This year is shaping up to be a strong one for dividend stocks. Payouts to shareholders are projected to reach $1.39 trillion for all of this year, just 3% shy of their 2019 pre-pandemic high, according to British asset manager Janus Henderson. Dividend payments in the second quarter of this year increased 26% from the same period last year to $471.7 billion, 7% below the levels seen before the pandemic.
Janus Henderson forecasts that dividend payouts will return to their pre-pandemic highs within the coming 12 months as a growing number of companies either raise their existing dividends or reinstate the payouts after they were suspended during the height of the Covid-19 outbreak.
According to Janus’s Research, 84% of companies around the world have either increased or maintained their dividends in this year’s first half compared to the first six months of 2020.
While dividends appear to be on the rise across the board, there are some companies whose dividends are still more generous than others. Here are seven of the highest-paying dividend stocks for investors to buy before the end of 2021.
American biopharmaceutical company AbbVie (ABBV) (formerly known as Abbot Laboratories) rewards shareholders with a strong dividend payment. In 2020, despite the pandemic, AbbVie raised its dividend payout by an impressive 28%. Today, the company’s dividend yield is 4.32%, which is extremely high in today’s low yield world. So far this year, holders of ABBV stock have been rewarded with a quarterly dividend payment of $1.30 a share.
AbbVie can afford to pay such a generous dividend as the company currently manufacturers and sells the the highest-grossing blockbuster pharmaceutical drug in the world, Humira, which treats a range of illnesses ranging from arthritis and Crohn’s disease to plaque psoriasis.
In late 2020, AbbVie finalized its acquisition of Botox maker Allergan, which should help to diversify its prescription drug portfolio and bolster its bottom line even further.
Swiss company Nestle (NSRGY) is today the largest food company in the world with annual sales of $93 billion and nearly 273,000 employees worldwide. The company, which is headquartered in Vevey Vaud, Switzerland, makes popular branded products such as Nespresso, Kit Kat, Smarties, Nesquick and the Stouffer’s line of foods.
In business since 1905, Nestle has earned a global reputation for having one of the most generous dividend payouts in the world.
Today, Nestle pays a dividend yield of 2.37%. Over the past decade, the company’s median dividend yield was 2.94%. Nestle has managed to maintain its dividend in good times and bad.
Currently, shareholders of the company receive a payment of Swiss Francs 2.75 ($3.00) per share each quarter. That’s a decent reward for shareholders.
Nestle managed to weather the global pandemic in fine shape as consumers loaded up on its various food and beverage products, and has benefitted from high food inflation this year.
A lot of investors buy Target stock (TGT) for its big gains. But the U.S. retailer also pays a fairly decent dividend to its shareholders — one that is likely to grow in coming years. Currently, Target’s dividend yield is 1.43%, not huge when compared to the other companies on this list. But the dividend is most likely to increase given that the Minneapolis, Minnesota-based company’s earnings has blown away expectations, which is likely to find its way into stockholders’ pockets. Indeed, Target’s management has said that its dividend is a priority following the impressive results of the company and TGT stock in recent months.
Target just reported second-quarter results that showed sales rose in every single merchandise category from apparel to groceries, helping the company to crush analyst’s estimates.
Target’s Q2 net income jumped to $1.82 billion, or $3.65 per share, from $1.7 billion, or $3.65 per share, a year earlier. Target’s profits were nearly double those in the same quarter of 2019, before the Covid-19 pandemic.
In 2017, Target announced a $7 billion, multiyear investment plan to enhance its e-commerce business. That investment now looks to be paying off big time.
McDonald’s (MCD), the world’s largest restaurant chain by revenue, is also a dividend aristocrat. The Chicago, Illinois-based company has increased its dividend payout each year for 43 consecutive years now. Not many companies can say the same.
Today, MCD stock has a dividend yield of 2.16%. Each quarter, McDonald’s pays stockholders $1.29 per share in dividend payments. That amounts to an annual payment of $5.16 a share. Over the past decade, McDonald’s has increased its dividend at an average annualized rate of about 9%.
As a company, McDonald’s is again firing on all cylinders as Covid-19 restrictions ease and in-store dining resumes at its franchise outlets in much of the world. The fast food giant just reported second quarter results that were stronger than Wall Street anticipated. McDonald’s reported revenue of $5.89 billion, compared with the consensus analyst estimate for $5.53 billion. Adjusted earnings per share for the quarter came in at $2.37, ahead of the consensus estimate of $2.12.
The company also continues to diversify its menu, recently adding glazed doughnuts.
PepsiCo (PEP) is another food and beverage company that pays a hefty dividend. The Harrison, New York-based company pays a dividend yield of 2.76%. Despite the pandemic, PepsiCo has declared a quarterly dividend payment of $1.08 per share, up 5% from a year ago.
Back in 2011, the company’s quarterly dividend was only $0.48. PepsiCo has made steadily increasing its dividend payout a priority and shareholders are being rewarded.
PepsiCo has also been crushing it on the earnings front this year. The company reported that its second quarter revenue rose 20.5% compared with the previous year as restaurant demand for its drinks returned. PepsiCo’s earnings per share (EPS) came in at $1.72 compared to $1.53 expected by analysts. The company’s revenue surged to $19.22 billion versus $17.96 billion that had been anticipated on Wall Street. PepsiCo also raised its full year adjusted earnings per share guidance when announcing its Q2 results.
Discover Financial Services
Discover Financial Services (DFS) might be the smallest of the big four credit card companies, but there’s nothing little about the company’s dividend payout. Discover currently pays the highest dividend among the four leading credit card companies with a yield of 1.55%. Shareholders of DFS stock receive a payment of $0.50 a quarter.
With a low payout ratio of 20%, there’s plenty of room for Discover to grow its dividend in coming years.
As consumers increasingly move away from cash and payments become more digital, Discover Financial Services is well-positioned to capitalize.
This may help to explain the incredible run of DFS stock both this year and over the past 52-weeks. Year-to-date, Discover’s stock has risen 46% to right around $132 per share. In the past 12-months, the share price is up 152%, making it one of the best performing stocks in the S&P 500 index (.SPX).
Silicon Valley technology giant Cisco (CSCO) is firmly committed to its dividend, paying a 2.49% yield and boasting a 60% payout ratio. The company has raised its dividend for nine straight years now and has kept the dividend growing throughout the global pandemic.
Cisco Systems, which makes both computer hardware and software products as well as telecommunications equipment, returned $2.3 billion to shareholders through dividend payments and stock buybacks over the past year.
Cisco’s business is currently booming with the rollout and conversion to fifth generation (5G) wireless internet. On a recent earnings call with analysts, the company said it expects its revenue to rise between 7.5% to 9.5% year-over-year in the first quarter of 2022, then grow between 5% to 7% for the full year as orders for its networking equipment surge. The company sees its earnings rising as much as 7% in the coming year.
CSCO stock has been on an upswing, rising 33% so far in 2021 to $59.49 a share.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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