While many analysts are hopeful for a gradual global economic recovery this year, the financial markets are expected to remain volatile on several grounds, including the effectiveness (or not) of current COVID-19 vaccination efforts, additional fiscal stimulus measures, changes in economic indicators under the new U.S. Presidential administration, and occasional profit taking. All this, along with paltry yields on savings due to a low interest rate environment makes a strong case for dividend investing.
Though a pandemic-driven recession forced many dividend-paying companies to slash or discontinue payouts, the wildly divergent impact of the pandemic on different sectors of the economy has meant that some companies have been able to maintain or raise their dividend payments while others have not. So, obviously, it is wise to target dividend stocks that have a history of paying steady or increased dividends.
In addition to a steady dividend income, we think the sound fundamentals of these four companies should lead to capital appreciation. The impressive performance of dividend stocks is evident in the SPDR Portfolio S&P 500 High Dividend ETF’s (SPYD) 34.4% returns over the past nine months.
Exxon Mobil Corporation (XOM), AT&T, Inc. (T), Total, SA (TOT), and British American Tobacco Industries (BTI) not only offer high dividend yields but also hold upside potential. Moreover, these companies have a solid history of paying dividends.
Exxon Mobil Corporation (XOM)
XOM is involved in the exploration, production, and sale of natural gas and crude oil. The company has international operations. Over the past six months, XOM’s stock has gained 8.8%.
The company recently announced that it plans to reduce its greenhouse gas emissions in keeping with the Paris Accords. This strategy could help the company’s long-term sustainability. XOM has also recently discovered hydrocarbons off the coast of Suriname.
XOM declared a dividend of $0.87 per share for the last quarter. This is an increase of 6.1% from the earlier dividend amount. XOM’s dividend payout grew at a CAGR of 3.86% over the past five years. The company has an annual dividend yield of 7.34%. The company’s four-year average yield is 5.26%.
XOM is expected to see a revenue growth of 23.7% in 2021. Its EPS is estimated to grow 670.6% in 2021 and at a rate of 14.6% per annum over the next five years.
AT&T, Inc. (T)
T delivers telecommunication services in the U.S. and internationally. The company’s services include wireless communication, video services, data and broadband services. T’s stock has returned 2.3% over the past three months.
The company is currently involved in the deployment of 5G+ networks in airports around the United States. It is collaborating with 100 Thieves, a gaming organization and lifestyle brand, as its official sponsor.
For the last quarter, T declared a dividend per share of $0.52. This is an increase of 1.9% from its earlier dividend. T’s dividend payout has grown at a CAGR of 2.04% over the past five years. The company has a four-year average dividend yield of 6.23% versus its current dividend yield of 7.19%.
T’s revenue is estimated to increase 1.4% in 2021. The company’s EPS is expected to rise 0.6% in 2021.
Under our POWR Ratings, T has been accorded a “B” rating for Industry Rank and Trade Grade. It has an overall rating of “Buy.” Within the Telecom – Domestic industry, it is ranked #11 of 25 stocks.
Total, SA (TOT)
TOT is involved in the production and exploration of oil and natural gas. The company has worldwide operations. TOT’s stock has risen 35.4% over the past three months.
TOT recently raised $3 billion to drive its growth strategy in the renewables space. The company recently bought a 20% stake in Adani Green Energy Limited, which is the largest solar power developer in the world.
TOT has declared a dividend per share of $0.8 for the last quarter, which is an increase of 3.8% from its last dividend payout. PGR’s dividend payout has grown at a CAGR of 7.25% over the past five years. The company has an annual dividend yield of 5.2%. The company’s four-year average yield of is 6.3%.
TOT’s revenue is expected to grow 31.3% in 2021. The company’s EPS growth is expected to be 134.6% in 2021 and 2% per annum over the next five years.
It is no surprise that TOT has a “Buy” rating in our POWR Ratings systems with a grade of “B” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 53-stock Foreign Oil and Gas industry, TOT is ranked #5.
British American Tobacco Industries (BTI)
BTI manufactures and sells tobacco and related products. The company’s offerings include cigarettes, cigars, e-cigarettes, medicinal nicotine, and more. BTI’s stock price has increased 13% over the past three months.
The company recently launched its first CBD vaping pen called VUSE CBD Zone. BTI is also working on developing a COVID-19 vaccine, for which it has begun Phase-1 trials.
BTI has declared a dividend of $0.67 per share for the last quarter. BTI’s five-year dividend payout CAGR is 3.45%. The company has a dividend yield of 7.09%. The four-year average yield of the company is 5.8%. The company’s EPS is expected to grow 5% per annum over the next five years.
BTI’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” in Trade Grade, and a “B in Buy & Hold Grade, and Industry Rank. It is ranked #4 of 11 stocks in the Tobacco industry.
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XOM shares were trading at $46.57 per share on Tuesday morning, down $0.33 (-0.70%). Year-to-date, XOM has gained 12.98%, versus a 2.73% 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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