Aristocrats, kings, and glorious pay-outs; these three dividend stocks will pay you more each year, but which one will you choose?
Jan. 23, 2021
A dividend payment is a percentage of a company’s profits paid to each of its shareholders — the amount is set per share. Not every public company does this, many choose instead to funnel profits into growth and innovation. Paying a dividend often signals to investors that a company has the cash to spare and therefore, is in a good place financially. However, it can also be a sign that the company is out of ideas, and often investors could be turned off by the company’s lack of investment in expanding its offering.
For now though, a dividend aristocrat is a company that has not only paid a dividend but has increased the dividend amount each year for a minimum of 25 years. To become a dividend king, this must continue for a minimum of 50 years. Out of 15 such companies listed in the U.S., two will be included in the following article.
Investors can choose to invest in a dividend stock, or they can find an ETF that holds the better dividend stocks on in its books. The Dividend Aristocrats ETF (BATS: NOBL) contains the three stocks below and many more and in 2020 it paid out $1.71 per share. By investing in an ETF such as this you can avail yourself of a dividend that increases each year. Either way, here are our top three picks for any investor interested in a dividend stock.
1. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) is a stock that has been around for a very long time. In fact, this is the first of our ‘dividend kings’. In itself, this should signal to prospective investors that the company is a strong and stable bet.
Stability really is the key aspect of this stock, with diversification making sure that the company can weather any volatility. Only about half of its revenue comes from the U.S. whilst it also makes products from broad ends of the healthcare spectrum — it produces Skincare and pain relief, as well as replacement hips.
51% of its revenue comes from pharmaceuticals and with its current single-dose coronavirus vaccine in its 3rd trial phase, this sector will no-doubt receive a bump in revenue going forward. This will not hide the fact, however, that Johnson & Johnson is a slow-growth company with around 3% annual growth since 2009. Despite its slow growth, a strong and stable, dividend-paying company is a brilliant addition to your portfolio to counteract any volatility.
Coca-Cola (NYSE: KO) was expected to have a great year in 2020 following almost 2 decades of steady growth since its 1999 dive. But the pandemic had other plans, and as many businesses closed, partnerships with Coca-Cola slowed down and even its coke machines saw people avoiding them due to exposure.
Despite its sluggish movement over the last 20+ years, Coca-Cola has kept up its dividend payments and even announced its 58th consecutive dividend increase in 2020 from $0.4 to $0.41 per share. Thus, it is our second ‘dividend king’ in this list. Yet, the after-effects of the pandemic could cause further harm to the beverage company as many restaurants will not re-open again, having gone out of business.
That being said, the company has deep roots and a long history. It is a leader of the soft-drinks market, and as people start returning to normality, consumption of their products will likely increase again. Coca-Cola should see its financials improve for the second half of 2021.
3. Abbott Labs
Abbott Labs operates in around 150 countries and it employs about 99’000 people, all of whom work on improving healthcare by developing products widely used in the healthcare industry. For example, in October 2020, it had its 7th emergency use authorization for a COVID-19 antibody blood test.
Abbot Labs has been a major player in the diagnosis of coronavirus in patients since the pandemic’s beginning and as a result, its stock recovered extremely well from its March low of $62, experiencing a high of $114 per share in November. Whilst Abbott did experience a revenue decline in its 3rd quarter, it also managed to increase its dividend payout for its 48th consecutive year, in 2021, each quarter will see a dividend payment of $0.45 per share.
Abbott Labs is a large, stable company that is worth investing in. As it continues to produce innovative new products for the healthcare market, it will continue to provide an increasing dividend for its investors. Moreover, since going public in 1981, Abbott Labs stock has been on a slow but steady upward trend which is not likely to change for the foreseeable future.
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.