In this article, we will be looking at the 10 best dividend stocks for long term. To skip our detailed analysis of dividend investing, you can go directly to see the 5 Best Dividend Stocks for Long Term.
Dividend investing is a strategy that has managed to stick around as long as it has for two main reasons: first, it enables investors to benefit by receiving a part of any profits a company they hold stakes in will bring in, and second, dividend investors are also benefitting from any additional growth in their portfolio as their stocks and holdings become more valuable. Finally, dividend investing becomes all the more appealing for investors dealing with companies offering a dividend reinvestment plan, or DRIP, through which investors can choose to reinvest their dividends and buy more shares in the relevant company.
Dividends Vs Bonds: Which Is a Better Investment?
Some may consider dividend investing to be too much risk for too little reward, and may thus gravitate toward safer investment options providing similar benefits, like investing in bonds. However, a word for the wise is warranted for those thinking along these lines: bond investments tend to have lesser inflation protection as compared to dividend stocks, for instance, and are also steadily becoming less popular with investors, according to BlackRock Inc. Dividend stocks, on the other hand, are scheduled to continue gaining popularity throughout the year, according to a Bloomberg report. Tony DeSpirito, the chief investment officer of US fundamental active equity at BlackRock Inc. has commented that it is safe and beneficial to invest in dividend stocks, which are set to provide better income than bonds.
Additionally, dividend stocks have always been a vital contributor to the returns any investor receives, and this has held true for the past 50 years at least, according to Hartford Funds in their 2021 report on the power of dividend stocks. Between 1930 and 2020, dividends have been estimated to have contributed about 41% to the S&P 500 Index’s total returns, for instance, and if we go back to the 1970s, dividends contributed about 80% to the S&P 500 Index’s total returns.
However, before going and investing in any dividend stock you can find, it’s important to take note of two things: first, dividend investments are risky investment options, much like any other investment option, and so one must take care to consider only stable dividend-yielders like the so-called “dividend kings” such as The Procter & Gamble Company (NYSE: PG), The Coca-Cola Company (NYSE: KO), Johnson & Johnson (NYSE: JNJ), and PepsiCo, Inc. (NASDAQ: PEP). Second, the pandemic has changed the way all investment strategies work, and so one must tailor their expectations held of dividend investments according to the new financial landscape.
One change in dividend investing that can be expected, for instance, is lower payouts from dividend stocks. Not every dividend stock has fully recovered from the financial strain placed on the stock market, and Janus Henderson has estimated that over half the dividend-paying companies canceled their dividends in the second quarter of 2020. Additionally, about 25% of dividend-yielding companies lowered their cash payouts as well. In light of these developments, it becomes all the more important to take care of where you invest, and so we have compiled this list of the 10 best dividend stocks for long term.
Investing is becoming difficult by the day, even for 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.
Without further ado, let’s look at the 10 best dividend stocks for long term. The stocks added to our list below were selected on the basis of hedge fund popularity, analysts’ ratings, fundamentals, and growth potential based on core business strengths. We also took into account the number of years these companies have been paying and increasing their dividends.
Best Dividend Stocks for Long Term
10. Cardinal Health, Inc. (NYSE: CAH)
Number of Hedge Fund Holders: 39
Dividend Yield: 3.41%
Cardinal Health, Inc. (NYSE: CAH) is an integrated healthcare service and products company in the US and internationally. The company provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, and other such facilities. It ranks 10th on our list of the best dividend stocks for long term.
This January, Cardinal Health, Inc. (NYSE: CAH) was upgraded from Underperform to Peer Perform by Wolfe Research with a $58 price target, and the company’s Lymphoseek pediatric indication was also granted FDA approval this June. In the fiscal third quarter of 2021, Cardinal Health, Inc. (NYSE: CAH) had an EPS of $1.53, missing estimates by -$0.03. The company’s revenue was $39.27 billion, up 0.3% year over year but missing estimates by -$909.56 million, and it has a gross profit margin of 4.4%. The stock has a forward PE ratio of 9.52 and it has gained 1.99% in the past 6 months and 7.73% year to date.
Cardinal Health, Inc. (NYSE: CAH) has also consistently increased its dividend for the last 25 years.
As of the end of the first quarter of 2021, 39 hedge funds out of the 866 tracked by Insider Monkey held stakes in Cardinal Health, Inc. (NYSE: CAH) worth roughly $967 million. This is compared to 49 hedge funds in the previous quarter with a total stake value of about $1.14 billion.
9. ABM Industries Incorporated (NYSE: ABM)
Number of Hedge Fund Holders: 17
Dividend Yield: 1.77%
ABM Industries Incorporated (NYSE: ABM) is a provider of integrated facility solutions in the US and internationally. The company’s segments include the Business & Industry, Technology & Manufacturing, Education, Aviation, and Technical Solutions segments. It ranks 9th on our list of the best dividend stocks for long term.
This June, ABM Industries Incorporated (NYSE: ABM) announced the upsizing of its credit facility to $1.95 billion to enhance financial flexibility and provide increased liquidity for strategic growth initiatives in the future. The company has also provided 2021 guidance for an increase in adjusted EPS to $3.30 – $3.50.
This April, KeyBanc analyst Sean Eastman raised the firm’s price target on ABM Industries Incorporated (NYSE: ABM) to $60 while retaining its Overweight rating, and commenting that ABM Industries Incorporated (NYSE: ABM) is a beneficiary of the coronavirus pandemic, and its balance sheet and unmatched scale are rewarding the company with an excellent position in the janitorial space.
The company has retained its dividend for about 54 years.
In the fiscal second quarter of 2021, ABM Industries Incorporated (NYSE: ABM) had an EPS of $0.82, beating estimates by $0.11. The company’s revenue was $1.50 billion, up 0.09% year over year and beating estimates by $22.40 million, and it has a gross profit margin of 16.96%. The stock has a forward PE ratio of 12.73 and it has gained 5.28% in the past 6 months and 16.20% year to date.
As of the end of the first quarter of 2021, 17 hedge funds out of the 866 tracked by Insider Monkey held stakes in ABM Industries Incorporated (NYSE: ABM) worth roughly $40.3 million. This is compared to 20 hedge funds in the previous quarter with a total stake value of about $37.2 million. Like The Procter & Gamble Company (NYSE: PG), The Coca-Cola Company (NYSE: KO), Johnson & Johnson (NYSE: JNJ), and PepsiCo, Inc. (NASDAQ: PEP), ABM Industries Incorporated (NYSE: ABM) is a good dividend stock to invest in.
8. Air Products and Chemicals, Inc. (NYSE: APD)
Number of Hedge Fund Holders: 32
Dividend Yield: 2.06%
Air Products and Chemicals, Inc. (NYSE: APD) is a company providing atmospheric gases, process and specialty gases, equipment, and services worldwide. The company ranks 8th on our list of the best dividend stocks for long term.
On June 11th, Susquehanna upgraded Air Products and Chemicals, Inc. (NYSE: APD) to Positive with a $350 price target. In the same month, Societe Generale raised its price target on Air Products and Chemicals, Inc. (NYSE: APD) from $295 to $334, reiterating a Buy rating on the shares, while Wolfe Research also initiated coverage of the stock with an Outperform rating. Analyst Josh Silverstein has commented that the company has a stable generation of cash flow, which allows for it to fund long-term initiatives in Energy Transition. Additionally, the company has revealed plans to build a net-zero hydrogen energy complex in Alberta this year. Air Products and Chemicals, Inc. (NYSE: APD) has retained its dividend for about 39 years, making it a highly reliable dividend-yielding stock as well.
In the fiscal second quarter of 2021, Air Products and Chemicals, Inc. (NYSE: APD) had an EPS of $2.08, missing estimates by -$0.03. The company’s revenue was $2.5 billion, up 12.89% year over year, beating estimates by $149.99 million and it has a gross profit margin of 32.1%. The stock has gained 1.77% in the past 6 months and 8.42% year to date.
By the end of the first quarter of 2021, 32 hedge funds held stakes in Air Products and Chemicals, Inc. (NYSE: APD) worth roughly $586 million. This is compared to 50 hedge funds in the previous quarter with a total stake value of roughly $1.28 billion. Like The Procter & Gamble Company (NYSE: PG), The Coca-Cola Company (NYSE: KO), Johnson & Johnson (NYSE: JNJ), and PepsiCo, Inc. (NASDAQ: PEP), Air Products and Chemicals, Inc. (NYSE: APD) is a good dividend stock to invest in.
7. Raytheon Technologies Corporation (NYSE: RTX)
Number of Hedge Fund Holders: 58
Dividend Yield: 2.38%
Raytheon Technologies Corporation (NYSE: RTX) is an aerospace and defense company that provides systems and services for commercial, military, and government customers across the world. It ranks 7th on our list of the best dividend stocks for long term.
This year, Raytheon Technologies Corporation (NYSE: RTX) has managed to bag a number of contracts including a $172 million naval air systems contract and a $2 billion contract for the US air force this July, and another $328 million contract for naval air systems command this June, among several others. In June, Jefferies raised its price target on Raytheon Technologies Corporation (NYSE: RTX) from $95 to $105, keeping its Buy rating on the shares, in light of hosing investor meetings with the company’s CEO and CFO. Raytheon Technologies Corporation (NYSE: RTX) has also received Buy ratings from Langenberg and Redburn, while Wells Fargo holds an Equal Weight rating on the shares.
In the first quarter of 2021, Raytheon Technologies Corporation (NYSE: RTX) had an EPS of $0.90, beating estimates by $0.07. The company’s revenue was $15.25 billion, missing estimates by -$81.84 million, and it has a gross profit margin of 14.82%. The stock has gained 22.86% in the past 6 months and 25.43% year to date as well.
Raytheon Technologies Corporation (NYSE: RTX) has retained its dividend for about 28 years, making it a stable dividend-yielding stock to consider investing in.
As of the end of the first quarter of 2021, 58 hedge funds out of the 866 tracked by Insider Monkey held stakes in Raytheon Technologies Corporation (NYSE: RTX) worth roughly $2.49 billion. This is compared to 59 hedge funds in the previous quarter with a total stake value of about $2.72 billion. Like The Procter & Gamble Company (NYSE: PG), The Coca-Cola Company (NYSE: KO), Johnson & Johnson (NYSE: JNJ), and PepsiCo, Inc. (NASDAQ: PEP), Raytheon Technologies Corporation (NYSE: RTX) is a good dividend stock to invest in.
Davis Funds, an investment management firm, mentioned Raytheon Technologies Corporation (NYSE: RTX) in its fourth-quarter 2020 investor letter. Here’s what they said:
“In today’s uncertain economy, we believe we have found such businesses trading at bargain prices in two sectors: industrials and financials. In the industrial space, concerns about the impact of the economic downturn on short-term profitability led to a wave of selling in a select group of leaders with durable competitive advantages, long records of profitability and bright long-term prospects. Companies like Raytheon Technologies is a wonderful example of attractive investments in this sector.”
6. The Clorox Company (NYSE: CLX)
Number of Hedge Fund Holders: 38
Dividend Yield: 2.5%
The Clorox Company (NYSE: CLX) is a manufacturer and marketer of consumer and professional products sold across the world. The company has four segments: Health and Wellness, Household, Lifestyle, and International. It ranks 6th on our list of the best dividend stocks for long term.
This June, UBS screened the best stocks to invest in based on pricing power, margin momentum, and input cost exposure, where it named The Clorox Company (NYSE: CLX) as one of the top stock picks in the consumer staples sector. Argus also holds a Buy rating on the stock with a $206 price target, with analyst John Staszak commenting that the outbreak of the coronavirus pandemic should be beneficial for The Clorox Company’s (NYSE: CLX) sales, especially in light of the fact that it is adding more disinfectants to its inventory, increasing spending on promotions, and expanding distribution.
In the fiscal third quarter of 2021, The Clorox Company (NYSE: CLX) had an EPS of $1.62, beating estimates by $0.16. The company’s revenue was $1.78 billion, missing estimates by -$85.42 million, and it has a gross profit margin of 46%.
The Clorox Company (NYSE: CLX) has regularly paid out dividends for 44 years, making it a reliable dividend stock pick.
As of the end of the first quarter of 2021, 38 hedge funds out of the 866 tracked by Insider Monkey held stakes in The Clorox Company (NYSE: CLX) worth roughly $1.19 billion. This is compared to 39 hedge funds in the previous quarter with a total stake value of about $1.65 billion. Like The Procter & Gamble Company (NYSE: PG), The Coca-Cola Company (NYSE: KO), Johnson & Johnson (NYSE: JNJ), and PepsiCo, Inc. (NASDAQ: PEP), The Clorox Company (NYSE: CLX) is a good dividend stock to invest in.
LRT Capital Management, an investment management firm, mentioned The Clorox Company (NYSE: CLX) in its first-quarter 2021 investor letter. Here’s what they said:
“For several months now, our largest position has been Clorox – the cleaning products company. Besides wipes, the company also manufactures bleach, charcoal, cat litter, plastic bags, and container products. Clorox benefited during the Covid-19 pandemic from an increased demand for cleaning products. Companies and consumers trust the Clorox brand – a source of the company’s huge competitive advantage.
United Airlines, for example, chose to partner with Clorox in its push to reassure consumers about the safety of air travel. The company is a typical “defensive” holding – subject to very small fluctuations in end market demand. Its branded consumer products remain in strong demand. Historically (pre-Covid), the company’s sales grew in line with GDP, while earnings-per-share grew slightly faster due to operational and financial leverage. We expect sales will decline slightly in the next few quarters as the Covid-19 pandemic comes to an end, but we believe this decline is more than accounted for by the company’s low valuation.
On February 4th, Clorox reported results for Q4 2020, with both earnings and sales beating estimates. Sales grew by +27% (vs. 20% estimate) from the prior year’s Q4, and EPS increased +39% ($2.03 vs. $1.75 expected). The company continues to see robust demand and raised its sales and EPS guidance for the rest of the year. Shares are down 4% year-to-date. We believe the shares are undervalued at 20x trailing and 24x forward earnings and currently represent an excellent opportunity.”
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Disclosure: None. 10 Best Dividend Stocks for Long Term is originally published on Insider Monkey.
