYSE: USAC) offers compression services under fixed-term contracts to companies in the oil industry.
The company reported total revenues of $157.5 million in Q1 2021 compared to $179.0 million reported in Q1 2020. Net income during the quarter was $0.4 million compared to a net loss of $602.5 million reported in Q1 2020. Following the positive earnings report, USA Compression Partners, LP (NYSE: USAC) declared a quarterly dividend of $0.525/share. The company has a record of increasing dividends since May 2013. The stock ranks 3rd in the list of best income stocks to invest in.
USA Compression Partners, LP (NYSE: USAC) also got its rating improved from “Neutral” to “Buy” by UBS’s Sheer Gershuni.
2. Shell Midstream Partners, L.P. (NYSE: SHLX)
Dividend Yield: 11%
Number of Hedge Fund Holders: 7
Shell Midstream Partners, L.P. (NYSE: SHLX) is an oil company that owns, operates, and develops pipelines and other logistical and midstream assets in the U.S. The company has a record of increasing dividend since January 2015.
The company recently reported $163 million or $0.37 per share in net income attributable to the Partnership for Q1 2021. Shell Midstream Partners, L.P. (NYSE: SHLX)’s also reported $201 million in revenue attributed to the partnership.
In its quarterly update, the company said it had reported an 11% growth in offshore oil pipeline volumes in Q1, although onshore flows continued to drop due to the COVID-19 pandemic. Shell Midstream Partners, L.P. (NYSE: SHLX)’s Louisiana coast-based Mars crude oil pipeline system reported a 13.0% growth in volumes from 441K/ bbl/day in Q4 2020 498K in Q1 2021.
Shell Midstream Partners, L.P. (NYSE: SHLX) is working on expanding the system by ~65K bbl/day, and currently, the group is acquiring materials for the expansion.
1. IBM Common Stock (NYSE: IBM)
Dividend Yield: 4.53%
Number of Hedge Fund Holders: 51
IBM Common Stock (NYSE: IBM) tops the list of best income stocks to invest in now. The company has been increasing its dividend consistently for the last 26 years. Last month, IBM declared a quarterly dividend of $1.64 per share, a 0.6% increase from prior dividend of $1.63.
You can also take a peek at 10 Best Healthcare Dividend Stocks and Top 15 Dividend Stocks With Upside Potential.
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Disclosure: None. 10 Best Income Stocks to Invest In is originally published on Insider Monkey.
