In this article we presented the 10 best American dividend stocks to invest in. You can skip our detailed discussion on these stocks, and read the 5 Best American Dividend Stocks to Invest In.
With the effects of the COVID-19 pandemic felt by the entire world, the stock market has also become increasingly volatile making dividend investing even trickier. But while companies are still recovering from the reverberations of the pandemic, dividend stocks can still provide investors with a steady income. Investing in dividend stocks that have a long history of growing their payouts over time is still a safe bet. Dividend stocks have a multipurpose role which makes them suitable for all types of investors. Therefore, stocks with strong dividend yields have a much greater appeal than non-dividend paying stocks, especially during times of crisis.
Many American companies that have consistently paid dividends have shown strong financial performance throughout the years. They are able to pay these dividends due to enough cash holdings. For example, companies like International Business Machines Corporation (NYSE: IBM) and Exxon Mobil Corporation (NYSE: XOM) have increased their dividends and payout ratios over the past several years making them an ideal choice for dividend investment. Other interesting American dividend stocks to invest in include Altria Group, Inc. (NYSE: MO) which is a leading cigarette manufacturer. It has become one of the most popular dividend stocks with its recent investment in Cronos Group Inc. and a high dividend yield of 6.88% paying a higher-than-average annual dividend of $3.44. Similarly, ONEOK, Inc. (NYSE: OKE), a leading oil and gas company, has declared a quarterly dividend of $3.74 per share on an annual basis in April 2021 with a dividend yield of 6.93%.
One reason why dividend stocks are preferred by investors is because of the belief that cash is king. Most people evaluate a company’s performance by looking at its cash flow particularly in difficult market conditions such as the COVID-19 pandemic. A high dividend payment usually reflects that a company has enough resources to pay its shareholders unless the company’s dividend cover ratio is very poor. Studies have also shown that high dividend stocks are less effected in times of trouble than non-dividend stocks. Moreover, strong dividend policies can lead to more selective and higher returns. When companies pay dividends, they are able to restrict their spending and have more stringent criteria for their investments which leads to better decision making and cost saving initiatives and ultimately better overall returns.
However, dividend investing also involves some risk as dividends are never guaranteed. For example, during the COVID-19 pandemic, many prominent companies such as The Walt Disney Company (NYSE: DIS) and HSBC Holdings plc (NYSE: HSBC) suspended their dividend payments in order to conserve their cash. Shareholder payouts fell by 22% to $382.2 billion in 2020, according asset manager Janus Henderson. Therefore, diversification should always be a priority for any investor looking to secure their wealth. That’s why in our list of best American dividend stocks, you will see companies like British American Tobacco p.l.c. (NYSE: BTI), International Business Machines Corporation (NYSE: IBM) and Altria Group, Inc. (NYSE: MO) which have strong core businesses and a good track record of dividend hikes. British American Tobacco p.l.c. (NYSE: BTI), for example, announced better-than-expected quarterly results in February and increased its full-year dividend by 2.5%.
Finding valuable American dividend stocks is no easy feat amidst market volatility and uncertain economic times around the world. 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.
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Here is the list of 10 best American dividend stocks to invest in.
Best American Dividend Stocks to Invest In
10. Cisco Systems, Inc. (NASDAQ: CSCO)
Dividend Yield: 2.80%
Number of Hedge Fund Holders: 60
Cisco Systems, Inc. (NASDAQ: CSCO) develops infrastructure platforms such as networking technologies and data center products which deliver networking capabilities and help transport and store data. Based in San Jose, California, the $224.7 billion blue-chip stock has a dividend yield of 2.80% with a payout ratio of 60.25%. Cisco Systems, Inc. (NASDAQ: CSCO) dividend has increased for nine consecutive years and has remained a cash cow for its shareholders throughout the COVID-19 pandemic.
The company returned $2.3 billion to its shareholders through stock buybacks and dividends in the quarter ended March. The recent announcement of Cisco Systems, Inc. (NASDAQ: CSCO) of its plans to acquire Kenna Security, Inc has helped boost its security offerings. Cisco Systems, Inc. (NASDAQ: CSCO) hopes to combine Kenna’s services with its SecureX platform which is likely to further boost the company’s security revenues which already experienced a growth rate of 10% year-over-year to $822 million in the first quarter of fiscal year 2021. This communication equipment company is experiencing growing demand as business activities are recovering throughout the world making it a stable dividend stock.
Cisco Systems, Inc. (NASDAQ: CSCO) ranks 10th in the list of the 10 best American dividend stocks to invest in 2021.
9. AbbVie Inc. (NYSE: ABBV)
Dividend Yield: 4.45%
Number of Hedge Fund Holders: 83
AbbVie Inc. (NASDAQ: ABBV) has caught the eye of many investors as it makes strides in the healthcare industry. The company invests in pharmaceutical treatments and is making cutting-edge medical discoveries. The COVID-19 pandemic has brought healthcare companies to the forefront and AbbVie Inc. (NASDAQ: ABBV) is one of the companies that has reported huge profits in the recent quarter which means that investors can expect high dividends as well. The company also acquired botox maker Allergan which has further diversified its portfolio.
With a market cap of over $200 billion, AABV is currently selling the highest-grossing drug in the market called Humira which is used for the treatment of arthritis. In the first quarter of 2021, AbbVie Inc. (NASDAQ: ABBV) revenues rose by 51% year-over-year, beating the EPS estimated according to GAAP by $0.52. The quarterly GAAP EPS reported by the company was $1.99. This pharma giant is a top pick in the 10 best American dividend stocks to invest in list as the company boasts an attractive dividend of 4.45% which is much higher than the S&P 500’s average of approximately 2%. AbbVie Inc. (NASDAQ: ABBV) has increased its dividend at an average rate of 19% over the past 5 years.
AbbVie Inc. (NASDAQ: ABBV) ranks 9th in Insider Monkey’s 10 best American dividend stocks to invest in list.
8. International Business Machines Corporation (NYSE: IBM)
Dividend Yield: 4.53%
Number of Hedge Fund Holders: 51
International Business Machines Corporation (NYSE: IBM) is a safe bet when it comes to investing in the tech industry. The company provides integrated cloud solutions and services that are continuing to expand and are being applied in various industries around the world. The shares of International Business Machines Corporation (NYSE: IBM) have gained 7.65% over the past month and the company has announced strong financial results for the first quarter of fiscal year 2021 which was driven primarily by the cloud computing segment. Revenue for IBM grew by 1% to $17.7 billion while the GAAP gross profit margin was up by 120 basis points according to the company’s latest press release.
International Business Machines Corporation (NYSE: IBM) reported an adjusted earnings per share of $1.77 which beat consensus forecasts. The company has estimated a revenue growth for the full year and a free cash flow of approximately $12 billion in 2021. The acquisition of Salesforce partner Waeg by International Business Machines Corporation (NYSE: IBM) is expected to significantly boost its AI and hybrid-cloud strategy. With a dividend yield of 4.53% International Business Machines Corporation (NYSE: IBM) is selected as one of the best American dividend stocks to buy now due to its consistent dividend hikes over the past 10 years. The dividend growth rate for the past 10 years is approximately 9.23%. In 2020, the company paid an annual dividend of $6.51 per share.
7. Iron Mountain Incorporated (NYSE: IRM)
Dividend Yield: 5.68%
Number of Hedge Fund Holders: 18
Iron Mountain Incorporated (NYSE: IRM) provides storage and information management services and has shown strong financial performance in the recent years. With a market cap of $12.352 billion, the company is serving more than 225,000 companies around the world. Iron Mountain Incorporated (NYSE: IRM)’s legal structure is such that it is able to avoid double taxation by paying out 90% of its taxable income to its shareholders. Hence it is an ideal choice for investors who prioritize steady income and meaningful growth potential. The current dividend yield of Iron Mountain Incorporated (NYSE: IRM) is 5.68% and is one of the best performers on the list with a payout ratio of 218.94%. Like British American Tobacco p.l.c. (NYSE: BTI), International Business Machines Corporation (NYSE: IBM) and Altria Group, Inc. (NYSE: MO), IRM is one of the best dividend stocks to buy.
Iron Mountain Incorporated (NYSE: IRM)’s reported revenue for the first quarter of 2021 was $1.08 billion compared to $1.07 billion in same quarter of the previous year which shows an increase of 1.2%. Moreover, the Adjusted EBITDA for the quarter totaled $380.6 million which was a 4% year-over-year increase from $366 million in 2020. The adjusted EPS amounted to $0.32 for the first quarter of 2021 compared to $0.28 in the previous year. Iron Mountain Incorporated (NYSE: IRM) declared a quarterly cash dividend of $0.6185 per share on May 6, 2021. This dividend is payable on July 6, 2021. The company has also improved its financial outlook for the current year due to its quarter outperformance which will fare well for its shareholders as well.
Iron Mountain Incorporated (NYSE: IRM) ranks 8th in the 10 best American dividend stocks to invest in.
6. Exxon Mobil Corporation (NYSE: XOM)
Dividend Yield: 5.60%
Number of Hedge Fund Holders: 63
Exxon Mobil Corporation (NYSE: XOM) is involved in the exploration and production of crude oil and natural gas in the US and around the world. With a market cap of $255.87 billion, the company is currently planning to convert its refineries in Altona and Australia into fuel import terminals. According to its latest earnings report, Exxon Mobil Corporation (NYSE: XOM) has announced first quarter 2021 earnings of $2.7 billion or $0.64 per diluted share. The company’s shares have gained 45% over the past 12 months. Exxon Mobil Corporation (NYSE: XOM)’s Board of Directors have declared a cash dividend of $0.87 per share on its common stock which is payable on June 10, 2021. The company’s dividend payments to its shareholders have grown at approximately 6.1% annually over the last 38 years making it one of the best American dividend stocks to invest in. Like British American Tobacco p.l.c. (NYSE: BTI), International Business Machines Corporation (NYSE: IBM) and Altria Group, Inc. (NYSE: MO), XOM is one of the best dividend stocks to buy now.
First Eagle Investment Management, in their Q1 2021 investor letter, mentioned Exxon Mobil Corporation (NYSE: XOM). Here is what the fund said:
“Leading contributors in the First Eagle Global Fund this quarter included Exxon Mobil Corporation. Recovering oil prices on improvements in demand for crude and other distillates helped fuel strong performance across the energy complex, including shares of Exxon Mobil Corporation (NYSE: XOM). The company’s financial results have improved markedly from the Covid-related demand shocks in 2020, helping ease concerns about the sustainability of Exxon’s dividend, which is among the largest in the S&P 500 Index. In addition, Exxon has reiterated its commitment to reducing capital expenditures, which we believe should further bolster the resilience of its cash flows against future demand slowdowns.”
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Disclosure: None. 10 Best American Dividend Stocks to Invest In is originally published on Insider Monkey.
