Are These The Best Dividend Stocks To Buy In 2021?
Dividend stocks could provide investors with predictable income as well as long-term growth. At a time when interest rates are still at dovish levels, it makes sense for investors to look for top dividend stocks to buy. However, not all dividend stocks are great investments, and you know it. With many investors starting out in the stock market today, chances are they don’t really know where to begin. And I don’t blame them. Dividend stocks aren’t exactly the type of investments that make the headlines. Most prefer growth stocks as they potentially bring in gains faster. But before we dive in, what exactly is a dividend stock? For those unfamiliar, dividend stocks are usually well-established companies with a track record of distributing earnings back to shareholders.
During a choppy stock market, it’s natural for investors to turn to dividend stocks for a steady income stream as well as benefit from long-term capital gains. But that’s not usually quite attractive unless you are investing in the millions.
However, if you are looking to buy dividend stocks that could sustain your retirement life which is twenty or thirty years down the road, then it may be a more realistic and attainable goal. While some dividend stocks were hard hit by the coronavirus pandemic, others continue to rise. And they could continue riding higher. Here are 5 top dividend stocks that could potentially manifest this growth.
Dividend Stocks To Buy [Or Avoid] In 2021
- Enterprise Products Partners L.P. (NYSE: EPD)
- Altria Group Inc. (NYSE: MO)
- AT&T Inc. (NYSE: T)
- Exxon Mobil Corporation (NYSE: XOM)
- British American Tobacco PLC (NYSE: BTI)
Enterprise Products Partners L.P.
First on the list is Enterprise Products Partners which is a midstream energy service provider with diversified operations in natural gas, oil, and other petrochemicals. The company boasts a dividend yield of 8%. More impressively, the company has a strong track record of over 20 consecutive years of dividend raises. Midstream companies like Enterprise Products generally aren’t too affected by energy price volatility as a significant portion of revenue comes from fees generated by their asset usage.
An attributable factor to its consistent high yield is that Enterprise Products has one of the strongest balance sheets amongst its peers, similar to Chevron (NYSE: CVX). Its low debt to capitalization ratio is what makes the investment in EPD stock worthwhile. Setting sights on renewable and clean energy, the company is planning to purchase 100 megawatts of solar project power from EDF Renewables.
With economies reopening, we may see Enterprise Products gaining a significant boost to its business this year. With that in mind, would EPD stock be a great choice for investors to add to their portfolio?
Altria Group Inc.
Coming up next, Altria Group is a tobacco company with its famous Marlboro brand. It also has a wine subsidiary and has a 10% stake in Anheuser-Busch InBev (NYSE: BUD), the world’s largest beer company. Don’t get me wrong though, the majority of its profits still come from cigarette sales. Altria currently has a dividend yield above 6.5% with an annualized dividend of $3.44.
With annual cigarette volumes on a declining trend, how could the company keep up with such a high dividend yield? Glad you asked. For the uninitiated, the company has actually grown its overall revenue with investments in the largest vaping company, Juul, and a significant stake in Cronos Group (NASDAQ: CRON).
Altria also has a non-smokable nicotine pouch, on! which has more than 2% market share in the oral tobacco category. With such exciting developments, do you think MO stock will continue seeing stellar dividends in the years to come?
AT&T is the largest telecommunications company with more than 225 million monthly subscribers. T stock currently has a dividend yield above 6.5% with an annualized dividend of $2.08. The telecom giant has consecutively raised its dividend for 36 years. Now, AT&T has yet to raise its dividend in 2021. But it still has an average dividend yield of over 5% for the past 10 years. It is unlikely AT&T would break its streak and investors might see a dividend raise later this year.
A potential push for AT&T to propel forward would be the rollout of 5G networks. As consumers and businesses looking to upgrade their wireless devices, the boost in data download speed would play to AT&T’s benefit. On its streaming services, releasing 2021 movies on HBO Max the same day when they hit theaters has improved subscriber count significantly as well.
The company expects 120 million to 150 million subscribers by 2025 which is a significant bump compared to its initial target of 75 to 90 million in 2019. With that in mind, could it be rewarding for investors to hold on to T stock for the long term?
Exxon Mobil Corporation
Exxon Mobil is an oil giant with upstream and downstream services in the energy market. XOM stock currently has a dividend yield above 6% with an annualized dividend of $3.48. It fits the bill as a long-time dividend distributor. Exxon proved its resiliency by being one of the few O&G companies that did not suspend payout in 2020.
Like most oil and gas companies, Exxon had a rough 2020 as well. The company initially had planned huge capital investments in 2019 but was majorly disrupted by the pandemic. Since then, Exxon has made significant adjustments to its planned capital spending in the next 5 years. Extra cash flow would go towards debt reduction and dividend payment.
The company appears to be heading in the right direction. And this should give investors in XOM stock some peace of mind especially those that stuck out during its steep price drop last year.
British American Tobacco PLC
Last on the list, British American Tobacco (BAT) is another tobacco giant with a fantastic dividend yield above 7%. Due to the strategic combination of mergers and smart management choices, BAT has actually grown into its business strongly in recent years. However, BTI stock has also consistently underperformed the market.
Like Altria, BAT has also diversified into vaping, tobacco heating products, and nicotine pouch businesses. On the company’s website, it says it’s the first global vaping company to launch a CBD vaping product, the Vuse CBD Zone, which is available in Manchester, U.K. BAT plans to roll out the product to new markets as the year progresses. The company’s investment in marijuana producers OrganiGram (NASDAQ: OGI) could be a potential game-changer for the company.
If it all plays out well, BAT could benefit from great potential earnings growth. Considering all these, could BTI stock be an attractive dividend stock to add to your portfolio?