Below you can see our list of the 5 best dividend stocks to buy for passive income. For a more comprehensive list please visit 10 best dividend stocks for passive income.
5 – Sysco Corp. (NYSE: SYY)
Sysco is the global leader in selling, marketing and distribution of food products to restaurants, healthcare and educational facilities, lodging establishments and other customers who prepares meals away from home. As it is expected, due to Covid-19 the company’s sales and revenues took a dive. In the financial statements following note takes place: “The COVID-19 pandemic is more widespread and longer in duration than historical disasters impacting our business, and it is possible that actual uncollectible amounts will differ, and additional charges may be required.” When this problem addressed, I do expect a recovery.
Now that we have 3 different vaccine candidates showing at least 70% efficacy, it is time to get back in recovery stocks like Sysco. The company has a 2.57% dividend yield and it increase its dividend from $0.39 to $0.45 last year. The company may not be able to increase its dividend at the same rate next year, but analysts are optimistic about 2022. When it comes to the number of hedge funds, there are 33 managers who were invested in this stock at the end of September.
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4 – General Dynamics (NYSE: GD)
At the fourth place is a company from the Aerospace & Defense Industry. Although Covid-19 had adverse effects on this industry, the company managed to limit the damage. Company’s chairman and CEO, Phebe N. Novakovic stated that: “… we continue to reduce debt and invest in the company for future growth.” Oakmark Funds is bullish about GD. Here is what they said in their 2020 Q2 investor letter:
““General Dynamics is one of the leading U.S. defense contractors and controls the world’s premier business jet franchise (Gulfstream). Short-term fears that the coronavirus will hurt demand for business jets drove down the share price, so we were able to purchase this high-quality business at a large discount to both its historical and peer valuation levels. Taking a longer term view, we believe the company is poised to benefit from new product introductions within its business jet division, an improvement in free cash flow conversion and a highly visible, decade-long increase in deliveries of next generation nuclear-powered submarines. As these positives come into clearer view, we believe the discount to intrinsic value will close.”
GD shares currently trade at $148.36 and have a trailing P/E of 13.5. This figure is also the lowest in our list. The stock’s current quarterly dividend is $1.10 corresponding to an annualized dividend yield of nearly 3%. Compared to the previous period, dividend payout was bumped up by 7.8%. There were a total of 37 hedge funds with long positions in the stock at the end of September.
3 – Chevron Corp. (NYSE: CVX)
Chevron is one of the world’s leading integrated energy companies. Its main operations focus on “explore for, produce and transport crude oil and natural gas; refine, market and distribute transportation fuels and lubricants; manufacture and sell petrochemicals and additives; and develop and deploy technologies that enhance business value.” Without a doubt lockdowns and slumping demand due to Covid-19 had drastic effects on the company’s sales, but still 43 big hedge funds took bullish positions in this company.
The best time to invest in oil stocks was three weeks ago, before the announcement of vaccine news. However, we aren’t too late. Chevron shares increased about 40%, but there is still room for an additional 20% increase over the next 12 months. While you wait, you will receive quarterly dividend payments of $1.29, corresponding to a 6% annualized dividend yield. Chevron managed to increase its dividends for 33 consecutive years.
If we look closer to top three funds that have strong positions at Chevron, we see Fisher Asset Management at the first spot. Billionaire Ken Fisher is one of the most well-known money managers in the financial world and had round $390 million worth of position in CVX. Kahn Brothers and Diamond Hill Capital also have large positions in the stock.
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2 – ExxonMobil Corp. (NYSE: XOM)
Similar to the Chevron, Exxon Mobil also operates in the Oil, Gas and Consumable Fuels industry. Over the 135 years of its history Exxon evolved from a regional marketer of kerosene in the U.S. to one of the largest publicly traded energy companies in the world. There were a total of 52 hedge funds with bullish positions in XOM at the end of September. Almost with a billion dollar sum First Eagle Investment Management has the largest position in the stock. Here is what they said in their Q3 investor letter about the stock:
““The stock of Exxon Mobil continued to struggle in the third quarter, and it lost roughly half its market cap year to date. Despite this, we believed Exxon Mobil was well-equipped to contend with lower prices and remained a compelling investment. The company demonstrated high levels of operational flexibility during the difficult market environment and maintained an upward drift in earnings power. Its high-quality, long-duration assets occupy attractive positions on the cost curve.”
Indeed, the large decline in XOM shares resulted in a double digit dividend yield earlier this year. ExxonMobil has successfully increased its dividend for 37 consecutive years. Current dividend for the third quarter of this year is $0.87 per share, and that makes a 9.42% dividend yield in annualized terms. This number is the highest yield offered by the companies featured in this article. We agree with First Eagle. Exxon shares offer a large upside over the next 12 months.
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1 – PepsiCo Inc. (NASDAQ: PEP)
In 1965, Pepsi-Cola and Frito-Lay merged to deliver their products under a single company. Their products are enjoyed by consumers in more than 200 countries and territories around the globe. Did you know that PepsiCo spun off Kentucky Fried Chicken, Taco Bell and Pizza Hut in 1997?During the first 9 months of 2020, PepsiCo generated almost $48 billion in revenues, $5.28 billion in net income, and $3.79 net income per share.
From the recent financials, the following statement was interesting: “Additionally, our industry continues to be affected by disruption of the retail landscape, including the rapid growth in sales through e-commerce websites and mobile commerce applications, including through subscription services, the integration of physical and digital operations among retailers and the international expansion of hard discounters. We have seen and expect to continue to see a further shift to e-commerce, online-to-offline, and other online purchasing by consumers as a result of the COVID-19 pandemic.” This explains the strong revenues and cash flow in spite of the difficult conditions that we face.
On 20th November 2020, the share price was $143.42. At the end of the third quarter there were 52 big hedge funds positioned in this stock. Among these asset managers Donald Yacktman’s Yacktman Asset Management sits at the top spot. Pepsi is also a favorite of several quant hedge funds like AQR Capital Management.
Current dividend for the company is $1.02 and in annualized terms that corresponds to a 2.85% dividend yield. Compared to the previous period, dividend payout was increased by 7.07% (from $0.9550 to $1.0225). PepsiCo Inc. increased its dividends for 48 consecutive years.
Please also see 10 best dividend stocks to buy according to billionaire Ken Fisher and 10 best high dividend stocks to buy.
Disclosure: None.
