Coming into 2021, it's hard to see a lot of value in the stock market, especially for dividend stocks. Yields aren't particularly attractive, and former dividend aristocrats like big oil companies and consumer staples no longer seem as stable as they once were.
If we take our analysis back to the fundamentals, though, there are still some great companies out there that generate a lot of cash and pay solid dividends. And if you're looking for dividend stocks you can safely hold in 2021, Apple (AAPL 0.58%), Verizon (VZ 1.19%), and Simon Property Group (SPG 1.02%) are at the top of my list.
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The tech giant
Few companies are as steady or as profitable as Apple is today. The company's iPhone has become a daily staple for hundreds of millions of people around the world, and services revenue from the cloud, fitness, Apple Pay, and multiple other services are building a huge recurring revenue business on top of hardware sales. But what Apple doesn't get credit for is still being a growth company that's increasing cash flow that it can ultimately pay to investors as dividends.
You can see in the chart below that Apple's revenue is up 21% over the last five years, and free cash flow has increased 33% over that time. The dividend is also up 53%, yielding 0.6% at the current stock price. That may not seem high, but Apple has the ability to continue growing its dividend, potentially for decades -- which can more than make up for a low yield.
AAPL Revenue (TTM) data by YCharts
Apple may not be the best performing stock of 2021, but it's about as safe as a stock can get, and that goes for the dividend payout as well.
Telecom isn't dead yet
Telecommunications stocks haven't been popular on the market for years, but there's reason to believe that Verizon will begin a growth curve in 2021. The company's 5G network is starting to roll out, and that should allow it to add more devices, and even offer home internet to customers without running wires to each home. That could provide incremental growth on top of what's already a very stable and profitable business.
You can see below that Verizon isn't going to wow investors with growth numbers right now, but the stock does yield 4.3%, and I think it has room to grow.
VZ Revenue (TTM) data by YCharts
Unless you think wireless service is going to drop off in the U.S., this is about as steady a company as there is -- and that's why I like the dividend in 2021.
REITs could make a comeback
REITs have always been a favorite of dividend investors, but it's been a tough year for a lot of big REIT stocks. Rent couldn't be paid by some tenants, and dividends were cut as a lot of commercial real estate assets were affected by COVID-19. Simon Property's assets were no different, but that could create an opportunity for long-term investors.
Despite its tenants being hit by COVID-19, Simon Property Group reported net income of $145.9 million, or 0.48 per share, in the third quarter of 2020, and funds from operations of $723.2 million, or $2.05 per share. So it's not like the company is losing money, despite the face that its rent collection rate was only 85% for the quarter.
On the dividend front, the company has paid $1.30 per share to investors in the last two quarters, an implied yield of 6.3%. But that could be on the low end of what investors can expect in the future. The company paid a $2.10 quarterly dividend in late 2019, and the payout could go back to that level or higher as the economy recovers. This is a dividend stock that could yield over 10% based on today's stock price within just a few years, which is a great payout for investors.
Big names and big dividends
These stocks are big, consistent companies with predictable cash flows, and that's why they're great dividends to own in 2021. They're not flashy or high performers, but for dividend investors it's the fundamentals and consistency that matters. That's why Apple, Verizon, and Simon Property are my top dividend stocks to safely buy for 2021.
