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Best Dividend Stocks to Buy in 2021

Author: Tony Loton

Before the Covid-19 pandemic, the Federal Funds interest rate (i.e., the interest rate banks charge each other for overnight borrowing) was guided by global supply and demand, and it stood at 1.55% in the USA. When the Covid-19 epidemic became a global pandemic, central banks’ governing bodies reduced already-low interest rates to bare minimums in line with their economies. 

In 2021, there is light at the end of the tunnel in terms of effective coronavirus vaccines. However, the Federal Reserve and most central banks have maintained the minimum possible interest rates in the hope that economies will rebound because businesses can borrow at such low rates.

With interest rates on bank deposits so low, investors will be interested in achieving higher returns by investing in stocks that pay higher dividends while also enjoying share price appreciation. In this guide, we list and look at some of the best dividend-paying stocks in 2021.

Where Can I Trade Dividend Stocks?

Although there are many traditional broker-dealers through which you can trade stocks (including dividend stocks), these days you’re most likely to choose an online broker. Brokers are similar in many ways but differ in terms of such things as bid-ask spreads, trade execution speeds, and the number of markets they make available for trading.

To help you choose the best broker, we’ve done some research ourselves.

1
Johnson & Johnson (JNJ)
User Score
10
Globally Aging Populations
Covid-19 Vaccine Plans
$377.77 Billion Market Cap
Description:
Payment Methods
Full regulations list:
2
Merck & Co (MRK)
User Score
9.3
Merck & Co was founded in 1891 and is headquartered in New Jersey.
Market Cap of 189.58B as of February 2021.
The company is expected sales to rise 8% to $51.9 billion
Description:
Payment Methods
Full regulations list:
3
IBM (IBM)
User Score
8.7
One of the Biggest Global Tech companies (Founded in 1911 in New York)
Market Capitalization of +$106B as of February 2021
Provides multiple retail and individual hardware and software solutions and services
Description:
Payment Methods
Full regulations list:
4
Washington Trust Bancorp (WASH)
User Score
8.5
Washington Trust Bancorp, Inc. was founded in 1800 and is headquartered in Rhode Island.
Market Cap. of +0.7 Billion dollars as of February 2021.
Pays a high and reliable dividend of 4.54%
Description:
Payment Methods
Full regulations list:
5
3M (MMM)
User Score
7.9
3M Company was founded in 1902 and is headquartered in Minnesota.
Market Cap of 101.99B as of February 2021.
The company pays a reliable dividend of 3.36%
Description:
Payment Methods
Full regulations list:

What Are Dividend Stocks?

Companies distribute a portion of their earnings to common stockholders in the form of dividends, which investors can compare with the amount of money they would receive by depositing their money in a bank account instead.

Not all companies pay dividends, particularly in their early days before they have become profitable, but several stable companies have a good track record of paying consistent (or even rising) dividends for many years. The best dividend-paying stocks typically belong to established industries such as real estate, utilities, oil and gas, healthcare and pharmaceuticals, basic materials, and banking.

In this guide, we list ten of the best dividend-paying stocks before digging deeper into five of them.

How to Trade and Invest in Dividend Stocks?

1

Open a Trading Account

Open a trading account with a properly regulated brokerage firm. Provide any required personal information and proof of identity. Deposit trading funds by bank transfer, credit/debit card, or another convenient method such as PayPal.

2

Research Quality Dividend Stocks

Research the best dividend-paying stocks using our list of suggested stocks as a guide. Then find them in the list of stocks presented by your broker. You should be able to select each stock to see additional information, including a price chart.

3

Start Trading

Stocks can easily be bought by filling out your broker’s trading ticket with the number of shares you wish to buy or the amount you wish to invest in selected stocks. Outside of market hours, you can fill out an order ticket instead, to buy shares at the best available price or your maximum specified price when the market next opens.

Top 10 Dividend Stocks to Trade

We’ve identified the best dividend stocks to buy in 2021, as follows:

  1. Realty Income Corporation [O]
  2. Enterprise Products Partners [EPD]
  3. Stag Industrial [STAG]
  4. Kinder Morgan [KMI]
  5. Main Street Capital Corporation [MAIN]
  6. China Mobile [CHL]
  7. Vodafone Company [VOD]
  8. Total SE [TOT]
  9. Philip Morris International [PM]
  10. Innovative Industrial Properties

Now, let’s look at five of them in more detail.

1. Realty Income Corporation [O]

Commonly known as "The Monthly Dividend Company," this real estate investment trust (REIT) has a forward dividend yield in June 2021 of 4.05%. Regardless of whether this yield appears attractive, what is remarkable is the fact that this company has made over 600 regular monthly dividend payments with 92 consecutive rises in the quarterly dividend. The annual compounded dividend growth rate since inception is 4.5%.

Simply put, you can’t talk about dividend stocks without mentioning Realty Income Corporation.

2. Enterprise Products Partners [EPD]

EPD is a holding company that has interests in petrochemical and natural gas, and its dividend yield (as of June 2021) is 7.11%.

As long as the world runs on fossil fuels, EPD’s dividends should be secure.

3. Stag Industrial [STAG]

Stag Industrial is a REIT that specialises in the acquisition, ownership, and operation of industrial and logistics properties. After falling in March 2020 alongside most other stocks, Stag shares rallied when the need for logistics services soared during the coronavirus pandemic lockdowns. As more businesses go the e-commerce way and the need for distribution and logistics services increases, this dividend stock has room for growth.

With a forward dividend yield of 3.75% in June 2021, this stock might not have seemed like the most attractive dividend payer, but this figure is still way more than the interest paid on a typical bank deposit account.

4. Kinder Morgan [KMI]

Kinder Morgan operates in the energy sector and is your go-to company for storing and transporting fuel, natural gas, crude oil, ethanol, CO2, and coal. Until the world moves entirely to renewable energy sources, KMI should continue growing and paying out dividends.

Midway through 2021, KMI’s dividend yield is 5.68%.

5. Main Street Capital Corporation [MAIN]

Main Street Capital Corporation provides small and mid-cap companies with equity capital and long-term debt capital. As the global economy recovers from the coronavirus crisis, small and medium-sized businesses will be looking for funds, so this company should keep paying dividends as long as its debtors keep paying back.

The June 2021 forward dividend yield stands at 5.90%.

Expert Tip on Investing in Dividend Stocks

If a dividend yield looks too good to be true, it probably is. The dividend yield is inversely proportional to the share price, so many UK bank stocks appeared to have phenomenal dividend yields during the 2008/9 financial crisis simply because their share prices were falling fast.
- Tony Loton

Why Invest in Dividend Stocks?

Dividend stocks pay investors regular income that is notionally similar to the interest you would receive if you’d invested your money in a bank deposit account instead. Investors can make money by buying stocks whose dividend yields are higher than bank deposit interest rates, and ideally higher than inflation. On top of this, you might also benefit from future share price appreciation if you invest in undervalued stocks that pay dividends.

However, nothing in the markets is guaranteed. Dividends can be cut and share prices can fall, so investing in the best dividend stocks is not a guaranteed road to riches.

Frequently Asked Questions

  1. We’ve listed a few of the best dividend stocks because you should aim for a diversified portfolio rather than investing all your money in a single stock that could go bust.

  2. Dividend stocks can be a good long-term bet for investors who buy and hold them, so “right now” might not be the right question. When it comes to dividend income, “time in the markets” may be more important than “timing the markets”.

  3. In financial terms, our research suggests that the strongest dividend stock company is Philip Morris International.

  4. Cautious long-term investors tend to invest in dividend-paying stocks. Investors looking for quick wins are more likely to go for growth stocks.

  5. Dividend stocks are often recommended to beginners as safer investments than other stocks because these are typically longstanding companies that are consistently profitable.

  6. Dividend stocks are popular because they provide regular income as well as the prospect of capital growth.

  7. All stocks, not just dividend stocks, are traded on stock exchanges such as the London Stock Exchange (LSE) and New York Stock Exchange (NYSE) during their trading hours. These are typically 8 am to 4.30 pm (local time), Monday through Friday.

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