Below I’ll list my favorite Dividend Stocks for 2021, as well as explain why.
To make it to this list, we will look into more than yield alone. We want to see some growth, take a look into the finances & P/E levels. As a result, on this list you won’t find the typical everyday dividend stocks such as T or XOM. (Nothing against them, I own shares of both companies).
Which Sectors to invest in
Given that vaccines will be on the way next year and that the Federal Reserve has dumped the largest amount of stimulus on the economy ever, I like to believe that 2021 is going to be a really positive year for the stock market.
But which sectors will see growth?
- Tech
The pandemic has turned the sector into a sanctuary for investors, most of these companies have a business model that suits the pandemic. But, we think, Tech will also rise on a post-covid world. Most of these companies are highly profitable, with many of them reporting revenue raises of 15%+ annually. On top of that, major companies had to adapt to this situation, switching to home office.
Moving forward, many companies will likely reconsider their corporate real estate footprint, whether that involves downsizing or redistributing space to satellite offices.
To resume, companies just re-learned how to do business, and a lot is now Tech-Based. - Pharma Industry
Pharmas have a higher profit margin than most other industries. A IQVIA study and identifies that the value of the pharma industry will reach $1.5 trillion by 2023.
New technologies, such as AI, will help shorten the production cycle as well as the costs associated with production. Many pharmaceutical companies including Novartis use AI-based technology to develop better drug improvements and find faster ways to treat diseases. - Consumer Cyclical
Cyclical stocks typically hail from four sectors: consumer discretionary, financial services, materials and real estate.
The sector typically outperforms most sectors in the early stages of an economic recovery. For the 10-year period beginning in 2006, the consumer cyclical sector led all sectors in the economic recovery with a total return of 134%. This time, with extremely low interest-rates, consumers have more money on their pockets to spend.
Best Tech Dividend Stocks to Buy in 2021
- NVIDIA Corporation –
I did a whole post about them before, you can find it here. And yes, NVIDIA is not really one of the Best Dividends Stocks, it does however pay a small annually amount of $0.64 per share. Trading at $537.61 per share, and with a price target going as high as $650.00, this is definitely a must-have stock.
Nvidia acquired Mellanox for $6.9Billion & Arm Holdings for $40.0B, this deals are expected to add tremendous value over time.
I added NVIDIA to this list due to its potential to increase their dividend pay-out, seeing as at the moment they only pay 13.94% of their earnings out as a dividend. - Automatic Data Processing (ADP) –
In my opinion, ADP doesn’t get the attention it deserves. One of the longest paying dividend stocks out there, this soon-to-be Dividend KING (2 years left, 48 consecutive dividend increases by now) is trading at $173.63 at has a starting yield of 2.10%. ADP have also grown it’s dividends by an average rate of 15% in the last 3 years.
ADP anticipates 7-9% long term revenue growth. The company will combine its revenue growth initiatives with cost efficiencies from economies of scale and cost reduction programs. This combination of factors is expected to deliver double-digit percent annual earnings growth moving forward.
Best Dividend Pharma Stocks for 2021
- Abbvie –
Weird eh? A pharmaceutic dividend list and I’m not putting Johnson & Johnson at the top spot? Well… On this post I made a comparison between ABBV and JNJ. In my opinion, ABBV is a better dividend stock.
Not only does the company have a starting dividend yield of 5.1%, they have grown its dividend for the last 48 consecutive years. The company is increasing its dividend by an average of 23.36% each year. Also, AbbVie pays out 52.80% of its earnings out as a dividend, leaving enough room for growth.
ABBV is part of the Dividend Channel ”S.A.F.E. 25” list, signifying a stock with above-average ”DividendRank”. Their net profit margin as of September 30, 2020 is 18.16%. (a 20% margin is considered high (or “good”), and a 5% margin is low.)
Thanks to its acquisition of Allergan, AbbVie now has more than 120 additional products in its lineup that combined generated more than $16 billion in sales last year. - Viatris –
The new company created by the merger of Pfizer‘s Upjohn and Mylan, Viatris should generate annual revenue of between $19b and $20b with free cash flow of around $4b.
The deal structure means Viatris stock looks attractive on 2021 pro forma multiples of ~5x-8x EV/EBITDA.
Viatris is expected to use around 25% of its free cash flow to fund a dividend program, which should be initiated in the first full quarter after the transaction closes.
Viatris is a leading provider of antiretrovirals to treat HIV/AIDS and other infectious diseases.
The company is embarking on a significant global restructuring program in order to achieve synergies of $1 billion and ensure the new company is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers and other stakeholders.
Best Consumer Cyclical Stocks 2021
- American Express –
AXP trades at $114.14 per share & has a starting yield of 1.51%.
As seen on the graphic, the company regularly increase their dividends. Also, their payout ratio is 42.68%, which leaves enough room for further dividend-increases.
American Express revenues are expected to improve to $40.7 billion in FY2021, mainly due to higher discretionary consumer spending on travel, hotels, and other items. The stock is still 20% down from it’s 52wk High.
American Express reported a profit during a very slow period and maintained its dividend, unlike some other financial-services companies. It has a strong cash position and pivoted to meet new demands and behaviors, focusing on future growth.
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ABBV vs JNJ Stock
https://www.andrespassivejourney.com/best-stock-to-buy-abbv-vs-jnj/
Best growth stock 2021?
https://www.andrespassivejourney.com/best-stocks-to-buy-now-is-this-the-best-growth-stock-of-2020/
Google – The future of Tech
https://www.andrespassivejourney.com/google-stock-the-future-of-tech-revolutionary-ai/
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