Last year was a tale of two halves for dividend stocks. The novel coronavirus pandemic made the first half of 2020 a period of payout cuts and halts by S&P 500 Index names, but payouts came back mightily in the second half of the year, indicating that many of the top stocks for 2021 are dividend payers.
Goldman Sachs analysts expect a 5% rise. “Goldman expects the vaccine distribution efforts by mid 2021 should help real GDP growth reach 5%, which itself is 120bps above the consensus for growth,” noted Seeking Alpha in December. “The analysts also point to historical annualized growth in dividends, which, since the early 1950s, never dipped below 2.2% CAGR, while dividend futures are pricing in an average annual dividend growth from 2019-2029 of -1%.”
Investors seeking dividend stocks often look to the energy sector. That’s because the energy sector is known historically to contain reliable dividend payers. However, outside of the sector, yield seekers still have many options.
That’s where we’ll look today. There are many great companies to invest in that bear dividends across industry. A few of these companies also possess significant growth potential.
- AbbVie (NYSE:ABBV)
- Walmart (NYSE:WMT)
- Fortress Transportation & Infrastructure (NYSE:FTAI)
- Albemarle (NYSE:ACRE)
- Phillip Morris International (NYSE:PM)
- Archer-Daniels-Midland (NYSE:ADM)
- Gaming and Leisure Properties (NASDAQ:GLPI)
Dividend Stocks: AbbVie (ABBV)
AbbVie is a pharmaceutical company focusing on a range of therapeutics. These cover a range of specialties, including immunology, neuroscience, oncology, virology and eye care, among others. AbbVie also manufactures medical devices.
AbbVie declared a $1.30 dividend on Feb. 18. The company has increased its dividend 225% since its inception in 2013.
Still, AbbVie is a great stock outside of its dividend. It is a strong company. 2020 revenues were $45.8 billion which was a year-over-year increase of 37.7%. Immunology was its strongest business in 2020, accounting for 48.4% of revenues. AbbVie depends on Humira for the bulk of those revenues but other immunology products, including Skyrizi and Rinvoq, grew at over 100% in 2020. AbbVie’s other businesses including oncology and neuroscience actually grew faster in 2020.
But, back to the dividend. I believe AbbVie is a strong company with growth ahead of it. But it should be noted that its dividend is not perfect. Does it continue to grow? Yes. But it does have a high dividend payout ratio of 1.74 in order to maintain that constant increase. This means AbbVie is paying 174% of earnings toward its dividend. That isn’t sustainable.
A healthier dividend payout ratio tends to be in the 35% to 55% range. Nevertheless, ABBV stock is strong and its dividend stable.
Walmart remained the largest global retailer in 2020. Its full year revenues for 2020 totaled $560 billion. This was an increase of $35 billion during the year. Amazon (NASDAQ:AMZN) remains the second-largest retailer, but made significant progress in closing the gap between the two companies. Amazon posted full year sales of $386.1 billion in 2020, up 38% from $280.5 billion in 2019.
But I digress. Aside from its massive scale and impressive business operations, Walmart is also a company with a strong dividend. The dividend not been cut since 1975. The yield is fairly modest at 1.66% trailing, and 1.69% forward. That translated into 55-cent payouts in each of the past four quarters. WMT stock traded between $102 and $153 in the past 52 weeks.
The dividend is extremely stable and predictable historically. Investors can expect Walmart to continue to increase its dividend 4 cents per year if the past is prologue. As the big-box retailer continues to improve its e-commerce platform, share prices may grow. The company is now the number two company in retail e-commerce sales.
Walmart doesn’t have the appeal that Amazon possesses. However, it is the larger retailer. Further, it has a dividend that Amazon lacks.
Fortress Transportation & Infrastructure (FTAI)
Compared to the first two names on this list, Fortress Transportation & Infrastructure is much lesser known. I’d venture to guess most readers have never heard of the company. I know I hadn’t before researching it recently. The company works in transportation and infrastructure.
Fortress acquires and operates transportation and transportation infrastructure.
Some of the company’s operations do touch upon energy, but the company is diverse enough to merit a spot on this non-energy list. The company is divided into two main businesses: equipment leasing, $1.66 billion; and, infrastructure, worth $971 million.
The equipment leasing arm is aviation focused, while the infrastructure does touch upon midstream energy operations. The equipment leasing section owns 264 assets including 78 aircraft and 186 engines which it leases to customers. Therefore, as full disclosure, those seeking dividends completely outside of energy beware.
Fortress began paying a 33-cent quarterly dividend in November 2018 which continues unchanged. The 4.97% yield rate is neither exceptional nor low. But the company looks to be in strong position as infrastructure investments should climb. And with its aviation assets, FTAI stock can benefit as air traveler traffic inches upward.
Albemarle is a company that operates in the relatively unsexy sector of chemical manufacturing. Despite that staid playing field, it is in a strong position due to the much-sexier electric vehicle industry. That’s because it produces lithium central to the production of EV batteries.
This makes ALB stock a bit speculative. Part of the argument in favor of buying Albemarle shares depends upon the continued growth of the EV market. A recent report from Deloitte assumes that compound annual growth in the sector will hit 29% through 2030. That same report anticipates that EVs will constitute 31% of all new car sales in 2030.
Another part of the argument favoring Albemarle assumes that lithium will remain the leading battery chemistry in EV batteries. That indeed looks to be the case at least through 2030, according to IDTechEx.
Albemarle isn’t a dedicated lithium producer, but it is a name deeply entrenched in the EV conversation. So, consider it a play on EV sector growth with a modest dividend attached to it.
The company’s annualized dividend is $1.56, equating to around a 1% yield at current prices.
Phillip Morris International (PM)
Phillip Morris is one of the biggest worldwide names in tobacco. That means it is a company in transition. Cigarette smoking hit an all-time low of 13.7% in 2018. It decreased again in 2019. Then cigarette sales flattened in 2020, meaning they actually trended upward, as the pandemic led to an increase in alcohol and tobacco consumption.
Phillip Morris is transitioning toward more smoke-free alternatives. How much those take root remains to be seen. In fact, the report liked above indicates that some consumers are returning to cigarettes following concerns about vape safety.
There were several positives from the company’s full-year report released on Feb. 4. EPS rose by 11.9% to $5.16 for 2020. EPS was even stronger in Q4, up 22.1% year-over-year to $1.27 during that period. Operating income increased by 10.8% while revenues declined by 3.7%. That indicates efficiency on the part of Phillip Morris.
PM stock carries a forward dividend yield of 5.66%, which now stands at $1.20 per quarter. There’s a fair bit of upside in shares themselves. Wall Street gives PM stock an average target price of $98.04 currently. That implies a good return based on current $84.12 share prices.
Archer-Daniels-Midland is the agricultural commodity firm behind many other companies. It produces things like wheat, corn and oils among its roster of agricultural commodities.
ADM is also a dividend aristocrat — since 1976 — with a $32 billion market capitalization.
The company, like many others, struggled during the pandemic. These struggles resulted in a 2020 which saw overall revenues remain flat from 2019. In fact they decreased a modest .47% year-over-year. However, overall profits increased 29.22% from 2019 through 2020. And although revenues were flat for the entire year, Q4 showed an increase. Q4 2020 revenues increased 9.7% of the same period in the previous year.
Archer Daniels Midland is separated into 3 main business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. All 3 showed increased profitability in 2020. Investors can anticipate a lot of stability from ADM stock.
Its forward dividend yield is 2.63% and the company maintains a healthy 0.46 payout ratio. Thus, even though ADM’s dividend doesn’t yield massive returns, there is absolutely no reason it is at any risk at all. In fact, ADM could easily increase its yield and remain in a very healthy range of payout ratio.
Gaming and Leisure Properties (GLPI)
Gaming and Leisure Properties stock carries a nicely growing dividend. The company just increased its quarterly payout to 65 cents per share. The company acquires, owns, and finances real estate which it leases to gaming operators.
The company is the name behind up-and-coming names in the gambling space including Penn National Gaming (NASDAQ:PENN) and DraftKings (NASDAQ:DKNG). GLPI is underpinned by 48 properties which it states are all current in respect to rental payments. Some 47 of its 48 properties are now open under safety protocols.
I personally think this is an exciting stock to own because it is a REIT operating in the gambling sector. Gambling is certainly a growth sector worth considering. The rise of DraftKings and Penn speak to this trend.
Real estate is usually a fairly safe bet although it has downsides. Investors have seen this in 2020 as remote work roiled real estate. However, the real estate GLPI operates will certainly continue to draw users because it is unique among commercial real estate. People simply will come to gamble.
GLPI’s dividend yield is about 5.5% and, based on the most recent 65-cent dividend, pays $2.60 on an annualized basis.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.