Top dividend stocks for Q2 2021

Dividend stocks can play a valuable role in investor portfolios.

Not only can they potentially provide investors with the winning combination of capital growth and passive income, but they can also provide portfolio stability.

Dividend investing is not as easy as it sounds, however. It’s not as simple as picking the stocks with the highest yields. Often, a high yield is actually a sign that the company is in trouble.

How to find top dividend stocks

The key to finding top dividend stocks is identifying companies that have good dividend track records, stable earnings and cash flows, and strong balance sheets. Long-term growth potential is also very important. Ultimately, a company’s revenue and earnings growth have a huge impact on its ability to sustain its dividend payments.

5 top dividend stocks for Q2

In this guide, we’re going to highlight five top dividend stocks to consider for Q2 2021. The stocks are:

  • PepsiCo
  • Kimberly-Clark
  • CVS Health
  • Diageo
  • Tritax Big Box REIT

All of these stocks are reliable dividend payers. And all have solid long-term growth prospects meaning that they have potential to provide investors with both capital gains and dividends in the long run. We also highlight a selection of dividend-focused ETFs and CopyPortfolios for those who prefer to invest in this way.

You can find information on how eToro pays dividends to clients who own dividend-paying securities here

PepsiCo (PEP)

Pepsico chart
Past performance is not an indication of future results. Your capital is at risk.

  • PepsiCo is one of the world’s leading food and beverage companies. Its products, which include PepsiDoritos, and Gatorade, are enjoyed by consumers more than one billion times per day worldwide.
  • PepsiCo has now registered 49 consecutive annual dividend increases meaning it has a strong dividend history. As a result, it is a member of the ‘Dividend Aristocrat’ club. This is an elite group of S&P 500 dividend-paying stocks that have registered 25 consecutive dividend increases or more.
  • The dividend giant recently declared a payout of $4.02 per share for 2020. That equates to a current dividend yield of 3.1%. Wall Street analysts expect PepsiCo to pay out dividends of $4.24 per share for FY2021. That equates to a prospective dividend yield of 3.2% at the current share price. The consensus earnings per share (EPS) estimate is $6.05 per share, which means that dividend coverage is 1.43x.
  • Fourth-quarter and full-year results were robust. For Q4, revenue was up 8.8% to $22.5 billion. Meanwhile, for 2020, revenue was up 4.8% to $70.4 billion. Full-year EPS rose 2% to $5.52. As a result of this performance, the company announced a dividend increase of 5%. These results demonstrate the resilience of the business.
  • PepsiCo is moving into higher-growth markets in order to boost its growth. Recently, it announced a joint venture with Beyond Meat to develop plant-based snacks. This is an area of the food industry that has enormous growth potential.
  • Next earnings release: Q1 results, 15 April 2021
YearFY2018FY2019FY2020FY2021E
Dividend per share ($)$3.59$3.79$4.02$4.24
Dividend yield*3.07%3.23%

* Yields correct as of 2 March 2021

Kimberly-Clark (KMB)

KMB chart
Past performance is not an indication of future results. Your capital is at risk.

  • Kimberly-Clark is a leading provider of personal care and consumer tissue products. Its products are sold in 175 countries worldwide. One quarter of the global population use its brands – which include KleenexAndrex, Kotex and Huggies – every day.
  • Kimberly-Clark has now registered 49 consecutive annual dividend increases meaning that it is also a member of the ‘Dividend Aristocrat’ club. Its three-year dividend growth rate is 3.3%.
  • Analysts forecast dividend income of $4.51 per share for FY2021. That equates to a prospective dividend yield of 3.5% at the current share price. The consensus EPS forecast is $7.82 per share, which means that dividend coverage is 1.73x.
  • Q4 sales were up 6% to $4.8 billion, while full-year sales were up 4% to $19.1 billion. Full-year adjusted EPS were $7.74, up 12% year on year. As a result of this strong performance, the company increased its quarterly dividend by 6.5% and authorised a new $5 billion share repurchase programme.
  • Kimberly-Clark has advised that it expects net sales in 2021 to increase 4% to 6% percent. Looking further out, the company is well placed to benefit from rising wealth in the developing and emerging markets where it generates approximately 30% of its sales.
  • Next earnings release: Q1 results, 23 April 2021
YearFY2018FY2019FY2020FY2021E
Dividend per share ($)$4.00$4.12$4.28$4.51
Dividend yield*3.31%3.49%

* Yields correct as of 2 March 2021

CVS Health (CVS)

CVS chart
Past performance is not an indication of future results. Your capital is at risk.

  • CVS Health is an American healthcare company that operates retail pharmacies, walk-in clinics, and virtual care services. Across the US, it operates around 10,000 retail pharmacies as well as around 1,100 walk-in clinics. It also provides health insurance services.
  • Analysts expect CVS to pay a dividend of $2.02 per share this year. That equates to a prospective dividend yield of 2.9% at the current share price. The consensus EPS forecast for the year is $7.44. This means that the dividend coverage ratio is a very high 3.7x which indicates that the dividend is very secure.
  • Q4 revenue was up 4.0% year on year to $69.6 billion while full-year revenue was up 4.6% year on year to $268.7 billion. Full-year adjusted EPS came in at $7.50, up from $7.08 the year before. These results are a testament to the strength of the company’s strategy and the flexibility of its diversified health services model.
  • In the short term, CVS could benefit from its role as a Covid-19 vaccine administrator. It expects to reach millions of new customers as it administers vaccines in the months ahead. Meanwhile, in the long run, CVS looks well placed to benefit from the ageing population in the US.
  • Next earnings release: Q1 results, 4 May 2021
YearFY2018FY2019FY2020FY2021E
Dividend per share ($)$2.00$2.00$2.00$2.02
Dividend yield*2.90%2.93%

* Yields correct as of 2 March 2021

Diageo (DGE.L)

Diageo (DGE.L) chart
Past performance is not an indication of future results. Your capital is at risk.

  • Diageo is a UK alcoholic beverages company that operates in more than 180 countries worldwide. It owns many well-known brands including Johnnie Walker, Smirnoff, Tanqueray, and Guinness.
  • Diageo has now registered 22 consecutive annual dividend increases meaning it has a fantastic historical dividend growth track record.
  • Analysts forecast a dividend payout of 70.8p per share for the year ending 30 June 2021. That equates to a prospective yield of 2.5% at the current share price. Analysts expect EPS of 113.9p for the year meaning that dividend coverage is a healthy 1.61x.
  • Diageo has been impacted by global lockdowns. Recent half-year results showed a 4.5% drop in sales and a 12.8% drop in adjusted EPS to 69.9p per share. However, the company still increased its dividend by 2%, which suggests that management is confident about the future.
  • Diageo should benefit as the global economy reopens in the months ahead. Meanwhile, in the long run, the company looks well placed to benefit from the rising levels of wealth in the emerging markets where it generates a large proportion of its revenues.
  • Next earnings release: full-year results, 4 August 2021
YearFY2018FY2019FY2020FY2021E
Dividend per share (p)65.3068.5769.8870.80
Dividend yield*2.43%2.46%

* Yields correct as of 2 March 2021

Tritax Big Box REIT (BBOX.L)

Tritax Big Box REIT (BBOX.L) chart
Past performance is not an indication of future results. Your capital is at risk.

  • Tritax Big Box is a real estate investment trust (REIT) that is focused on investing in large logistics warehouse assets in the UK. Its warehouses are let out to blue-chip retailers such as AmazonTesco, and Ocado.
  • As a real estate investment trust, Tritax Big Box is required to pay out 90% or more of its property income to shareholders as dividends every year. Analysts expect Tritax to pay out dividends of 6.71p per share this year, which at the current share price, equates to a prospective yield of 3.8%.
  • The UK is seeing record demand for logistics real estate space at present and Tritax is benefiting. In January, it advised that the valuation of its investment and development portfolio had risen approximately 8% since 30 June 2020.
  • Looking ahead, the company is well placed to benefit from the online shopping boom. According to property group Knight Frank, the growth of e-commerce could increase demand for warehouse space across the UK by 92 million sq ft by 2024.
  • Next earnings release: full-year results, 10 March 2021
YearFY2018FY2019FY2020EFY2021E
Dividend per share (p)6.706.856.316.71
Dividend yield*3.53%3.75%

* Yields correct as of 2 March 2021

Dividend ETFs and CopyPortfolios

Those who prefer to invest in ETFs also have plenty of options when it comes to dividend stocks.

Some dividend-focused ETFs on eToro include:

Investors may also want to consider eToro’s DividendGrowth CopyPortfolio. This is a fully-allocated investment portfolio focused on high-quality dividend-paying companies that have exceptional long-term dividend growth track records.

A final word on dividend stocks

Investors should remember that dividend stocks are long-term investments. In the short term, even the most rock-solid dividend stocks can experience volatility as equity markets rise and fall. The best approach to investing in dividend stocks is to spread capital over a number of different companies to minimise stock-specific risk, and take a long-term view.

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