Dividend stocks are a special category of financial assets, providing a lot of benefits for investing that make them attractive for the majority of investors. Searching for dividend stocks to buy, investors will see they offer income and can provide stock price appreciation.
In general, dividend stocks are safer and less volatile compared to tech stocks or growth stocks.
The following five dividend stocks to buy are dividend aristocrats, have good fundamentals and are considered to be undervalued.
In addition, these dividend stocks offer sustainable income, diversification and are defensive stocks for a turbulent stock market in the future, which is a realistic scenario.
The dividend aristocrats definition makes these stocks interesting as a dividend aristocrat is a stock with a long history of raising its dividend, more than 10 years. The best part is the expectation of increasing the dividend in the future.
I particularly like dividend stocks for one key reason. They are suitable for passive investing, receiving the annual or quarterly dividend on time. But they can also be monitored for active trading. This means waiting for any stock price correction to buy low, and increase the total return, from a potential stock price appreciation and the dividend.
Here are five dividend stocks to buy that are attractive with high odds of increased dividends in the future. (Data is taken using the Dividend.com screener.)
- People’s United Financial (NASDAQ:PBCT)
- AbbVie (NYSE:ABBV)
- Leggett & Platt (NYSE:LEG)
- AT&T (NYSE:T)
- Cincinnati Financial Corporation (NASDAQ:CINF)
Dividend Stocks to Buy: People’s United Financial (PBCT)
People’s United Financial is the operator for People’s United Bank providing a range of financial products ranging from commercial banking to retail banking and wealth management.
The stock has a one-year annual dividend growth of 1.43%, five-year average dividend growth of 7.60% and has 27 years of consecutive dividend growth. With an average financials sector trailing yield of 3.42% and a banking average trailing yield of 1.87%, the stock offers a more attractive yield compared to many financial sector dividend ETFs.
PBCT shares have a payout ratio of 53.8% for 2019 and 62.2% for the trailing 12 months. There is room for the dividend to increase. Talking about consistency, the dividend in 2015 was 67 cents, and has increased by 1 cent each year ever since.
What makes this stock attractive is that it is down nearly 25% in 2020. It is a prime candidate for stocks that have missed the stock market rally in 2020.
AbbVie is an international healthcare company. It is no surprise that its stock offers a high dividend yield. The healthcare sector is a favorite for investors searching for dividend stocks to buy.
ABBV stock has a one-year dividend growth of 19.22%, five-year annual dividend growth of 157.83%, and the years of consecutive dividend growth are 48. Yes, that is almost half a century. ABBV stock is the definition of passive income.
With a year-to-date return of about 18%, the stock has delivered perfectly its expectation for investing in quality dividend aristocrats stocks. It has offered a considerable total return adding the dividends.
The dividend in 2018 was $3.59, it increased to $4.28 in 2019 and for the trailing 12 months, it is $4.61.
Dividend Stocks to Buy: Leggett & Platt (LEG)
LEG stock could bounce in 2021 as it is in the consumer cyclical sector. Leggett & Platt produces worldwide furniture, flooring and textile plus bedding products. If you are performing stock analysis and want another stock with almost half a century of increased dividends, then here is another second choice, as ABBV stock before.
Leggett & Platt stock has a one-year annual dividend growth of 5.33% and a five-year annual average dividend growth of 29.51%. The stock has posted 49 years of consecutive dividend growth.
The 70.2% payout ratio for 2019 is high enough, but this has boosted the dividend of $1.50 in 2018 to $1.58 in 2019 and $1.60 for the trailing 12 months.
AT&T is among the largest telecommunication and media company in the U.S. and has been mentioned in another article 3 5G Stocks to Buy as the U.S. Military Tests the Waters.
It is a great dividend and income stock, too. The stock has a one-year annual dividend growth of 2%, a five-year annual dividend growth of 10.87%, and 36 years of consecutive dividend growth.
This stock also missed the stock market rebound from the March 2020 crash with a year-to-date return of about -25%. Yes, picking it at the end of the year would not have been among top stock gainers in 2020. But investing is mostly forward-looking.
AT&T is an attractive stock that you could well buy and forget if you are a passive investor. The dividends earned can provide inflation compensation and generate substantial income.
The dividend of $2.01 in 2018 increased to $2.05 in 2019, and it is $2.08 for the trailing 12 months. Among the mentioned stocks in this list, I believe T stock is also a cheap stock, with plenty of upside stock price potential.
Dividend Stocks to Buy: Cincinnati Financial Corporation (CINF)
CINF stock is the second stock in the financial services sector in this list of dividend stocks to buy, but in a different industry. This stock also has been out of favor in 2020 with a performance of -21%. Should this be a negative factor for considering it? To me, it is not.
Buying stocks at low prices and taking into account the fundamentals and the attractive dividend yield is an interesting investment approach. And it could well compensate for the risks of investing in stocks. Meanwhile, the dividend history of CINF stock is impressive.
It has a one-year annual dividend growth of 5.66%, a five-year average dividend growth of 27.27%, and 38 years of consecutive dividend growth. The dividend of $2.12 in 2018 has grown to $2.24 in 2019 and is $2.36 for the trailing 12 months.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article.