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5 Dividend Stocks That Have Had a Great Run and Are Just Getting Started

By Howard Smith – Oct 29, 2020 at 7:11AM

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There are good reasons why these well-known companies have handily beaten the S&P 500 since the March doldrums.

The stock market has come back strong from its March lows earlier this year. While it's not unexpected that some high-growth companies outpace the S&P 500 index, it may surprise some investors that several well-known dividend stocks have also had huge runs. 

Company Gain Since March 2020 Low* Current Dividend Yield*
S&P 500 Index 47% N/A
Hasbro (HAS -2.40%) 83.4% 3.27%
Home Depot (HD -2.44%) 78.8% 2.16%
Tractor Supply (TSCO -1.01%) 101% 1.07%
Target (TGT -2.35%) 71.4% 1.71%
McCormick (MKC -0.57%) 66% 1.31%

*Data as of midday Oct. 28, 2020

These five stocks have surged off their market lows, still yield between 1% and 3% from dividends, and have businesses that should thrive for years to come. 

business man drawing digital arrow up with 2020 showing, indicating gains this year

Image source: Getty Images.


When the coronavirus began spreading in Asia in January, retailers relying on supply chains there were hit hard. Shares of Hasbro had already fallen more than 50% by the time the market hit its March lows. 

But stay-at-home orders ended up being beneficial to the toymaker, as well as competitor Mattel. Sales from Hasbro's gaming category, including Monopoly and Magic: The Gathering, surged 21% in the quarter that ended Sept. 27 versus the same period the year before.

Investors still have concerns as the TV/Film/Entertainment segment continues to struggle, and its 28% year-over-year decline led to a sell-off in shares after its third-quarter earnings report. But a greater than 3% dividend yield at today's share price gives investors steady income as they wait for that segment to provide another catalyst in the business.

Though the company has recently slowed the growth in dividends it has given investors over the past several years, the current payout appears sustainable, as cash flow still covers the payment. 

Home Depot

It's not surprising that home improvement claimed a good portion of consumer discretionary spending during the pandemic as homes transformed into workplaces, playgrounds for the kids, and projects to stay busy. Sales at Home Depot jumped 23.4% in the three months ended Aug. 2, and earnings rose an even more impressive 24.5%. 

But the results aren't just a temporary bump from the pandemic. The company began investing in its $11 billion One Home Depot strategy in December 2017. The aim was to grow online sales and its business for professional contractors, and improve the customer experience through digital initiatives. There should be plenty more to come from this new approach, as well as continued growth in the dividend.

Even with the stock's big jump since it bottomed out in March, Home Depot shares still yield an attractive 2%. Even though the company has more than doubled its dividend over the past five years, its payout ratio -- dividends paid as a percentage of net income, so lower is better -- remains at just over 50%, indicating there's more room for increases. 

Tractor Supply employee walking a woman and her dog out to their car with supplies

Image source: Tractor Supply.

Tractor Supply

Like Home Depot, Tractor Supply benefited during the pandemic, but with a different focus on clientele. The rural lifestyle retailer just reported a record third quarter with net sales growth of over 31%, and it expects to see strong comparable-store sales increases between 15% and 20% for its fourth quarter. Shareholders have been rewarded with a doubling in price since its March lows. Though the dividend yield is an unassuming 1%, its low payout ratio of 22% means there's lots of room for increases ahead.

Tractor Supply has a multipronged approach to growth. The company is on track to open approximately 80 new stores in 2020, the same number it has added each year since 2018. It expects to match that in 2021, bringing its store total close to 2,000.

Tractor Supply believes it has the opportunity for a store base of about 2,500. In addition, it currently plans to expand its small-box Petsense pet supply locations from about 180 up to 1,000 stores. Other areas where the company is aiming to grow are side-lot garden centers, store efficiency, and supply chain initiatives -- as well as digital-channel opportunities, where it's working from a relatively low base of 5% of sales. 


Like Home Depot and Tractor Supply, Target has focused on e-commerce opportunities. In its second quarter, which ended Aug. 1, digital sales soared 195%, which contributed to more than half of the 24.3% comparable sales growth for the quarter. 

The company started its digital initiatives prior to the pandemic, but the crisis has accelerated acceptance by customers. Same-day services that the company has ramped up during the pandemic (including in-store and curbside pickup and its Shipt delivery service) soared 273% in the second quarter.

Investors have responded with a big increase since the March lows, and the dividend has been a priority for the company. Target is one of the elite Dividend Aristocrats, meaning it has increased its dividend for at least 25 consecutive years. In Target's case, it has been growing its payout for 48 straight years. 


Spice and flavorings leader McCormick is in a unique position to thrive in any consumer environment. With just over 60% of 2019 net sales coming from the consumer segment, and the balance from its flavor solutions group, the company has shown the ability to navigate the pandemic-driven economy with the help of its diverse customer base.

In its recently reported third quarter, the consumer segment continued to thrive from stay-at-home trends, with sales jumping 15%, while it also showed a recovery in its flavor segment, which supplies restaurants and packaged-foods makers. And investors can count on the dividend continuing to grow from its current level, too. McCormick is also a Dividend Aristocrat, having increased its dividend for 34 consecutive years. 

Diversity, growth, and dividends

All five of the above companies have rewarded shareholders throughout the pandemic. Returns have handily outpaced the S&P 500 since March stock market lows. Investors can look at the growth stories behind these companies and feel good about owning the stocks. And even after these record runs, the companies offer income streams through dividends that yield from 1% to 3%.

These stocks would be a good addition to any investor's portfolio. Whether you seek dividend income or a pathway to growth, these businesses all have long-term strategies that can be rewarding even after recent strong gains.

Howard Smith owns shares of Hasbro and Home Depot. The Motley Fool owns shares of and recommends Hasbro, Home Depot, and Tractor Supply. The Motley Fool recommends McCormick. The Motley Fool has a disclosure policy.

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