Income investors are used to a balancing act when shopping for an attractive dividend. Often, stretching for high yields and stable cash flows requires a trade-off in terms of the prospect for market-thumping sales gains. Many of the best growth stocks pay tiny dividends -- if they pay any at all.
But there are exceptions to that general rule. With that in mind, let's look at a few standout dividend payers (members of the S&P 500 index with current yields of at least 2%) that trounced the market in 2020 and delivered that rare mix of capital gains and sturdy income.
Read on for a quick synopsis of what made United Parcel Service, Fastenal, and Clorox some of the biggest winners this year .
|
Stock |
2020 Performance |
Dividend Yield |
|---|---|---|
|
UPS (UPS +1.31%) |
49% |
2.3% |
|
Newmont |
42% |
2.6% |
|
BlackRock |
40% |
2.1% |
|
Clorox (CLX +2.15%) |
35% |
2.2% |
|
Fastenal (FAST +2.35%) |
32% |
2% |
Data source: Yahoo! Finance. As of Dec. 18.
1. United Parcel Service
UPS might seem like an obvious winner in a year that saw an unprecedented shift toward online shopping and home deliveries for all kinds of products. But the stock trailed the market to start 2020 and remained behind for much of the year on concerns that global commerce would slow under the weight of recessions. It wasn't until the delivery leader's late July earnings report that this dividend stock started trouncing the market.
Image source: Getty Images.
That announcement showed surging sales volumes in both its business-to-consumer and business-to-business niches. UPS notched higher profit margins for the period, and in subsequent quarters, as its network maintained service levels despite the extra strain from COVID-19. This dividend giant usually announces its annual payout boost in February, and there's every reason to expect a significant increase following what's likely to be a historic holiday season for shipping volumes. Things might stay busy in early 2021 as vaccine distribution becomes a global priority.
2. Fastenal
Industrial supply giant Fastenal had a great 2019, but investors are ringing in big gains again this year. The company has enjoyed gushing cash flow even after accounting for the slowed growth in the fiscal third quarter following a surge in demand for things like personal protection equipment and hand sanitizer in the second quarter. Executives said in mid-October that they're encouraged by a steady pickup in underlying business activity through most of the year , which suggests a strong start to 2021 ahead.
Fastenal's prospects are highly dependent on the continued global economic recovery. Assuming no surprise slump, it should continue delivering more cash to shareholders through a growing dividend.
3. Clorox
Clorox is down from its 2020 highs of over 50% returns, but shareholders are still cleaning up with this dividend stock today. The business showed no signs of slowing growth as organic sales landed at 27% in the most recent quarter compared to 22% for the quarter that ran through late June.
Clorox is benefiting from elevated demand for cleaning products both at home and from businesses. But improving economic conditions are also lifting results in areas like pet care, cooking, and grilling.
CEO Linda Rendle and her team are projecting organic sales gains of 5% to 9% in fiscal 2021. That result should easily support another big annual income boost from this Dividend Aristocrat in the next year.
Success in 2020 suggests each of these stocks has positive momentum that could allow for another year of market-beating performance ahead. But the share-price gains that Clorox, Fastenal, and UPS enjoyed limits investors yield opportunities in buying these stocks.
There are bigger dividend yields available. Still, if you're shopping for income stocks that can deliver both income and capital gains, consider adding these 2020 winners to your watch list.
