What are the Top 5 Dividend Stocks to Invest in for 2021?

Last Updated July 23rd 2021
22 Min Read

Are you an investor looking for a more regular income? Are you wanting to add diversity to your growing portfolio? 

Take a look at 5 dividend stocks that are great potentials leading into 2021 and to stick with for the long-haul. 

5 Top Performing Dividend Stocks 

As 2020 has proven anything can happen unexpectedly at any given time and can also turn out to be extremely volatile.

With that being said, it is very much similar within the stock market too as nothing is guaranteed as stocks can go from or way to another at any given moment.

Many new investors who are just starting out within their trading journey and investors that have been in the field for a while generally have one common aim, to gain wealth.

What many investors sometimes do overlook, however, is dividend stocks as investors tend to be drawn towards growth stocks to achieve their success.

Nethertheless, the potential revenue that an investor can add to their income stream brought in from dividend stocks, can be extremely rewarding.

From learning the understanding of what dividend stocks are and how they can benefit your trading journey, to looking into learning 5 of the best returning dividend stocks that are currently waiting for investors like you to add them to your growing or if you are an experienced investor, adding these budding dividend stocks to your established portfolio.

Now let’s explore what dividend stocks are and the exciting benefits of what they entail that are on offer to you as an investor.

That’s why we put together a list of the best dividend stocks of 2021 for you to consider.

So without further ado…

Th Top 5 Best Dividend Stocks for 2021: 

1. Verizon Communication Inc (VZ)

2. Royal Bank of Canada (RY) 

3. Nike Inc (NKE) 

4. Enbridge Inc (ENB)

5. McDonald’s (MCD)

 

What are Dividend Stocks? 

If you're new to investing, dividend stocks are stocks which you will more then likely want to keep on your radar, as these stocks have many advantages for you within your investing journey.

To keep it simple, dividend stocks are simply a share in a company's profits.

Every quarter (every three months), a company will share a portion of its profits with its shareholders which is paid out either in cash payouts or shares which is known as a dividend.

For investors, dividend stocks are great for the long-term as they have shown and delivered great investment returns. As of the short-term, dividend stocks are still worthwhile but however, will not be as beneficial as opposed to the long-term investment.

A great example of a dividend stock that has and is continuing to perform well and on the radar for investors leading into 2021 is Broadcom (AVGO).

The American fabless semiconductor company has shown good growth over the past five years with a solid 75% increase and with a stock return of 237%.

As the company continues to grow, other factors to look into before investing into a dividend stock is looking into their dividend payout ratio, dividend yield and dividend stability factor which is ranked on a scale of zero to 99, with 99 being the most volatile.

A dividend yield is a percentage of the amount of money a company will pay its shareholders divided by its current stock price. AVGO stock is currently offering $14.40 annual dividend with a dividend yield of 3.34%.

A company's dividend payout ratio is the percentage in which will be paid out or estimated to be paid out to its shareholders.

Along with the last point, a company's dividend stability factor shows how stable the company's position is as it pays its shareholders from the company's earnings. A company that pays a manageable amount of earnings through dividends are classed as stable and has future potential for its dividend payouts to increase as time moves forward.

Although it's advised to research and understand your chosen stocks before investing, you have to be aware that although stocks have performed and continue to perform well, it does not confirm that this will definitely be the case for the future.

As company management, analysts and investors can only expect and predict their earnings and if 2020 has taught us anything, this year has proven anything can happen.

The Difference Between Dividend Stocks and Growth Stocks 

Although both avenues are good avenues to go down, dividend stocks offer advantages that growth stocks are unable too.

The most notable advantage that dividend stocks have over growth stocks as already advised is that dividend stocks pay out every quarter giving you that more regular source of income. Whereas growth stocks will reinvest their earnings back into the company in order to grow and gain higher returns.

In the bigger picture, dividend stocks are deemed to be less risky than growth stocks and have actually been known for many years as being better performers than growth stocks.

On the subject of profits, profits from growth stock investments are made when either shares are sold or redeemed. Whereas dividends are paid every three months in cash flow or shares, you do not need to sell your stock.

The reasoning as to why dividend Stocks are classified as more consistent and less risky than growth stocks, is due to the fact that cash flow is being released within regular intervals proving to be more consistent than growth stocks. However, as advised growth stocks have the potential for higher returns for investors in the long-run but offer no regular cash flow.

Overall, dividend stocks are designed for investors who are wishing to obtain cash flow from stocks that are paid out in regular quarterly intervals and within a shorter time frame as opposed to growth stocks.

Growth stocks are designed for investors who are in for the long-haul with cash-flow being available only at the sale or a redemption of a stock.

To summarize, if regular income is what you are wishing to achieve with the added consistency and stability then dividend stocks are for you.

 

Dividend Stocks are Well-Known Companies Too 

One factor which many new investors may not be aware of is that dividend stocks are also some of the world's well-known companies.

McDonald’s, Johnson & Johnson and Target, the American superstore are just three big names in a pool of many successful dividend stocks.

Not all big-branded names are growth stocks like Amazon, Facebook and Apple who are in the list of the top big names within growth stock investing.

To read and discover more, 20 Top Performing Stocks for 2021 has a combination of it all for you.

To discover and gain a good understanding of some of the best performing growth stocks that are the perfect addition to your portfolio, with the additional benefits of further dividend stocks that are great assets and sources of income to your current income streams.

What are the Top 5 Dividend Stocks to Invest in for 2021?

let's take a look at five of the top-performing dividend stocks that are consistently performing heading into 2021 and set for good potential dividend investments for years to come.

1. Verizon Communication Inc (VZ)

Dividend Yield: 4.1% 

verizon stock price chart

One of the world's largest communication technology companies is also one of best performing dividend stocks within the energy sector on the market to date, Verizon Communications.

Headquartered in New York City, the company reported a final revenue figure in 2019 of $131.9 billion along with $10.02 billion in cash dividend payments paid to its shareholders within the same year.

And the company who has performed well over the years is set for a sparkling future as it continues to flourish.

Verizon's dividend per share currently stands at 65.75c which has increased by 1.25c per share from its previous quarter.

As the 5G network has become readily available and accessible for us all to be a part of and as wireless technology continues to take over the world, there is no wonder this stock is gaining growth in its share price.

Being on the subject of 5G, Verizon has set their sights firmly on investing and going all in for the new 5G network. VZ has reportedly spent around $15 billion on investing with maintaining and acquiring its products, to which the well-established company can comfortably afford such spending and even paid out cash dividends of around $10 billion alongside.

The largest tech company has declared a new dividend yield of 4.1%.

The company over the years has been classed as being generous with its payouts every year, as it has grown steadily. For a company which is now one of the largest communication tech companies out there, it deserves to get the credit it deserves.

Vezion’s price to earnings ratio p/e currently stands at 12 on the scale, which is reasonable.

Looking to the future, the company is set to stand out in comparison to its peers as the continued enrollment of the 5G network carries on gaining momentum.

A stock that is considered a strong and solid dividend stock by many, is also one to look to add to your list.

2. Royal Bank of Canada (RY) 

Dividend Yield: 4.1%

A top-performing bank in 2020 has been the Royal Bank of Canada which is also set to be a good stable dividend stock to keep a hold of for the long-term.

The banking and financial industry has been hard hit like many industries this year due to the Covid-19 pandemic but in comparison to its fellow businesses, RY has carried well.

Although statistics will show that within the 2nd, 3rd and 4th quarters the percentages were down in comparison to last year, however, the results were only marginal in the bigger picture and in comparison as mentioned to other businesses within the field, RBC is leading a solid path going into 2021.

Looking into the future, Royal Bank of Canada has expressed that they see economic growth leading into the second half of 2021 which will inevitably see the company's earnings per share increase if their predictions work in their favour.

As it stands, at present the share price for the company is at 105.23 like most of the RBC’s financial figures they are set in green across the board.

The company's current payout ratio is 54.84% which means that this percentage has been paid out in dividends of its trailing 12-month EPS (earnings per share).

From last year, the company's annual dividend growth is up by 1.7% and as the company strives for more growth, it is increasing its dividend by an average of 8.14% each year.

With a reliable dividend yield of 4.1%, a solid aim for more growth and with all figures lighting up in the green proves that this stock is one good addition to give you additional income with adding this dividend stock to your portfolio.

3. Nike Inc (NKE) 

Dividend Yield:  0.83%

nike stock price chart

The American sports multinational corporation is coming into the limelight more so just recently for many reasons. One of the main reasons being is for the brand’s impressive revenue results in the second quarter of 2020.

The large-cap sportswear giants have delivered better than expected results within its second-quarter even though the stock is already up over 35% this year to date, which has blown over its expected results.

In light of this year, Nike is one brand that is looking to excel as we head into the new year with confirmation of the opening of new stores in the second half of 2021 and looking set to open more within 2022.

With a market cap of $222.15 billion, Nike pays on average 59.46% of its earnings out as a dividend and is increasing its dividend average by 12% per year.

Last month it was announced by the brand that the company was increasing its dividend to 12% which is to be paid to its investors as of 29th December 2020.

As this year has brought thousands of individuals across the globe to obtain and carry out healthy lifestyles due to the pandemic, has witnessed Nike’s digital sales soar and add significantly to its glowing results which have risen by 37% this year.

With many advantages including its cash flow, the brands forward-thinking fashionable and futuristic sports designs, its strong digital presence which has stood tall within the Covid-19 pandemic, its impressive record to date and lastly the company's proven track record in paying increasing dividends over the years.

4. Enbridge Inc (ENB)

Dividend Yield: 8.1%

enbridge stock price chart

The Canadian multinational energy transportation company that even has Nasdaq writing about is Enbridge. 

The Canadian company was named as the top dividend stock according to the Candian Stock Channel, “DividendRank'' report which along with the brands compelling figures has caught the eye of many. 

And let's be truthful, the large-cap stocks impressive yield, if it is not the highest, is most certainly up there. 

Over the past five years the company has increased its dividend each year and to recent, the company's stock price is down and stands at 40.95 but these two factors are two key factors as of the result of the dividend yield being as high as it is.  

As the oil industry took a hard hit this year due to the pandemic, the Covid-19 recovery is looking optimistic for the oil and gas company. 

The company has focused in recent times on its core strengths, paying down debt and selling assets in a restructuring plan which is setting the way for the company's future. 

ENB has been named as the safest and the highest quality name stream energy transportation company within North America and the company's management have also predicted growth by 6% over time, for the company's dividend yield which stands at an impressive 8.1%. 

As the company reconstruction plans are underway, it enables a stable cash flow for the company to be able to continue growing in earnings. With the plans moving forward ENB expects to grow its dividend cash flow to a potential 7% by 2022. 

The company has targeted a healthy payout ratio of 65% or just under at the end of 2021. 

As the demand for oil and gas is predicted to get higher as the coming year evolves, the long-term look is looking encouraging, healthy and bright for Enbridge making this a great multinational energy transportation company to your income portfolio. 


5. McDonald’s (MCD)

Dividend Yield: 2.41%

mcdonalds stock price chart

Coming in on the list of top 5 dividend stocks to buy in 2021 is the leading and iconic food chain McDonald’s. 

The super-food chain that has taken to the hearts of billions around the world has been a solid and reliable performer for many years and is not slowing down any time soon. 

The global retailer is spread across over 100 countries worldwide and has its presence shown and felt in over 38,000 locations. 

The brand has been a reliable and stable stock over the past 20 years as it has continued to increase its quarterly dividend payout, which has seen its dividends per share growth rate in the past 10 years being impressive and coming in just under 9% annually. 

Although MCD has been hit hard like the whole of the hospitality industry within 2020, which arguably has been one of the top sectors that have lost hugely this year due to the sad events, McDonald’s have adapted to the Covid-19 safety measures very efficiently and quickly since the stores re-openings, which are mostly franchised across the globe.  

When the McDonald’s brand did re-open its stores gradually across the world, the rise was apparent as long queues were formed daily and the company's revenue only showed a 0.23% decrease within its third quarter from the previous year. 

Considering the impact Covid-19 has had on the brand and the hospitality sector as a whole, it is not a bad result at all. 

As individuals across the globe become vaccinated against the Covid-19 virus, the growth for the leading mega-brand is set to grow respectively in the new year with analysts predicting MCD’s revenue to increase by 13.7%. 

There is no question about it as to why analysts and investors are keeping this stock under their wing and advising MCD’s stock ‘a stock to buy for 2021’ as it is a wonderful addition to your income stream. 

How to Invest in Dividend Stocks 

After breaking down the top five chosen dividend stocks now it's time to get set and ready to begin an exciting trading journey within dividend stocks. 

First thing is first, research is key as gaining knowledge on which dividend stocks you wish to be a part of is your first and most vital step. 

Becoming a shareholder within a company as a beginner is an extremely exciting moment but it's wise to always conduct as much research as you possibly can on dividend stocks and make sure you know and understand what is fully entailed within dividend stocks before you jump straight in. 

Secondly, following on with the research point is making sure you evaluate the key points to look at when you are comparing or looking for the right dividend stocks for you to invest in. 

Looking into companies dividend yields along with the company's dividend stock ratios are two key factors to closely look into.  

Although some figures may catch your eye, it's always worth digging that bit further. 

A company's stock payout ratio is one vital point to look into when researching as this will show you how much income a company is paying out in dividends which is also a good indicator of what that company is looking to archive moving forward. 

If a company's payout ratio is above 50% this can be deemed to be potentially unstable as this means that 50% or more is being paid out in dividends to shareholders alone, not to take into consideration any other outgoings that the company is liable for. 

So in addition seeing a dividend stock with an 80% or more stock payout ratio, should be one to sadly avoid at that time as they run a potential high risk of falling into significant debt just to pay out dividends. 

Lastly on a similar note, it's wise to have an idea of how many stocks you are wishing to buy and to be mindful that it is also advised that to create a strong portfolio is having a good mix of diversity with your chosen stocks.

Investing in dividend stocks is easy and can be done quicker than you may believe. 

There are plenty of online platforms that offer a wide selection of dividend stocks to invest in, although you may wish to jump in on the first platform you see, picking a broker and a trusted platform is just as crucial as researching into your chosen stocks. 

Which is why we recommend the award-winning trusted online trading platform, eToro

With eToro you can have it all underneath your fingertips. Opening up an account is simple and easy, where you can choose your broker along with opening a trading account which is always recommended with keeping personal financial accounts separate to your additional income (trading) account. 

Once you have your broker and your trading account you are all set up ready to start your trading journey at your own leisure. 

If you feel that you need more guidance and practice experience additionally with our guidance, eToro also offers ample of trading information along with crash courses for you to get up to speed within your trading journey and with the additional benefit of having one-on-one guidance from a tutor online.  

But one of the biggest benefits that eToro offers for beginner investors is a free virtual trading platform. Here you can practice day and night until you feel completely comfortable with how trading operates. Alongside learning how trading operates you will also see, learn and understand trading strategies with the benefit of not investing your own money, as you are given virtual funds to practise with. 

Along with top dividend stocks, eToro also offers stock trading, cryptocurrencies as well as trading in CFD assets along with offering 0% commission when you open your online trading account. 

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Key Takeaways  

  • These Top 5 dividend stocks to invest in for 2021 offer many advantages for investors including quarterly dividend payments, stability and a great mix of diversity to your growing portfolio. 
  • Dividend stocks are deemed to be better performers then growth stocks due to their stability and the cashflow payments they release to shareholders every quarter. 
  • You can have a mix of both dividend stocks and growth stocks to your portfolio, this will offer you a good diverse mixture that you will accumulate within your portfolio.
  • Dividend stocks are also well-known stocks which is why it is wise to conduct as much research as possible when choosing your stocks to determine if a stock is a growth or dividend stock. 
  • Be mindful when carrying out research on chosen stocks as although dividend stocks may have had a strong performing background, it doesn't necessarily mean they will perform well in the future as nothing is ever guaranteed. 
  • Lastly, invest wisely and enjoy your journey into investing in dividend stocks.

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Please Note: Past performance is not an indication of future performance. The value of investments can go down as well as up. Any opinions, news, research, analyses, prices, or other information contained on this website are provided as general market commentary, and do not constitute investment advice.

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