15 of the Best Dividend Stocks to Buy for 2021

by Eren Rosa
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These are the best dividend stocks for 2021.

As 2020 began, it looked as if the long era of rock-bottom rates might finally come to an end. But the pandemic quickly threw a wrench in that outlook, as the unemployment rate soared from 3.5% in February to 14.7% in April, and the Federal Reserve slashed interest rates to zero in March. The 10-year Treasury yield has been less than 1% since March as well, and income investors once again have few attractive options. With that in mind, U.S. News has highlighted 15 of the best dividend stocks to buy for 2021, with yields that range from less than 2% all the way into the double digits. Here are some of the top dividend-paying stocks to buy for the year ahead.

Target Corp. (ticker: TGT)

First on the list is Target. Perhaps its dividend yield of 1.6% leaves something to be desired for most income investors, but rest assured, as it’s the only one of the 15 picks yielding less than 2%. Target is coming off an impressive 2020, during which its stock continued reaping the rewards of its renewed focus on digital sales, rising about 35% year to date through mid-December. In 2017, Target announced a $7 billion, multiyear investment plan to make itself more digitally minded, and those investments are paying off big-time. Last quarter, digital comparable sales rose 155%. The percentage of TGT earnings used to pay its dividend, known as its payout ratio, is low, at just 35% — indicating the dividend is safe and has room to grow.

Greif (GEF)

As the smallest company on this list, with a $2.3 billion market capitalization, industrial packaging and container company Greif can provide some midcap diversity to a dividend portfolio. This is a slow grower, but with a dividend of 3.7% and a price-earnings ratio less than 18, the stock is priced decently — especially with analysts expecting earnings per share (EPS) to grow 10% annually over the next five years. If and when the global economy picks back up, this maker of steel and plastic drums, corrugated sheets, container liners and other behind-the-scenes packaging products will see an uptick in demand. Greif’s products are used by all sorts of industries, with customers in the pharmaceuticals, petroleum, food and beverage, and chemicals sectors, to name a few.

AbbVie (ABBV)

Pharma giant AbbVie is a repeat pick among the 15 best dividend stocks roundup, having made the list in 2020. With only a handful of trading weeks left in the year, ABBV stock earned its superlative, adding about 23% in the calendar year. With a market cap of more than $185 billion, AbbVie currently sells the highest-grossing blockbuster drug in the world in Humira, which treats a number of ailments, including arthritis, Crohn’s disease and plaque psoriasis. The company’s acquisition of Botox-maker Allergan, which closed in mid-2020, helps further diversify its portfolio. ABBV pays an enviable dividend of 4.8%.

JPMorgan Chase & Co. (JPM)

For banks, 2020 was a down year. Interest rates plunged, narrowing the all-important spread between what a bank pays to borrow money and what it charges for loans. Even JPMorgan Chase & Co., the most valuable bank in the U.S., with a valuation around $365 billion, wasn’t immune from those headwinds, falling about 13% year to date through mid-December. This offers a good buying opportunity for patient investors seeking a safer asset with a decent yield. As one of the 30 members of the vaunted Dow Jones Industrial Average, JPM pays a 3% dividend and enjoys an attractive payout ratio of 47%. Last quarter, JPMorgan reported a 30% increase in trading revenue along with record revenue and net income in its wealth management division.

Johnson & Johnson (JNJ)

Another one of the few picks from 2020 repeated on the list of best dividend stocks to buy for 2021 is health care giant Johnson & Johnson. JNJ shares didn’t do quite as well as AbbVie’s did in 2020, gaining about 5% year to date through mid-December. Johnson & Johnson, a poster child blue-chip stock for decades, operates through three divisions: medical devices, consumer and pharmaceutical. The consumer side, which sells everything from Listerine and Tylenol to Pepcid and Band-Aids, is essentially bulletproof and humming along just fine. Its medical devices division is where the shortcomings fell this past year as hospitals scaled back on surgeries amid the pandemic. That should bounce back in the coming years, and JNJ’s pharmaceutical division was the fastest-growing of the three segments last quarter. Quarterly stock buybacks have averaged $1.64 billion over the past five years but just $595 million in the last two quarters, so 2021 could see JNJ grow EPS that way as well.

Iron Mountain (IRM)

The first real estate investment trust, or REIT, on this list, Iron Mountain specializes in storage and information management services. The company claims to store and protect $18 billion in assets from more than 225,000 organizations globally. IRM’s legal structure as a REIT allows it to avoid double taxation. It must pay out 90% of taxable income to its shareholders, but in exchange, it pays no corporate taxes. Investors willing to prioritize steady income over meaningful growth potential should consider Iron Mountain. Shares tend to trade within a relatively narrow range and currently yield 8.1%.

PepsiCo (PEP)

Another of the best dividend stocks to buy for 2021 is beverage and snack giant PepsiCo, a company with impressive diversification across geographies and business segments. In the 36 weeks that ended Sept. 5, PEP’s Frito-Lay North America division made up 26.6% of total revenue, not far behind its PepsiCo Beverage North America segment, which made up 32.9% of the top line. A dominant food and snacks division is something its biggest rival, Coca-Cola (KO), lacks. And while Coca-Cola saw EPS fall 33% last quarter, PepsiCo’s EPS actually advanced 10%. PEP pays a 2.8% dividend and is up about 6% in 2020 versus KO’s roughly 4% decline.

Discover Financial Services (DFS)

The credit card company Discover Financial Services makes the list of the top 15 dividend stocks to buy for a second straight year. At $25 billion, DFS is the smallest of the big four credit card companies, which include Visa (V) ($433 billion), Mastercard (MA) ($321 billion) and American Express (AXP) ($96 billion). In a way, this gives DFS more to gain than these other companies, with more market share on the table left to seize. DFS also pays the highest dividend of these four companies, at 2.1%, and with more commerce moving online and away from cash, credit cards in general should continue to grow market share against other payment methods in 2021. DFS has a 54% payout ratio.

Cisco Systems (CSCO)

Cisco, a $186 billion blue-chip stock and component of the Dow Jones Industrial Average, pays a 3.3% dividend with a 57% payout ratio. The company has raised its dividend for nine straight years and remains a veritable cash cow throughout the pandemic. Operating cash flow last quarter alone rose 14% year over year to $4.1 billion. Also last quarter, Cisco returned $2.3 billion to shareholders through stock buybacks and dividends. The communication equipment company, which essentially creates much of the plumbing that makes the internet possible, should be a stable dividend stock you can count on for years.

Mondelez International (MDLZ)

This $80 billion snack food titan is one of the best dividend stocks to buy for 2021 for several reasons. First, the company is eminently stable, which is what most income investors want to see in their dividend stock picks. With a portfolio of brands that includes Oreo, Cadbury, Toblerone, Halls candies, Trident gum and Tang powdered beverages, Mondelez enjoys wide brand recognition and loyalty. And second, Mondelez is a great way to add some international exposure to your portfolio, as 69% of its revenue came from outside North America last quarter. MDLZ pays a 2.2% dividend and has a 54% payout ratio.

Crown Castle International Corp. (CCI)

The second REIT among the best dividend stocks to buy for 2021, Crown Castle International Corp. operates in an increasingly important niche of the market, either owning, operating or leasing more than 40,000 cell towers in the U.S. Its properties span every major U.S. market, and CCI represents an investment in vital telecommunications infrastructure that keeps Americans connected to data, information and each other. CCI’s towers will also be a key part of the 5G — or fifth generation technology — rollout as those efforts pick up in coming years. CCI pays a 3.4% dividend and is up about 10% in 2020 through mid-December.

AT&T (T)

You can’t talk about the major telecom giants in this country without mentioning AT&T. At $216 billion, it’s not only the second-largest telecom company in the U.S., behind Verizon Communications (VZ), it also owns a sprawling media empire that includes Warner Bros., HBO, CNN, TBS, TNT, Cinemax, DC Comics, among others. While AT&T will also play a pivotal role in the rollout of 5G tech, the company’s unprecedented decision to offer all 17 of its 2021 theatrical releases — including “Space Jam: A New Legacy,” “The Matrix 4,” and “The Sopranos” prequel film, called “The Many Saints of Newark” — simultaneously for streaming on its HBO Max platform should drive up subscribers. AT&T pays a juicy 6.8% dividend.

Antero Midstream Corp. (AM)

Whenever you see a dividend as high as Antero Midstream’s — the stock yields roughly 14.7% as of mid-December — alarm bells should go off. There’s usually something wrong with that picture. Either the dividend stands to get cut, the company is in free fall or some other risk looms. That’s why Antero Midstream is arguably the riskiest stock on this list. It’s the second-smallest company selected, at $3.8 billion, and the company isn’t currently profitable as the hit to natural gas prices that spanned much of 2020 is only starting to recover. A global recovery from the pandemic would do wonders for AM’s stock price as well, and analysts expect the company to return to profitability next year.

Newmont Corp. (NEM)

Named as one of U.S. News’ 10 Best Stocks to Buy for 2021, Newmont Corp. clearly earned a spot on this list as well. The gold, silver and copper miner yields a modest 2.7%, but it has vowed to reward shareholders with special dividends should its mining operations churn out unexpected windfall profits. Newmont’s value as a hedge in recessionary environments makes it an attractive member of a larger portfolio as it has a low correlation to the broader market. NEM’s beta — a measurement that shows perfect correlation to the market at 1 and no correlation to the market at zero — is extremely low, at 0.16. Newmont projects its all-in cost to mine an ounce of gold will be $970 in 2021. With more easy money policies likely from the Fed and gold prices mostly trading at more than $1,800 an ounce since July, NEM looks attractive.

Kimberly-Clark Corp. (KMB)

Kimberly-Clark is a classic consumer defensive stock — a relatively boring business that can be expected to reliably churn out steady profits. KMB’s everyday household products include diapers, baby wipes, tissues, toilet paper, paper towels, soaps and more. One of the most time-tested stocks on this list, Kimberly-Clark has been around since 1872 and pays a 3.2% dividend. Its payout ratio is a modest 61%, and in November, KMB raised its dividend for the 48th consecutive year. That means KMB is one of the S&P 500’s dividend aristocrats, a list of companies that have raised their dividends for 25 straight years or more.

The best dividend stocks to buy for 2021:

— Target Corp. (TGT)

— Greif (GEF)

— AbbVie (ABBV)

— JPMorgan & Chase Co. (JPM)

— Johnson & Johnson (JNJ)

— Iron Mountain (IRM)

— PepsiCo (PEP)

— Discover Financial Services (DFS)

— Cisco Systems (CSCO)

— Mondelez International (MDLZ)

— Crown Castle International Corp. (CCI)

— AT&T (T)

— Antero Midstream Corp. (AM)

— Newmont Corp. (NEM)

— Kimberly-Clark Corp. (KMB)

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