With the arrival of a coronavirus vaccine in 2021, it is likely that the stock market will return to normal behavior. However, such a massive and unprecedented worldwide vaccination effort may well suffer hiccups along the way. So, markets could remain volatile until vaccine hopes become a verifiable reality. Similarly, lack of progress on fiscal stimulus talks in the US raises its own questions about how long it might take for the economy to return to normal.

Therefore, we believe investing in dividend stocks that have a strong record of past performance could be the safest bets going into 2021. However, one should be judicious in selecting the right stocks so that dividend income is not gained at the expense of capital appreciation or, worse, a capital loss.

Johnson & Johnson (JNJ), JPMorgan Chase & Co. (JPM), Verizon Communications, Inc. (VZ), and 3M Company (MMM) are well-established companies that have been paying steady dividends for years. These companies have proven business models and are market leaders in their respective spaces. So, betting on them could generate decent capital returns in addition to a steady dividend income.

Johnson & Johnson (JNJ)

JNJ develops, manufactures, and markets a diverse range of products in healthcare. The company has worldwide operations and owns popular brands such as Neutrogena for skin care, Zyrtec for allergies, and Listerine, an antiseptic mouthwash. JNJ’s stock has gained 4.4% so far this year.

The company is working on developing a one-dose coronavirus vaccine, for which it has entered Global Phase – 3 Clinical Trials. The company has also unveiled a new robotic surgery assistant called Ottava, which is designed to provide greater flexibility and control during surgeries.

The company has paid a $1.01 per-share dividend for the last three quarters, which represents an increase of 6.3% from the earlier dividend amount. The company’s dividend payout has a five-year CAGR of 6.32%. The expected annual dividend yield is 2.65%, while the four-year average dividend yield is 2.66%.

JNJ is expected to see a revenue growth of 4.8% for the quarter ended March 2021, and 8.5% in 2021. The company’s EPS is estimated to grow 12.4% in 2021 and at a rate of 4.4% per annum over the next five years.

How does JNJ stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

A for Industry Rank

A for Overall POWR Rating

The stock is also ranked #1  of 240 stocks in the Medical – Pharmaceuticals industry.

JP Morgan Chase & Co. (JPM)

JPM provides a diverse range of financial services, including investment banking, commercial banking, and retail banking. The company has worldwide operations. JPM’s stock has risen 52.2% since hitting a low in mid-March.

JPM has entered into a strategic agreement with Affinity Capital Exchange, a fintech company. The two companies will allow issuers of loyalty programs to augment secured debt financing by using a new class of loyalty points. The company also announced that it completed an intraday repo transaction using blockchain technology.

JPM has distributed a $0.9 dividend per share for the last six quarters, which is an increase of 12.5% from the previous dividend amount. JPM’s dividend payout has a five-year CAGR of 16.2%. The expected annual dividend yield is 2.99%, while the four-year average dividend yield is 2.6%.

JPM’s revenue is estimated to increase 0.4% in 2020. The company’s EPS is expected to rise 198.7% for the quarter ended March 2021 and 22.1% in 2021.

JPM’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade. It is ranked #3  of 10 stocks in the Money Center Banks industry.

Verizon Communications, Inc. (VZ)

VZ is a telecommunications conglomerate. The company provides network and other communications services to individuals, enterprises, and government agencies. VZ has operations worldwide. VZ’s stock price has increased 21% since hitting a mid-March low.

VZ, in collaboration with Corning, has launched 5G service for commercial indoor use. The move is a big step in VZ’s efforts to bring private 5G connectivity to users. In addition, a joint venture with Motorola, VZ has launched Group First Person, which is a group communications solution for first responders and similar teams. This new solution allows teams to seamlessly communicate via voice, data, and video.

VZ has distributed a $0.62 per share dividend during the last two quarters. This represents an increase of 2.03% from the earlier dividend amount. VZ’s five-year dividend payout CAGR is 2.51%. The company is expected to have an annual dividend yield of 4.15% this year. The four-year average yield of the company is 4.61%.

VZ’s revenue is expected to grow 2.8% for the quarter ended March 31, 2021, and 3.7% in 2021. The company’s EPS growth is expected to be 3.1% in 2021 and 2.3% per annum over the next five years.

It is no surprise that VZ has a “Strong Buy” in our POWR Ratings system with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 25-stock Telecom – Domestic industry, VZ is ranked #1.

3M Company (MMM)

MMM manufactures products in the electronics, telecommunications, health care, safety, and other segments. The company has international operations. MMM’s stock has gained 38.9% year-to-date.

MMM recently partnered with Safran Cabin to facilitate cleaner aircraft cabins for passenger safety and confidence. The company has also partnered with Rad AI to leverage artificial intelligence technology for radiology reporting.

MMM has paid a $1.47 per share dividend for the last four quarters, which is an increase of 2.08% from the previous dividend amount. JPM’s dividend payout has a five-year CAGR of 10.99%. The expected annual dividend yield is 3.4% while the four-year average dividend yield is 2.9%.

MMM’s revenue growth is expected to be 2.9% for the quarter ended March 2021 and 5.9% for 2021. The company’s EPS growth is expected to be 10.6% in 2021 and 4% per annum over the next five years.

MMM’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade and Buy & Hold Grade. It is ranked #1  of 61 stocks in the Industrial – Machinery industry.

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JNJ shares were trading at $153.14 per share on Friday morning, up $0.89 (+0.58%). Year-to-date, JNJ has gained 7.84%, versus a 14.85% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...

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