Here we will take a look at some High Yield Dividend Stocks which you should own in 2021.
I classify stocks with yields above 4.5% as high yield dividends.
Now there’s the saying one shouldn’t chase yields, and that is correct in most cases. Yield traps often happen with companies not being able to support their dividend payment with sales and therefore, sooner or later, ending up cutting or suspending their dividends.
For that not to happen, we will not only look into each company’s Yield but also their Dividend Safety score, as well as the finances and future growth potential.
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Why own High Yield Dividend Stocks?
High Yield Dividend Stocks can be a great way to generate passive income.
Depending on your age & investing strategy, high yield dividend stocks might represent a higher or lower percentage of your portfolio (The younger you are, the more Growth Stocks you should be invested in).
In my opinion though, no matter your age, a certain percentage of your portfolio should always include some solid high yield dividend stocks.
Giving myself as an example: Around 20% of my portfolio consists of such companies.
5 Companies with High Yield Dividends of 4.5% and up to look out for:
1 – Federal Realty Investment Trust (Symbol: FRT)
Federal Realty Investment Trust is a real estate investment trust that invests in shopping centers. As you might have guessed, malls took a huge hit from this pandemic. However, things are getting better, and will hopefully be back to normal once the vaccine is out.
Taking a deeper look, rent collection in the third quarter averaged 83%, meanwhile, its stock is still down from its 52wk High of $133.02 a share, trading at $88.37 at the time of writing. Now is the time to take a really close look at Federal Realty and its high yield dividend of 4.80%.
FRT has been named to the Dividend Channel “S.A.F.E 25” list, signifying a stock with an above-average “Dividend Rank”
Federal Realty has increased its quarterly dividends to its shareholders for 53 consecutive years. This represents the longest record in the REIT industry.
The company pays out 66.98% of its earnings as a dividend.
In my opinion, FRT is a buy IF you are planning on holding it long-term.
It might need many months to get back to its previous levels, but with such an impressive track record of dividend payments, and a high-class real estate portfolio, FRT is one of my favorite high yield dividends.
2 – Altria (Symbol: MO)
Altria needs no introduction, one of the world’s largest producers and marketers of tobacco, Altria has raised its dividend 54 times in the past 50 years, qualifying it as a Dividend King.
Altria is also looking into the future, “Over the next 10 years, Altria’s Vision is to responsibly lead the transition of adult smokers to a non-combustible future. We are developing and investing in potentially reduced harm alternatives that smokers will want to transition to.” As mentioned on their website.
Big Tobacco sees a logical long-term partner in the emerging cannabis industry, which some industry analysts say can reach $66 billion by 2025.
Altria, also hit by the pandemic, reported year on year decline of 8.7% in cigarette and cigar shipments.
But the worst may be over:
Shipments and sales numbers are expected to pick up from Q4 2020. Higher cigarette prices and a normalized supply network will likely result in healthy revenue and margin growth in 2021.
Altria’s stock is projected to register strong gains, with a consensus price target of $48, reflecting a potential upside of over 20% from its actual price.
The Dividend King’s stock, currently with a high dividend yield of 8.5%, is increasing its dividend by an average of 11.75% each year.
On May 14, CEO Billy Gifford said: “We are committed to the dividend. We know it’s important to our shareholders. They greatly value it, and it’s a top priority for us.”
Looking at Altria’s dividend history, line of business & future projects, I think its dividend is totally safe & am happy to own shares in the company.
3 – ABBVIE (Symbol: ABBV)
In 2013 Abbott separated into two publicly traded companies. The new Abbott Laboratories would specialize in diversified products including medical devices, diagnostic equipment, and nutrition products
while AbbVie would operate as a research-based pharmaceutical manufacturer.
Abbvie has the world’s best-selling drug, Humira. However, Humira’s patent has expired in Europe and is due to expire in the US by 2023.
To diversify away from Humira, Abbvie bought Allergan for a huge amount of $63 billion. This isn’t the only thing Abbvie is doing though. AbbVie has three launches in 2021 and more to follow in 2022 for both Skyrizi and Rinvoq.
As to show you that Abbv is already moving on from Humira’s revenue:
In 2020, Abbvie is expected to deliver 30B of revenue without counting Humira sales.
This represents a drop in Humira’s influence on the revenue from 60% to 40%.
Abbv has also grown its dividend for the last 48 consecutive years and is increasing its dividend by an average of 23.36% each year. Trading at $104.58 at the time of writing, the stock as a consensus price target of $111.67, implying a 6.78% upside.
ABBV’s stock gets even more interesting once you take a look at their high yield dividend of 4.51%, which is paid with 52.80% of their earnings. I think we will keep on seeing double-digit dividend growth for years to come.
Abbv is, in my eyes, a must-have high yield dividend stock.
HERE is a detailed ABBV vs JNJ comparison
4 – International Business Machines (Symbol: IBM)
IBM has been declining for years now, so why add it to this list? Well…
In the past 8 years, IBM has invested more than $120 billion in remaking the company.
In 2019 they bought Red Hat for $34billion to accelerate IBM’s transition to the cloud. This seems to be a good deal, seeing that Red Hat grew 17% year over year as customers embraced Red Hat’s OpenShift platform to deploy their cloud software solutions. Global cloud revenue increased by 19% to $6.0 billion, which represented 34.1% of the company’s total revenue, up from 27.8% one year ago.
On Oct. 10. IBM announced plans to spin off a $19 billion technology consulting business. This way it can focus more on cloud computing and artificial intelligence. The new company will provide hosting and network services, infrastructure modernization, and cloud migration services.
IBM is deeply invested in Artificial Intelligence:
M’s Watson is the most popular Chatbot platform among businesses. The Chatbot Market Overview estimated that 61% of Chatbots were built with Watson. The global Chatbot market is expected to grow by 24.3% to $1.23 billion by 2025.
IBM’s stock:
IBM is a Dividend Aristocrat trading at $123.52, with a consensus price target of $140.07. With a payout ratio of 50.90%, an average dividend year increase of 5.35%, and an initial high yield dividend of 5.28%, I see this as a great stock opportunity to start a position in this company.
Artificial intelligence makes IBM a true investment for the 21st Century.
5 – Main Street Capital (Symbol: MAIN)
Main Street Capital provides debt and equity capital to lower- and middle-market companies.
Founded in 2007, Main Street Capital has increased its overall dividend for the past five consecutive years, and never cut its dividend (including through 2008/2009 recession).
Although the COVID-19 financial crisis impacted MAIN’S net earnings, the company demonstrated it could withstand market crises through diversified investments.
Main Street Capital also has a 15.19 trailing price-to-earnings (P/E) ratio, which is much lower than the overall S&P 500 P/E ratio of 22.27. This P/E ratio suggests Main Street Capital has high earnings potential, especially when the COVID-19 crisis passes.
The company has an incredible dividend yield of 7.90%.
MAIN’s efficient operating structure provides significant operating leverage, greater dividends, and greater overall returns for its shareholders.
Based on its track record of performance, the Main Street stock appears to be a solid dividend yielding investment. Smart financial maneuvering should maintain the dividend in the future.
All of these companies make up a small portion of my portfolio and I truly believe in both their dividend safety as well as their potential for future growth.
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