The Federal Reserve slashed interest rates back in March in protecting the economy from the crippling economic effects of Covid-19. Dividend stocks became doubly important for investors, with savings yields taking a battering.
Thankfully, the pandemic-induced economic recession hasn’t affected dividend stocks as viciously as in the 2008 financial crisis did. For example, dividend payouts tanked 37% from 2008 to 2009.
Hank Smith, head of investment strategy at The Haverford Trust Company, told Forbes that investors shouldn’t be reaching for high dividend yields.
“Stocks with very high [dividend] yields, say 8% or higher, often are a market signal that the dividend is not safe,” he said.
Instead, it’s best to look for companies with a sound balance sheet and business model in today’s unique scenario.
The following are good dividend stocks to buy for 2021 because their companies increased the dividend payouts during the pandemic and have performed remarkably well.
Dividend Stocks to Buy: AbbVie (ABBV)
AbbVie is a multinational biopharmaceutical company that develops and sells pharmaceutical products in several major territories. Despite the challenges presented by Covid-19, ABBV stock has stayed resilient with a 12-month return of 21%.
Warren Buffett’s $1.8 billion stake in the company is a testament to its resilient business model and strong income generation ability.
The company recently posted its stellar third-quarter results, which comfortably beat analyst estimates. Global sales were up 52% to $12.9 billion compared to the year-ago period. Net earnings were at $1.29 per share compared to $1.26 in the prior-year period. Strong sales of its Humira rheumatoid arthritis treatment helped boost revenues, offsetting the dip in the companies Botox sales.
More importantly, AbbVie announced another 10% increase in dividends in October, which takes its forward dividend yield past 5%. The company has consistently increased its dividends since being spun-off from Abbott Laboratories (NYSE:ABT).
Johnson & Johnson (JNJ)
Johnson & Johnson is a multinational company that develops, manufactures, and sells various products in the health care sector. Another investment has done relatively well during the pandemic, with JNG stock’s 12-month return at 11%.
Moreover, it remains one of the most reliable dividend players in the health care industry.
With a sustained increase in the demand for its medical devices and drugs, third-quarter results remained solid. Revenues were at $21.08 billion, beating analyst estimates of $20.2 billion. Adjusted earnings per share were at $2.20, beating estimates by 11.1%. The company’s pharma business, which has been working on a Covid-19 vaccine, also grew 5%.
Its healthy dividend yield of 2.8% and a payout ratio of over 50% makes it one of the industry’s best dividend investments. JNJ’s one-year dividend growth rate is at an impressive 5.9% despite the dicey economic conditions.
Medtronic is engaged in the manufacturing and distributing medical therapies to clinicians, hospitals, and patients in over 150 countries. Despite troubles in the initial half of the year, Medtronic stock’s six-month returns are at a healthy 13.5%. It has been a dividend champion in the sector, with 43 consecutive years of growth. From 1993, dividend growth has averaged a spectacular 16.5% each year.
It recently reported its better-than-expected second-quarter results for fiscal 2021. Revenues came in at $7.6 billion ahead of analyst estimates of $7.1 billion. Non-GAAP diluted EPS was at $1.02, beating analyst estimates by 24.2%. Its impressive results were driven by the increased demand for medical devices and the number of elective procedures.
“Despite the challenges posed by the pandemic, we’re well-positioned to accelerate growth over the medium- and long-term,” Medtronic’s CEO Geoff Martha said
In terms of dividend performance, the company is arguably one of the best in the med-tech space. It has a payout ratio of over 57% and a yield of 2.09%. Additionally, its five-year dividend growth rate exceeds 12%. Therefore, it’s one of the top dividend stocks that have stayed resilient despite the pandemic’s effects.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.