In this article we will share our list of the top 5 dividend stocks to buy in 2021. For a detailed discussion of the methodology as well as a more comprehensive list please see The Top 10 Dividend Stocks To Buy in 2021.
5. IBM (IBM)
Dividend Yield: 4.59%
As a consistent leader in the tech industry, IBM has shown consistent payout ratios and an increase in dividend yields. The tech industry is a sector you’ll want to invest in as it’s only going to continue to change and grow. IBM has proven to be a safe bet.
International Business Machines Corp (NYSE: IBM) started as the computing, tabulating, and recording firm in the late 1800s. Its first major contract was to supply equipment for the tabulation and assessment of the U.S. census in 1890. The company grew over the years and become a leading supplier of computer systems in the late 1990s. However, the company has shifted its focus to cloud computing and AI in recent years. Its current product portfolio ranges from IT services and cloud offerings to artificial intelligence and enterprise software.
IBM recently announced strong financial results for the first quarter, mainly driven by its cloud computing services. The company reported earnings of $955 million, or $1.06 per share for the three months ended March 31, as compared to $1.18 billion, or $1.31 per share in the year-ago quarter. On an adjusted basis, the company earned $1.77 per share, beating the consensus forecast of $1.69 per share.
Revenue inched up 1 percent to $17.73 billion, above analysts’ average estimate of $17.32 billion. If we look at the performance of different segments, revenue from the Cloud & Cognitive Software business rose 3.8 percent to $5.44 billion, while revenue from Global Business Services increased 2.4 percent to $4.2 billion. However, revenue from Global Technology Services slipped 1.5 percent to $6.4 billion.
Famed short seller Jim Chanos doesn’t think IBM is a great long-term investment. He believes IBM is a “value trap”. You can read about his IBM short thesis in this article.
4. AbbVie Inc. (ABBV)
Dividend Yield: 4.67%
While making huge strides in the healthcare industry, this stock is one to watch. They invest in pharmaceutical treatments and make cutting-edge medical discoveries. As their research continues to expand and break barriers, you can expect high dividends. AbbVie has also shown a pattern of paying high dividends as the company makes increases.
AbbVie reported earnings of $36 million, or 1 cent per share for the three months ended Dec. 31, as compared to $2.80 billion, or $1.88 per share in the comparable period of 2019. On an adjusted basis, profit rose to $2.92 per share, beating the consensus forecast of $2.85 per share.
Revenue climbed 59.2 percent on a year-over-year basis to $13.86 billion, surpassing the analysts’ average estimate of $13.70 billion. Quarterly revenue for Humira jumped 4.8 percent to $5.2 billion, above the consensus forecast of $5.11 billion. Humira has been the top-performing drug for AbbVie, significantly contributing to the growth of the company over the years.
CEO Richard Gonzalez said in a statement, “We successfully completed the transformative Allergan acquisition and delivered another year of strong results in 2020, despite the challenges presented by the global pandemic. Based on our broad portfolio of diversified growth assets and the robust momentum of our business, we expect impressive growth again in 2021.”
3. Exxon Mobil Corp. (XOM)
Dividend Yield: 6.17%
Exxon is a leader in the oil and gas industry. They were met with setbacks during the pandemic and were forced to restrategize their investment plan. But they pivoted with the unexpected, and now they seem to be headed in the right direction. If you are looking for an oil and gas company with a high dividend yield that you can trust to stick around, choose Exxon.
Here is what First Eagle Investment Management has to say about Exxon Mobil Corporation in their Q1 2021 investor letter:
“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. 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.”
We should note that First Eagle was bullish about Exxon before the stock took off in Q4. Here is what they said in their 2020 Q3 investor letter:
“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.”
2. Equitrans Midstream Corp (ETRN)
Dividend Yield: 7.48%
This gas company has consistent and reliable growth. For any industry, the dividend yield is significantly high. There are no downturns because natural gas will always be needed. And Equitrans Midstream is a leading competitor in the energy industry to watch.
Equitrans Midstream Corporation is a natural gas gatherer in the United States. They own and operate midstream assets in the Appalachian Basin. And provide midstream services to EQT Corporation and multiple third-parties in Pennsylvania, West Virginia, and Ohio.
In an unfortunate incident, the companies’ compressor station in Morris Township exploded and the reason is still unknown today but the investigation is ongoing. Billionaire Dan Loeb has more than $100 million invested in ETRN.
1. Two Harbors Investment Corp. (TWO)
Dividend Yield: 8.88%
The real estate housing market is on fire, and Two Harbors have reaped the benefits with their real estate investments. Over the last 12 months, their stock has increased 100%, and their dividend payouts have tripled. The company knows how to treat its shareholders well and wants to show its loyalty.
Two Harbors Investment Corp (NYSE: TWO) operates as a REIT, which solely invests in mortgage-backed securities in the residential segment. PRCM Advisers, LLC is Two Harbors’ appointed management firm and advisor. 18 hedge funds had stakes in Two Harbors in Q4 2020 led by HBK Investments, which had 46.7 million shares in the company. Two Harbors Investment Corp (NYSE: TWO) ranks 7th in the list of top 10 REIT stocks under $10.
In Conclusion
When it comes to choosing the best dividend stocks, the answer can continually change. Learn to adjust your investments and consider the factors for selecting a quality dividend stock. And if your stock portfolio includes a variety of industries, then you will never be at a complete loss when the unpredictable happens.
Maximizing your dividend stock investments comes with practice and time. Gain your confidence by looking at the statistics and patterns the business has shown over the years. You will learn the system that works best for you. And you will soon recognize there is never one right way to invest in dividend stocks.
Please also see 10 Best Monthly Dividend Stocks in 2021 and 10 Best Dividend Stocks According To George Soros.
Disclosure: None.
