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10 Stocks That Pay You to Own Them

Author: Rachel Warren | January 19, 2021

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The joy of dividends

Dividend investing is one of the most popular approaches to trading stocks. When you invest in a dividend stock, you can use your payouts to boost your investment cash on a regular (usually quarterly) basis, or simply save the money for a rainy day.

Long-term investors who buy dividend stocks will often see their payouts rise over time. Among the most attractive dividend stocks are the handful of companies that make it into the elite clubs of Dividend Aristocrats or Dividend Kings.

Entry into either club requires a company to maintain a robust track record of raising its dividend each year. To be a Dividend Aristocrat, a company must raise its dividend for 25 consecutive years. The bar to be named a Dividend King is even higher, as it requires a company to increase its dividend every year for 50 years.

If you want to invest in dividend stocks in the new year, these 10 companies are must-haves to help build you a winning portfolio. Let’s dive right in.

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1. CVS

CVS’ (NYSE: CVS) dividend yields 2.6%, which is slightly above what the average stock on the S&P 500 pays. The company’s status as an essential business enabled it to report positive revenue growth in each of the first three quarters of 2020: 8.3%, 3%, and 3.5%, in order.

CVS produced cash flow from operations to the tune of $12.3 billion during the first nine months of 2020 alone, and management raised both the company’s earnings-per-share (EPS) guidance and cash flow guidance for the full year in its third-quarter report.

Generally speaking, pharmacy stocks aren’t known for above-average growth. However, CVS is a solid value play for the long-term investor, with a history of strong diversification and a resilient underlying business. Its dividend is just icing on the cake.

ALSO READ: Where Will CVS Health Be in 5 Years?

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2. Home Depot

Home Depot’s (NYSE: HD) dividend yields 2.2%, based on current share prices. The company has proven the strength of its business throughout the pandemic as a go-to for homeowners in lockdown who finally have the time to work on various projects around the house without interruption.

Home Depot reported 23.2% sales growth in the third quarter, and its net earnings grew $0.6 billion from the year-ago stretch. The company’s pandemic successes aside, the products and services Home Depot provides are also in demand year-round, which makes it a stalwart long-term investment.

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3. Coca-Cola

Coca-Cola (NYSE: KO) is one of a few stocks that have earned the title of Dividend King. The company has raised its dividend for 58 consecutive years and currently pays a robust yield of 3.4%.

The pandemic has had a noticeable effect on Coca-Cola’s balance sheet, but the nearly 130-year-old beverage giant has plenty of liquidity to see the company (and its dividend) through to greener pastures. Coca-Cola had $11.4 billion in cash and cash equivalents on its balance sheet at the close of the third quarter. And even though its revenue fell 9% during that three-month period, the company’s operating margin grew 0.3%.

It may take some time for Coca-Cola to recover to its prepandemic growth. But few beverage companies can compete with the popularity of Coca-Cola’s products and brand strength, both of which can help the blue chip stock to overcome headwinds from the pandemic.

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4. Procter & Gamble

Another stock with the elite title of Dividend King, Procter & Gamble (NYSE: PG) has boosted its dividend every year for 64 years. That’s a record few other stocks can boast of. And the company’s dividend also yields an above-average payout of 2.3%.

With a family of brands that include Pampers, Bounce, and Downy in its portfolio, it’s no surprise that Procter & Gamble has continued to flourish throughout the pandemic. In the company’s fiscal 2020, it reported 5% net sales growth and organic sales growth of 6%. It also registered sales increases in all but one of its business segments during the 12-month period ended on June 30.

Digital sales have been a lifeline for many retailers during the pandemic, and in the case of Procter & Gamble, have further solidified the durability of its business in recent months. The company’s e-commerce sales surged by 40% during the fiscal year 2020. The company also started its fiscal 2021 on a high note, reporting 9% net sales growth during the first quarter.

ALSO READ: 3 Best Consumer Staples Stocks to Buy Now

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5. Kraft Heinz

Food company Kraft Heinz (NASDAQ: KHC) pays the highest dividend of all the stocks on this list. At the time of this writing, the stock yields a mouthwatering 5% for investors. The company's family of brands is chock-full of household names including Velveeta, Planters, and Oscar Mayer.

In the first nine months of 2020, Kraft Heinz grew its net sales 4.4% from the comparable period in 2019. It also boosted its gross profits 10.2.% year over year during the January-September window.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

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6. Colgate-Palmolive

A veteran Dividend King, Colgate-Palmolive (NYSE: CL) has hiked its dividend every year for 57 years in a row. The company’s dividend yields 2.2%.

Colgate-Palmolive is a stalwart of the consumer goods industry, with an exceptional portfolio of brands to drive present and future growth. Accordingly, the company continues to report meaningful revenue increases and grow its cash position despite the market’s volatility.

In the third quarter, the company grew its net and organic sales by 5.5% and 7.5%, respectively. Over the first nine months of 2020, Colgate-Palmolive generated nearly $3 billion in net cash from operations, which grew its cash position to just shy of $1 billion by the end of the third quarter.

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7. 3M

Industrial company 3M (NYSE: MMM) is another top stock that has snagged the title of Dividend King. Its 60 years of consecutive dividend increases coupled with the stock’s robust dividend yield (3.6%) are a rarity in today’s market.

The company’s diverse product portfolio caters to clients across a plethora of industries, from automotive to energy to healthcare. 3M reported 3% sales growth in the first quarter of 2020, followed by a 12% sales decline in the second quarter. The company quickly turned its top line around in the third quarter, reporting positive sales growth of 5% from the year-ago period.

3M has plenty of cash to cover its dividend obligation, which it continues to stockpile. The company has also continued to pay down debt throughout the pandemic despite mixed financial performance. These are excellent signs of 3M’s continued resilience regardless of short-term bumps in the road and of its long-term potential as a rewarding investment.

ALSO READ: Here's Why the Best Is Yet to Come for 3M

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8. Best Buy

Best Buy (NYSE: BBY) pays a dividend that yields roughly 2%. The consumer electronics retailer was forced to temporarily shutter some of its locations due to the pandemic in 2020. This caused its enterprise revenue to decline 6% during the first quarter of its fiscal 2021 (ended May 2).

The company rebounded with a bang in the following two quarters (ended Aug. 1 and Oct. 31), reporting enterprise comparable sales up 6% and 23%, respectively.

Best Buy also proved the robustness of its e-commerce presence in each of the first three quarters of the company’s fiscal 2021, reporting domestic comparable online sales growth of 155%, 242%, and 174%, respectively, during these periods.

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9. McDonald’s

Fast-food giant McDonald’s (NYSE: MCD) also happens to be a Dividend Aristocrat. The stock, which yields 2.5% for investors, boasts more than 40 consecutive years of dividend increases. This means it’s just a few years shy of being crowned a Dividend King.

McDonald’s reported that its U.S.-based comparable sales grew 5% in the third quarter of 2020, even though global comparable sales were still down. The company also increased its diluted earnings per share by 11% during the three-month period, a positive sign that its pandemic-hit balance sheet is starting to make a strong comeback.

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10. United Parcel Service

United Parcel Service (NYSE: UPS) is the largest package delivery provider in the world, with a dividend yielding 2.5%.

When the company released its financial results for the third quarter of 2020, it reported 16% consolidated revenue growth, along with revenue surges in each of its individual business segments. The company’s bottom line also saw positive growth during the third quarter -- 12% on a year-over-year basis.

With so many people staying at home and ordering both essential and nonessential products online, UPS’ services have proven to be more indispensable than ever throughout the pandemic. As the e-commerce industry continues to grow at an exponential rate, the package delivery company will also continue to see impressive top- and bottom-line increases in the years to come.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Previous

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Building a strong investment portfolio in 2021

There’s no single right way to invest in the stock market. Some investors prefer to focus on growth stocks, while others like famed investor Warren Buffett prefer a well-curated collection of premium value stocks.

The great thing about dividend stocks is that many of them are also growth or value stocks. By investing in a quality company that pays a healthy dividend, you’ll not only bring multiple catalysts to your portfolio to boost your long-term returns but also make some extra cash on the side.

Whether you tend toward a more conservative investment style or you’ve structured your portfolio to handle higher levels of risk, the best dividend stocks make a strong addition to any investment portfolio and can help you to maintain a solid cash influx amid market uncertainties.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends 3M and CVS Health. The Motley Fool has a disclosure policy.

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