Most dividend stocks haven't exactly found themselves anywhere near the spotlight in 2020. Characteristics like stability, consistency, and value have taken a backseat to paradigm-shifting growth from stay-at-home stocks and rising tech titans.

Growth is nice, but it isn't everything. Industry-leading companies that pay growing dividends can help balance a portfolio. Honeywell International (NASDAQ:HON) and United Parcel Service (NYSE:UPS) are two market-beating dividend stocks that look to be great long-term holdings. Here's why.

A roll of $100 bills on a table next to a calculator and a sticky note that reads "dividends".

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1. Honeywell International

Despite a challenging second quarter, shares of Honeywell have beat the market and blasted to a new all-time high. It's now one of the largest U.S.-based industrial companies on the market, going back and forth with UPS for the No. 1 spot. Honeywell's outperformance is no surprise to long-term investors who have enjoyed market-beating returns over the medium- and long-term.

 

10-Year Total Return

5-Year Total Return

3-Year Total Return

Honeywell International

493%

106%

69%

S&P 500

257%

74%

53%

XLI Industrial index

259%

59%

39%

Data source: Honeywell International. 

Honeywell gives investors a complete package that could help its stock beat the market again in 2021. It all starts with Honeywell's balance sheet, which sports the lowest net long-term debt out of the top 10 largest U.S. industrial companies by market capitalization. Next up is Honeywell's diversified business, which has been strong enough to deliver impressive earnings and free cash flow (FCF) despite the fact that its largest segment by revenue -- aerospace -- has struggled mightily this year. Strong FCF generation supports Honeywell's dividend, which has steadily grown for 15 years. Honeywell just raised its dividend for the fourth quarter and is now on its way to becoming a Dividend Aristocrat if it qualifies in 10 years.

The final piece is future growth. Honeywell was added back into the Dow Jones Industrial Average because of its relevance in today's economy and its investments in the future economy. Honeywell is doing what most industrials say they want to do but few are actually doing.

The company is diving headfirst into the world of data. From satellites to airplanes to office buildings to oilfields, Honeywell's products are exposed to a lot of information. It's now capturing that information to make its products more efficient and earn its customers more money. It's also building operational technology and software as a service (SaaS) solutions for industrial companies so that those companies can better protect their assets and optimize performance. This includes smart technology that automates building conditions in high-value assets like data centers, as well as Honeywell Forge which is a platform that sorts through data collected by industrial equipment, organizes it, and forecasts improvements (among other things). 

2. United Parcel Service

Unlike Honeywell's earnings, which have taken a hit this year, UPS is having one of its best years ever. Fears that a slowdown in business-to-business (B2B) sales would drag down its overall performance were quickly washed away when UPS' second-quarter results crushed expectations. Since then, UPS has continued to deliver picture-perfect results. The third quarter notched double-digit-percentage revenue and earnings growth, record international operating profit, and strong air and ocean freight shipments from Asia. It was one of the company's best quarters in history.

There's no doubt that UPS is benefiting from the pandemic-induced uptick in package delivery. But there's reason to believe that UPS will be able to grow its business in 2021, even compared to a strong 2020. Permanent shifts from in-store to online (and especially mobile) shopping work in UPS' favor. In the third quarter, UPS reported that B2B business is already bouncing back. Average B2B volume was down just 8% year over year, an improvement from the second quarter. UPS is positioned to return its B2B business back to growth in 2021.

HON Total Return Level Chart

HON Total Return Level data by YCharts

As for new customers, UPS successfully tapped into the up-and-coming market of small and medium-sized businesses (SMBs). Along with healthcare, SMBs present one of UPS' strongest under-the-radar tailwinds that should carry it forward for years to come.

The pandemic accelerated the growth in e-commerce and grew the gig economy as many retailers shuttered stores and took to services like Shopify and Etsy to grow their online presence. New side hustles have come in the form of homemade masks, art sales, or just selling old things on eBay.

UPS is one of eBay's main shipping providers. In September, it worked with eBay to add even more services, discounts, and flexible options. It's never been easier to build an online business, and a lot of folks are doing that to supplement lost income, earn extra income, or just because they are bored.

No matter the motivation, UPS was positioned perfectly to benefit from the e-commerce surge. In late 2019, it implemented its Digital Access Program (DAP), a platform that partners UPS' shipping services and logistics with e-commerce storefronts and payment services to give SMBs easy-to-use professional services on par with larger players. DAP has been a big success, adding hundreds of thousands of new accounts this year. Altogether, SMB volume grew by nearly 20% in the third quarter, the highest rate in 16 years. 

Reliable dividend income from two growing businesses

HON Dividend Chart

HON Dividend data by YCharts

Honeywell and UPS have grown into two of America's largest industrial companies. For investors, that growth has translated into capital gains and dividend income. Both companies have increased their dividends handsomely over the past 15 years, and now sport competitive dividend yields of 1.8% for Honeywell and 2.3% for UPS.

Honeywell has survived a difficult 2020 and is looking to leverage its strengths to return to growth in 2021. UPS is having arguably its best year ever and is poised to continue benefiting from e-commerce tailwinds in addition to its solid overall performance.

Both companies are trading at the high end of historic valuations, but could very well outperform in 2021 if the market continues to pay a premium for growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.