In this article we will take a look at the 10 best dividend stocks to buy for long-term gains. You can skip our detailed analysis of these companies, and go directly to the 5 Best Dividend Stocks to Buy for Long-Term Gains.
Dividend investing can be the thing that makes or breaks an investor’s fortune. Dividend investing has become trickier over the last few years amid financial volatility. BP p.l.c. (NYSE: BP) and Ford Motor Company (NYSE: F) are two examples of this phenomena.
What went down with BP p.l.c. (NYSE: BP) is recent enough to still haunt investors. The situation was related to the 2010 Deepwater Horizon oil spill, which happened in April of that year. The oil spill itself is still thought of as perhaps the most disastrous event in US environmental history. On April 20th, 2010, a terrible explosion resulted in rupturing a deep-water well, which led to the Gulf of Mexico being flooded with oil. BP p.l.c. (NYSE: BP) ended up shouldering the blame for the explosion, as a third party had been drilling for the company when the accident took place. Before the oil spill ever happened, BP p.l.c. (NYSE: BP) had managed to increase its payout for 15 years, and it had been paying its shareholders a modest dividend for 17 years. But, with the unexpected disaster, the company was forced to suspend its dividend in June 2010. BP p.l.c.’s (NYSE: BP) stock price also took a hit after the oil spill, falling by 54.9%, while the company also came under financial pressure to pay out billions of dollars in fines.
As for Ford Motor Company (NYSE: F), we won’t be surprised if you’ve heard of the name already. Being recognized worldwide as an industry leader in the automobile sector, imagine peoples’ surprise when the company had to halt its dividend in 2006. Ford Motor Company (NYSE: F) had been facing financial troubles and was finding it difficult to stay afloat that year, resulting in a cut of 10,000 salaried workers, shuttering two plants, and an end to Ford Motor Company’s (NYSE: F) dividend. Even before this complete eradication of the dividend came about, the company’s dividend yield had been decreasing due to financial pressures.
But if you’re beginning to worry about whether dividend investing was ever a good choice to make in the first place, then stop right there. The purpose of putting out those two examples was not to dissuade, but rather to inform. It is always helpful to be familiar with the field you are entering into before going all-out and making any rash decisions. So it’s important for any potential investors to recognize and reconcile with the potential risks of dividend investing before moving on.
Dividend stocks will always be a good bet for any investor, regardless of whether they’re just starting out in the business, or if they’re seasoned veterans. This year, some big names like The Coca-Cola Company (NYSE: KO), The Procter & Gamble Company (NYSE: PG), and Colgate-Palmolive Company (NYSE: CL) have managed to make it to our list. All of these mega-companies have managed to raise their dividends annually for over 50 years straight. The Coca-Cola Company (NYSE: KO), The Procter & Gamble Company (NYSE: PG), and Colgate-Palmolive Company (NYSE: CL) also pay higher dividend yields to their shareholders than the Treasury’s 1.6% yield, all while keeping their cash dividend payout ratio below 100%.
The Coca-Cola Company (NYSE: KO) has so far seen 59 years of dividend growth without a break, while The Procter & Gamble Company (NYSE: PG), and Colgate-Palmolive Company (NYSE: CL) have both seen 64 and 58 consecutive years of dividend growth, respectively. These companies also have a dividend yield of over 2% each and are some of the biggest stocks out there that investors looking for highly profitable dividend stocks can consider. These companies aren’t the only ones on our list, of course, we figured it would help to mention them just to give you an idea of how companies like The Procter & Gamble Company (NYSE: PG), and Colgate-Palmolive Company (NYSE: CL) can handle paying out dividends while staying above danger levels themselves.
Our Methodology
We’ve come up with this list of the 10 best dividend stocks to buy for long-term gain based on data collected from Yahoo Finance and ranked on the basis of their forward dividend yield. Some of these companies have low yields, but we chose these companies because they offer long-term gains in terms of share price appreciations.
Image by Carabo Spain from Pixabay
Let’s now discuss the 10 best dividend stocks to buy for long-term gains.
Best Dividend Stocks to Buy for Long-Term Gains
10. FedEx Corporation (NYSE: FDX)
Forward Dividend Yield: 0.86%
Number of Hedge Fund Holders: 63
Ranking 10th on our list of the best dividend stocks to buy for long-term gains is FedEx Corporation (NYSE: FDX). This American multinational delivery service is headquartered in Memphis, Tennessee, and has proven to be a leader in the transportation sector.
The stock has proven to be resilient and reliable, attracting large investments from successful hedge funds like billionaire Kerr Neilson’s Platinum Asset Management. It ranks 10th in our list of the best dividend stocks for long-term gains.
Artisan Partners, in its Q1 2021 investor letter, mentioned FedEx Corporation (NYSE: FDX). Here is what Artisan Partners has to say about FedEx Corporation in its letter:
“Whatever products did make it off the line met a constrained logistics infrastructure, with commercial air capacity cut and ship cargo space at a premium. Then, in the event your dishwasher part actually made it to US waters, our ports were congested due to manpower shortages and COVID-19 protocols. When the goods were finally unloaded, it turns out trucking shortages caused a spike in ground rates! All this might be bad for your dinner parties, home décor or exercise goals, but it can be great for the middlemen. Middlemen like logistics expert FedEx.
FedEx provides global logistics services. It gets your dishwasher part on a truck, or that semiconductor chip on a plane. Surging demand for at-home deliveries during the pandemic boosted volumes and allowed management to push through price increases, keeping competitive with industry peers. The industry’s renewed pricing discipline was a welcome change, reflecting a broader commitment to earn better returns on invested capital. Despite a significant re-rating of the business over the last 12 months, FedEx remains attractive based on our margin of safety criteria.”
9. Target Corporation (NYSE: TGT)
Forward Dividend Yield: 1.18%
Number of Hedge Fund Holders: 60
This American retail giant ranks 9th on our list of the best dividend stocks to invest in for long-term gains. Target Corporation (NYSE: TGT) is the eighth-largest retailer in the US and is a component of the S&P 500.
Target Corporation’s (NYSE: TGT) shares saw a 1.9% increase just recently, with a 33.2% gain for year to date.
LRT Capital Management, in its Q1 2021 investor letter, mentioned Target Corporation (NYSE: TGT). Here is what LRT Capital Management has to say about Target Corporation in its letter:
“Target, the Minneapolis-based retailer, continues to fire on all cylinders as the company has reported two quarters in a row of +20% revenue growth (5% traffic growth + 15% average basket size6 ), coupled with the strongest EBITDA margins in over four years. The company has successfully navigated the Covid-19 pandemic with online sales growing by 155% and 118% during Q3 2020 and Q4, respectively.
On March 2nd, the company reported another stellar quarter, with same-store sales growing by over 20%, and both earnings (+57% YoY) and revenues (+21% YoY) beating estimates. The shares are up 14.11% year-to-date. We believe the shares are a bargain 23x trailing and 20x forward earnings.”
8. Hormel Foods Corporation (NYSE: HRL)
Forward Dividend Yield: 2.01%
Number of Hedge Fund Holders: 26
Ranked 8th on our list of the 10 best dividend stocks to buy for long-term gains is Hormel Foods Corporation (NYSE: HRL). This is an American food company founded in 1891 in Austin, Minnesota and is one of the few dividend stocks that have managed to consistently raise dividends over the last several years.
Hormel Foods Corporation (NYSE: HRL) has also recently been facing strong demand for its packaged meat brands especially ever since the advent of the coronavirus pandemic. Its SPAM and Skipy brands have also proven to be highly popular and are generating exceptional earnings.
The company’s cash dividend payout ratio for the past 12 months was recorded at 81% and it has seen 55 consecutive years of dividend growth.
Like The Procter & Gamble Company (NYSE: PG), Target Corporation’s (NYSE: TGT) and BP p.l.c. (NYSE: BP), Hormel Foods is one of the best dividend stocks for long-term gains.
In its Q4 2020 investor letter, Nelson Capital Management mentioned Hormel Foods Corporation (NYSE: HRL). Here is what the fund said:
“We had a quiet fourth quarter, making just one swap within our consumer staples sector. We sold our position in Hormel (tkr: HRL). Hormel has seen tailwinds from the pandemic, as the maker of Spam and Skippy peanut butter has experienced higher demand from nervous consumers seeking out products with longer shelf lives. The stock had risen 18% year-to-date and its price-to-earnings (P/E) ratio had expanded from 25x to over 31x. Hormel pays a 2% dividend which is lower than many of its peers in the consumer staples sector. Furthermore, Hormel’s Jennie-O Turkey brand has experienced disruption in recent years as raw material over- or undersupply has caused large swings in revenue that lead to unpredictability. We decided to seek out better opportunities within the sector, particularly looking for a more attractively valued company that pays a higher dividend and sells everyday products that people will buy even in times of economic distress.”
7. Colgate-Palmolive Company (NYSE: CL)
Forward Dividend Yield: 2.15%
Number of Hedge Fund Holders: 48
Ranked 7th on our list of the 10 best dividend stocks to buy for long-term gain is Colgate-Palmolive Company (NYSE: CL). This is an American multinational consumer products company manufacturing and selling household, health care, personal care, and veterinary products.
In the pandemic’s aftermath, Colgate-Palmolive Company (NYSE: CL) has benefited from shifting shopping trends with people across the world buying their products at accelerated rates. The company sells its namesake products alongside others such as Softsoap and Ajax.
Like Hormel Foods Corporation (NYSE: HRL), this company is known to be quite a reliable dividend-paying stock. With 58 years of dividend growth without a break, and a cash dividend payout ratio of 53%, Colgate-Palmolive Company (NYSE: CL) is one of the few dividend stocks investors can trust in.
Like The Procter & Gamble Company (NYSE: PG), Hormel Foods Corporation (NYSE: HRL), Target Corporation’s (NYSE: TGT), The Coca-Cola Company (NYSE: KO) and BP p.l.c. (NYSE: BP), Colgate-Palmolive Company is one of the best dividend stocks for long-term gains.
First Eagle Investment Management, in their Q1 2021 investor letter, mentioned Colgate-Palmolive Company (NYSE: CL). Here is what the fund said:
“The leading detractors in the quarter (included) Colgate-Palmolive Company (NYSE: CL). After a strong 2020 fueled in part by lockdown-driven demand, consumer staples stocks generally cooled during the first quarter as investors shifted attention to the more economically sensitive areas of the market likely to benefit from re-openings and improved discretionary spending. The effects of this rotation could be seen in the share price underperformance of names like Colgate-Palmolive.”
6. The Procter & Gamble Company (NYSE: PG)
Forward Dividend Yield: 2.55%
Number of Hedge Fund Holders: 70
This American multinational consumer goods corporation headquartered in Cincinnati, Ohio is ranked 6th on our list of the 10 best dividend stocks to buy for long-term gains. The Procter & Gamble Company (NYSE: PG) was found in 1837 and has since proven to retain its reputation and reliability.
The Procter & Gamble Company (NYSE: PG) is the name behind many of today’s bigshot brands like Gillette and Pampers. The company’s products can be found in over 180 countries.
The Procter & Gamble Company (NYSE: PG) has shown its shareholders a whopping 64 years of consistent dividend growth, with a cash dividend payout ratio of 50% in the past 12 months. The company is one of the most reliable and consistent in terms of financial stability and dividend investing, much like The Coca-Cola Company (NYSE: KO).
Like Hormel Foods Corporation (NYSE: HRL), Target Corporation’s (NYSE: TGT), The Coca-Cola Company (NYSE: KO), BP p.l.c. (NYSE: BP) and Colgate-Palmolive Company (NYSE: CL), The Procter & Gamble Company (NYSE: PG) is one of the best dividend stocks for long-term gains.
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Disclosure: None. 10 Best Dividend Stocks to Buy for Long-Term Gains is originally published on Insider Monkey.
