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Best dividend stocks to buy in 2021
This page covers the basics of a dividend stock and why you might want to invest in one. Then it goes through the best options available today to help you get started.
What are the top dividend stocks to buy?
Our experts have been through the stock market to choose their favourites and you can find them ranked in the table below. Click the links to find up to date price information or read on for a summary of each company in turn.
|#||Stock symbol||Company name|
|2||PG||Procter & Gamble|
|3||JNJ||Johnson & Johnson|
|4||KO||The Coca-Cola Company|
1. 3M Company (NYSE: MMM)
3M is an American conglomerate that produces goods in a wide range of industries, including safety equipment, healthcare products, and optical films. Formed in 1902, 3M manufactures more than 60,000 products in total and operates in 70 countries around the world.
The company’s stock price has been trending up ever since the pandemic crash in March 2020. After a difficult couple of years, that pandemic offered the company a chance to reset and opened up new revenue opportunities, not least from its range of respirators which were suddenly in demand.
While the upward trend is good news, it’s the dividend that’s the main selling point for 3M. That dividend currently stands at about a 3% yield and has been increased every year for a staggering 63 years in a row. 3M is a massive, stable company that you can rely on to return money to shareholders come rain or shine.
2. Procter & Gamble (NYSE: PG)
Procter & Gamble is another major American conglomerate that produces consumer goods. It’s one of the oldest companies in the country, having been formed all the way back in 1837, and owns about 60 brand names in total, including 20 with net sales of over $1bn per year each.
In 2018, Procter & Gamble decided to restructure to focus on its most valuable brands and business areas. That decision has paid off spectacularly for its investors, as the stock has doubled in value in the years since then. In danger of being spread too thin at one stage, PG is now a streamlined company with 60 brands that produce just as much revenue as it was earning before.
That stock growth alongside a dividend yield of 2.5% makes Procter & Gamble an appealing stock to own. It looks well set for the future and it has an even prouder tradition of raising dividends than 3M does, having done so for 65 consecutive years.
3. Johnson & Johnson (NYSE: JNJ)
Johnson & Johnson is a pharmaceuticals and consumer healthcare company. Founded in 1886, it’s been at the forefront of American healthcare for over a century. It’s one of the most valuable companies in the world and the largest healthcare stock by market capitalisation.
The company has been very successful for a long time. Its stock price has been on the up and up, continually hitting new all-time highs at regular intervals. Even after a pandemic during which competitors like Pfizer and AstraZeneca won the race for a vaccine, JNJ is still at its highest ever point.
Like the companies above it in this list, Johnson & Johnson has a long tradition of raising its dividend. A relatively baby compared to the previous two, it has paid out for 59 years in a row and the yield sits at just under 2.5%.
4. The Coca-Cola Company (NYSE: KO)
The beverage company, Coca-Cola, is perhaps the most instantly recognisable brand in the world. First set up in 1892, The Coca-Cola Company is now a lot more than just its eponymous soft drink. It owns many other beverage brands as well, including the likes of Costa Coffee and Monster.
Despite the fact it makes most of its money from restaurants and bars, Coca-Cola coped with the pandemic quite well. Despite an initial cratering of the share price, it recovered thanks to a major uptick in sales through supermarkets. By 2021 the company was back to trading near its pre-pandemic price and close to its all-time high.
Coca-Cola has an extremely efficient operation thanks to the fact it has tight control over each part of its supply chain. It should also benefit as the world continues to open up again and its hospitality customers return. The dividend – raised for 59 years in a row if you’re counting – with a yield of almost 3% is a sweetener to go along with those good prospects.
5. Gilead Sciences (NASDAQ: GILD)
Gilead is an American pharmaceutical company. Formed in 1989, it predominantly develops new drugs and treatments that it can patent and sell to the public. Its most famous drugs have aided the fight against Hepatitis, HIV, and flu, among other diseases.
Like many pharma companies that rely on patent protection for the majority of their revenues, Gilead’s fortunes rise and fall depending on the success of their drugs. That means the stock can be quite up and down. The company did well post-pandemic on news of a potential merger but has fallen since as it spent money on acquiring new companies.
Gilead has a good record of success, however, and snapping up other business is one way for companies to add new drugs and research to their portfolio. Its dividend history is a little different to the others on this list, as it has made the top five based on its yield – a tidy 4.5% – rather than longevity. That means it could have more upside than the rest in future.
Where to buy the best dividend shares
The best place to find all of these shares is through an online stock broker. We have pulled together the best brokers below so that you can get started quickly by simply following the links in the table.
What is a dividend stock?
Any company that returns some of its income to shareholders through a regular dividend payment. Dividends are usually a staple of large, well-established businesses and so investing in these stocks tends to be a reliable way to build long term wealth.
Are dividend shares a good investment?
They usually are but it depends on your investing goals and your timeframe for seeing returns. Dividend stocks are best suited to someone who wants to invest for many years, because you can keep reinvesting the payments into your portfolio.
As these companies pay a substantial amount of their revenue to shareholders every year, there is less for them to spend in other areas. Stocks that prioritise growth often forego a dividend in favour of putting the money into research and development or subsidising a loss-leading venture that grabs more market share.
That means you need to decide which of the two approaches suits your style best. Many people choose to combine them, with the dividend stocks providing balance to more risky investments elsewhere.
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