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2 Market-Beating Dividend Stocks With Above-Average Payouts

By David Jagielski – Updated Jul 25, 2020 at 1:35PM

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They're both up more than 10% in 2020.

It's been a volatile year in the markets, and the S&P 500's returns are flat year to date. While that's good news for investors who were fearing the worst (a prolonged market crash) in March, 2020's still been a lousy year for many stocks. But two stocks have been the exception to the norm, outperforming the markets and also paying dividends of 3% or more. Here are two gems to consider adding to your portfolio right now:

1. AbbVie

AbbVie (ABBV -5.96%) is an even stronger, more versatile healthcare stock to hold in your portfolio now that it's completed its $63 billion acquisition of Botox maker Allergan. AbbVie made the announcement on May 8 that the deal was final, calling it a "turning point" that will allow the now stronger biopharmaceutical company to not only become more diversified with a wider range of products, but also to have the "financial strength" to continue innovating and investing in new products.

Dividends spelled out on a blackboard with other images.

Image source: Getty Images.

One of the newest drugs in AbbVie's portfolio as a result of the acquisition is migraine treatment Ubrelvy, which the Food and Drug Administration approved late last year. AbbVie will release its second-quarter results on July 31, the first report since closing the deal with Allergan.

When the Illinois-based company released its first-quarter results on May 1, its net sales of $8.6 billion were up over 10% year over year. The company's arthritis drug, Humira, drove a lot of that growth with its sales up 5.8% from the prior-year period. It also got a boost from Skyrizi, which treats plaque psoriasis. The drug added $300 million in revenue in Q1; in the same period a year ago, it wasn't yet contributing anything to AbbVie's top line.

The company's net earnings of more than $3 billion were also strong, up 23% from the prior-year period. AbbVie's been doing well of late, and the addition of Allergan into the mix should only make it a better buy over the long run.

Year to date, the stock's up around 11% and it currently pays a quarterly dividend of $1.18, which yields 4.8% annually -- well above the S&P 500 average of 2%. The stock's also a Dividend Aristocrat, having increased its dividend payments for more than 25 years in a row, which includes when it was still a part of Abbott Labs.

2. General Mills

General Mills (GIS -1.42%) is another top stock that's doing well this year. Up over 21%, it's been soundly beating both the S&P 500 and AbbVie. The packaged foods company has been prospering amid the COVID-19 pandemic as consumers are stocking up on essentials to make meals at home. 

On July 1, the Minnesota-based company released its full-year results for fiscal 2020. While net sales for the full year rose by just 5%, in the fourth quarter they were up a staggering 21% from the prior-year period, which the company says is due to the pandemic and "a significant increase in at-home food demand." 

Operating profit during the quarter rose by 16%, which was in line with the 17% increase General Mills generated for the full year. In the previous year, however, the company's operating profit grew by just 4%.

General Mills pays a quarterly dividend of $0.49, which today yields just a shade over 3% per year. The last time the company increased its payouts was in 2017. 

Which stock is the better buy today?

It may be tempting to look at General Mills' stock, see a high performer, and want to climb aboard the bandwagon.

However, investors need to remember that 2020 is turning into an odd year, driven by the COVID-19 pandemic. Once the pandemic's over, people will likely return to their old routines, including eating out and making fewer meals at home. Consistent double-digit sales growth just isn't a realistic expectation investors should have for General Mills. The last year the company produced that kind of revenue growth was in fiscal 2012, when sales were up 12% from the previous year.

AbbVie, with its incorporation of Allergan, looks to be in a better position to generate more sustainable sales growth in future years now that it has a more diversified portfolio of drugs to work with. And with a higher dividend yield, it gives investors the best mix of possible sales growth and recurring income.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

General Mills, Inc. Stock Quote
General Mills, Inc.
$76.61 (-1.42%) $-1.10
AbbVie Inc. Stock Quote
AbbVie Inc.
$134.21 (-5.96%) $-8.51
Abbott Laboratories Stock Quote
Abbott Laboratories
$96.76 (-1.56%) $-1.53

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