In this article we will take at 10 best dividend stocks for 2021. You can skip our detailed discussion on the merits of dividend investing and go to 5 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.
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Disclosure: None. 10 Best Dividend Stocks For 2021 is originally published on Insider Monkey.
