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3 Top Dividend Stocks That Just Went on Sale

By Demitri Kalogeropoulos - Jan 21, 2021 at 8:45AM

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There's more for income investors to love about these giants after their weak share price performances in 2020.

Investors don't usually like to see stock prices fall. It might be a rational response to celebrate cheaper valuations if you're looking for an entry point at which to buy shares. But declines never feel good when you're watching the worth of your portfolio sink.

But there's an extra silver lining when it comes to dividend stocks, in that price drops correspond to rising dividend yields. All other things being equal, your potential return is amplified by both a lower starting price and a higher annual yield.

With that in mind, let's look at some attractive dividend giants, Hasbro (HAS -1.70%), Hershey (HSY -1.15%), and General Mills (GIS -1.10%), that have become cheaper in recent weeks or compared to their price a year ago.

Hasbro's Monopoly game has had hundreds of variations over the year.

Image source: Hasbro.

1. Hasbro

Wall Street was down on Hasbro in 2020 for understandable, but likely temporary, reasons. The toy and game giant's core business fared well during the pandemic, but its recent push into theatrical and TV content production has been a money pit. Revenue from its entertainment segment plunged in each of the last three quarters and produced mounting losses.

Film and TV production has restarted again after the pause taken earlier in the pandemic, which means a rebound for that segment of the company could be in the cards for 2021. And while Hasbro has added to its debt load, it still possesses the other elements that made it an attractive dividend stock. Operating cash flow is strong and rising, organic sales are growing in key markets around the world, and its product portfolio is stuffed with blockbuster brands either owned by Hasbro or licensed through partners like Disney.

The weak performance of the stock last year in comparison to the broader market, meanwhile, means that investors who buy in now can get paid almost 2.9% per year in dividends for holding shares of this solid business.

2. Hershey

This stock's 2020 underperformance has simply sweetened the deal for investors looking to buy into the candy giant right now. Hershey's business took an initial hit as social distancing efforts began early in the year, but its sales volumes and margins were rising again by the third quarter. Those gains were supported by its core portfolio of popular sweets, plus its acquired franchises such as Pirate Brands.

Hershey is aiming to accelerate its sales volume growth in 2021 after relying a bit more on higher prices to keep revenue rising last year. If it can manage that, then this cash-rich business could have plenty of resources to direct back toward investors over the next few years through stock repurchases and a growing dividend payment.

A woman enjoys a piece of chocolate.

Image source: Getty Images.

3. General Mills

Investors quickly lost interest in General Mills' stock last year even though its industry enjoyed record growth as people ate more meals at home. But there's more to like about this dividend stock than its pandemic-fueled revenue spike.

General Mills is winning market share in categories ranging from snacks to baking ingredients, while still finding big new sales channels for its Blue Buffalo pet food segment. Organic sales rose 7% last quarter, and the fact that volume played the biggest role in that growth suggests the company is building a bigger customer base.

Operating results will likely be volatile over the next few quarters as the company's year-over-year comparisons go up against the unprecedented demand spike that occurred at the start of the pandemic. But its higher profitability and expanding portfolio should support solid returns for investors even as they collect dividends that at today's share prices offer a tasty annual yield of  3.7%.

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Stocks Mentioned

Hasbro, Inc. Stock Quote
Hasbro, Inc.
HAS
$84.19 (-1.70%) $-1.46
General Mills, Inc. Stock Quote
General Mills, Inc.
GIS
$70.26 (-1.10%) $0.78
The Hershey Company Stock Quote
The Hershey Company
HSY
$218.42 (-1.15%) $-2.54

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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