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3 Dividend Stocks to Buy on Sale

By Travis Hoium - Jan 31, 2021 at 7:45AM

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These dividends are high, but they have room to grow.

The stock market in recent times has produced some huge winners, particularly among growth stocks, and it's understandable that such companies would capture a hefty share of investors' attention. But steadier, less-flashy dividend stocks remain a great way to beat the market over the long term and generate consistent cash flow from your portfolio. 

Surprisingly, some of the cheapest and best dividend stocks today are names that you probably know -- among them, Simon Property Group (SPG 2.60%), Verizon (VZ -0.49%), and Procter & Gamble (PG 0.88%).

Let's take a closer look at these three dividend stocks that are currently on sale.

Blocks making an arrow pointing upward.

Image source: Getty Images.

1. Simon Property Group

Real estate investment trusts (REITs) like Simon Property Group had a rough 2020 as so many malls and mall-based retailers spent time in government-mandated shutdowns and were often shunned by consumers even when they were allowed to reopen. Many tenants were at times unable to pay their rent, and there was more uncertainty than ever about the future of malls. But late in 2020, conditions appeared to be returning to a more normal level. As such, 2021 could be great for the business. 

To put matters into perspective, Simon Property Group said net billed rents paid were 72% in the second quarter, but 85% in the third quarter. We don't yet know what the fourth quarter looked like, but it's likely the percentage of rents paid will rise as the pandemic is brought under control.

Despite these challenges, Simon Property management reported $723.2 million in funds from operations ($2.05 per share) in the third quarter, and the company declared a $1.30 per share dividend. That was down from a payout of $2.10 per share before the pandemic, but shares still yield 5.3% at today's price. If the payout goes back to early 2020 levels, the implied yield would be 8.6%. 

I don't think the mall business is dead by any means, and for a premium owner like Simon Property Group, it's still a cash flow giant even during a pandemic. Plus, there's an upside to be had in a recovery, and those are the kind of dividend stocks I want to own long-term. 

2. Verizon

It seems like Verizon has been stuck in a rut for most of the past decade along with most telecommunications stocks. But the company has been extremely steady over that time and continues to churn out cash. Revenue may have stagnated, but it's highly profitable, and its dividend, which at current share prices yields 4.4%, continues to grow. 

VZ Revenue (TTM) Chart

VZ Revenue (TTM) data by YCharts

Why is this a great dividend stock to buy today? Look at the chart above as the foundation the company is building on. From here, it is adding to a 5G network that will enable new technologies like self-driving cars and edge computing devices like VR headsets. But it'll also be able to add customer services like wireless home internet, which with 5G is as fast, or faster, than cable internet. 

Verizon isn't going to be a big-time growth stock but it's a steady company with great cash flow and a great dividend. Adding connections from new 5G devices and home internet will only bolster the strong business we see today. 

3. Procter & Gamble

Consumer staples companies have been under pressure for years as smaller retailers have popped up, and as it has become easier to build brands and take them directly to consumers. But Procter & Gamble has navigated these challenges well, and it has actually grown its business and increased margins over the last five years. 

PG Revenue (TTM) Chart

PG Revenue (TTM) data by YCharts

The company's popular brands play a big role in its stability, and it can't be understated how difficult it would be to create a new competitor in products like toilet paper, diapers, and shaving products. Procter & Gamble's products enjoy great advantages due to their scale and the distribution power that the company possesses, and the company's established manufacturing capacity gives it a favorable cost structure that start-ups would have a difficult time replicating. And when start-ups do manage to surmount all those obstacles, P&G has at times simply acquired them, as it did with The Art of Shaving. 

From a dividend perspective, Procter & Gamble's 2.4% yield isn't the highest on the market. But the company has been paying a dividend for 130 consecutive years and has increased those payouts for 64 straight years. With a payout ratio of under 60% and a growing business, there's still growth potential for this dividend over the long term. 

Dividends stocks to hold for the long haul

Malls, wireless networks, and consumer staples are all great businesses to own, and in the cases of Simon Property Group, Verizon, and Procter & Gamble, they come with great dividends. As the economy continues to recover, I think these businesses will do well, and investors will come to view these dividend stocks as having been on sale early in 2021. 

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Stocks Mentioned

The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
PG
$146.48 (0.88%) $1.27
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$50.99 (-0.49%) $0.25
Simon Property Group, Inc. Stock Quote
Simon Property Group, Inc.
SPG
$112.03 (2.60%) $2.84

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

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