Top Dividend-Paying Stocks In 2021

Contents

Introduction 

What are dividend stocks?

Is Dividend Investing Worth It? (What to look for when investing in dividends?)

What is dividend investment?

Why invest in dividends?

What to look out for in dividends?

Top 10 high-dividend stocks to buy in 2021

Realty Income (O)

LTC Properties(LTC)

Dynex Capital (DX)

Prospect Capital (PSEC)

Gladstone Capita Corporation (GLAD)

Broadcom (AVGO)

Texas Instruments (TXN)

Eaton Corp. (ETN)

Automatic Data Processing (ADP)

Vanguard Short-Term Corporate Bond ETF (VCSH)

Introduction 

 

 

Looking for a stable source of passive income? Well, why not invest in dividend-paying stocks? You see, most of these stocks are for stable multinational companies that payout either monthly or annually. In this article, we look at 10 of the best you can invest in 2021. Let’s get started.

What are dividend stocks?

Dividend stocks are those companies that pay dividends regularly. These companies are well-established and have been paying dividends to shareholders for more than a decade.

Is Dividend Investing Worth It? (What to look for when investing in dividends?)

If you want to have a consistent source of passive income, then dividend investing is one of the ways to go about it. This is because you are sure of returns on the dividend payout day. Besides, it helps you grow in value due to capital appreciation over a long period.

However, it can lead to huge money loss if not done correctly. To avoid this, we will share with you tips on profitable investment. But first, what is dividend investment?

What is dividend investment?

Investing in dividends is basically buying stocks of a company that pays dividends. The amount you receive depends on the payout ratio. This is the money paid to shareholders relative to the net earnings of the company.

Why invest in dividends?

Well, investing in dividends is a sure way to earn stable passive income and enjoy capital appreciation right from the word go. The company pays out two types of dividends: regular and special. Regular dividends are paid after a specific period while special dividends are awarded to shareholders after a company makes huge profits.

What to look out for in dividends?

Now that you’ve decided to invest in dividends, what aspects should they fulfill? Let’s find out.

High returns

You should calculate how much you’ll gain for every dollar you invest at the company’s dividend ratio. Go for companies that have high yields. You can gauge the yield by dividing the amount you want to invest by the price of a share.  

However, let not high yields fool you. Often, companies with high yields are somehow in financial troubles, hence use the yields to trap unsuspecting investors. As such, you should do thorough background research of a company.

Safety

You don’t want to invest in a company and after a month it goes bankrupt. It’s for this reason that you should opt for dividends that have shown stability over a decade, regardless of economic downturns. Also, another crucial aspect that indicates the safety of dividends is the coverage ratio.

What is coverage ratio?

This is how often a company can pay cash dividends to its shareholders. If the metric is high, that’s a safe dividend. Otherwise, you are better off looking for other companies.

Qualified dividend stocks

If you are into tax benefits, then go for qualified dividend stocks since they are held for at least 60 days, attracting lower tax rates. Qualified stocks are paid by an American company or a foreign entity that meets the IRS requirements.

However, not all dividends that meet the above requirements qualify. For example, those paid by credit unions and tax-exempt companies will never qualify.

State of the industry

Don’t overlook the overall health of an industry. Consider industries that have healthy historic data and are currently doing well. For example, the tech industry is poised to grow as more and more people embrace AI, ML, and IoT.

Top 10 high-dividend stocks to buy in 2021

 

Realty Income (O)

First on the list is this company that is hailed for monthly dividends. The Realty Income Company even got the nickname “The Monthly Dividend Company”. Its market value is capped at $21.5 million and it offers a $61.26 dividend with a yield of 4.6%. In fact, it has made payouts for 604 consecutive months and its dividend has risen in 92 consecutive quarters. The same is expected for 2021.

LTC Properties(LTC)

This is yet another high-dividend stock that you can purchase in 2021. The company has a market value of $1.5 billion and has a $38.67 annual dividend with a 5.9% yield. The landlord company offers services to seniors and nursing facilities.

So why should you opt for LTC? Well, in the next decade, the Baby Boomers will be aging. And as such, most will opt to relocate to senior living property or seek nursing services. And as expected, LTC Properties will be a choice for many.

Dynex Capital (DX)

The Dynex Capital Company is one of the largest mortgage REITs in the market. It boasts of a market value of $417.3 million and an $18.03 annual dividend. With a dividend yield of 8.7%, it is one of the best investment decisions you can make. And its shares have been gradually growing since the second quarter of 2020.

At least 95% of its portfolio is an investment in agency mortgage securities making the Federal Reserve one of its main customers. It is poised to lure more risk-averse investors in 2021 with Eric Hagen, BTIG analyst stating that the company can achieve a return of 11% if it widens its credit spreads.

Prospect Capital (PSEC)

Next off is Prospect Capital that boasts of a $2.1 billion market value and a dividend yield of 13.3%. Currently, the dividend yield is $5.42. It has a diverse portfolio spanning more than 39 industries and 120 companies. It primarily invests in companies that deal with loans and debts. It pays off dividends every month.

Gladstone Capita Corporation (GLAD)

This is yet another monthly dividend-paying company that you should consider. It has a market value of $278.0 million and a dividend yield of 9.0%. Formed in 2001, the company has gone on to offer loans to medium-sized companies across the country.

 It is part of the Gladstone Companies that owns Gladstone Commercial and Gladstone Land, among others. It has s diversified portfolio with 48 companies spanning over 18 industries. The best part: most of the industries it invests in are less susceptible to economic downturns.  

Broadcom (AVGO)

This tech company majoring in the manufacture of enterprise software and semiconductors has recorded an increase in dividends for more than nine years.  It has a market cap of $174.496 billion with an annual dividend of $14.40 and a 3.3% yield. The company has registered a 75% growth in dividends over five years. It has profound earning stability and its dividend payout ratio is 211%.

Texas Instruments (TXN)

With a market cap of $147.954 billion, the chip-making company boasts of a 2.5% stock yield of a $4.08 annual dividend. It has registered a steady 23% dividend growth for the last 16 years. What makes it an ideal investment option is its 221% five-year return which shows that it is financially healthy. You can expect a 70% payout ratio which is ideal for any type of investor.

 

Eaton Corp. (ETN)

The company has been operational since the early 1900s and paid its first dividend in 1923. Since then, it has registered six years of a consecutive dividend increase. The company primarily builds power management systems for medium to large companies.

Its stock boats of a $2.92 annual dividend with a 2.5% yield. Its payout ratio is 86% and the dividend growth rate is 7%. The market value is capped at $46.7 billion.

Automatic Data Processing (ADP)

The company provides services to companies that require payroll and HR solutions. It’s been paying dividends since the late 1980s. The yield of the $3.72 annual dividend is 2.1%. It has recorded a 126% five-year return and a dividend growth rate of 14% over the years. While it has a rather impressive dividend growth, its earnings stability is not appealing standing at 4.

Vanguard Short-Term Corporate Bond ETF (VCSH)

The company manages at least $35.0 billion worth of assets and has an SEC yield of 2.0%. Its portfolio is mainly on short-term corporate bonds with a maturity timeline of 1-5 years. Most of the bonds mature within 3 years. You’ll find A-rated, BBB, and AA-rated bonds in its portfolio.