Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 66 companies that made the cut for the 2020 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. Keep in mind, just because they are on this list now, that doesn’t mean in the future they could reduce their dividend.
Typically. some investors are drawn to companies in which the dividend story seems intact, but the sector they reside in is in some peril. The best example being energy. There has been some chatter, albeit muted, that Exxon Mobil Corp.’s (NYSE: XOM | XOM Price Prediction) may be mulling a cut of its large dividend, which currently comes in at a stunning 9.59%. That would for sure rock the share price, especially now, with oil trading below $40 a barrel.
We decided to screen the Dividend Aristocrats list looking for companies in sectors that are positive now or could be good ideas for 2021. Five stocks hit our screens, all of which are Buy rated at top Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AbbVie
This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
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One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so last June it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of this year.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
Shareholders receive a 5.19% dividend. Morgan Stanley has a $108 price target on the shares. The Wall Street consensus price target is $109.81, and AbbVie stock closed trading on Tuesday at $90.91.
Cardinal Health
This is another way to play the health care sector for more conservative growth and income investors. Cardinal Health Inc. (NYSE: CAH) is one of the largest drug and medical product distributors. The company generates approximately two-thirds of its profit from the pharmaceutical business and nearly one-third from its medical business.
The pharmaceutical distribution business supports retail/mail/hospital/physician clients, as well as drug manufacturers. The medical business manufactures its own portfolio of medical products and distributes brand-name products to hospitals and physicians.
Shareholders receive a 4.18% dividend. BofA Securities price objective is a gigantic $64, and the consensus target price is $58.94. Cardinal Health stock was last seen trading at $46.55.
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Consolidated Edison
This old-school stock offers investors the stability and track record many seek now. Consolidated Edison Inc. (NYSE: ED) offers electric services to approximately 3.5 million customers in New York City and Westchester County; gas to around 1.1 million customers in Manhattan, the Bronx and parts of Queens and Westchester County; and steam to about 1,700 customers in parts of Manhattan.
The company owns 62 area distribution substations and various distribution facilities; 39 transmission substations and 62 area stations; electric generation facilities with an aggregate capacity of 724 megawatts that run on gas and fuel oil; 4,348 miles of mains and 369,791 service lines for natural gas distribution; and one steam-electric generating station and five steam-only generating stations.
The company operates 572 circuit miles of transmission lines; 14 transmission substations; 86,794 in-service line transformers; 3,994 pole miles of overhead distribution lines; and 1,889 miles of underground distribution lines, as well as 1,867 miles of mains and 105,482 service lines for natural gas distribution. In addition, it is involved in the sale and related hedging of electricity to retail customers, and the provision of energy-related products and services to wholesale and retail customers.
Holders of Consolidated Edison stock receive a 4.11% dividend. The $78 BofA Securities price target compares to the $77.33 consensus target and the most recent close at $74.47 a share.
Federal Realty Investment Trust
While real estate is somewhat out of favor, this is one to own for a turnaround. Federal Realty Investment Trust (NYSE: FRT) is a recognized leader in the ownership, operation and redevelopment of high-quality retail based properties located primarily in major coastal markets from Washington, D.C., to Boston, as well as San Francisco and Los Angeles.
Founded in 1962, Federal Realty’s mission is to deliver long-term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply. Its expertise includes creating urban, mixed-use neighborhoods like Santana Row in San Jose, California, Pike & Rose in North Bethesda, Maryland, and Assembly Row in Somerville, Massachusetts.
Federal Realty’s 105 properties include approximately 3,000 tenants in 24 million square feet and over 2,600 residential units. Federal Realty has increased its quarterly dividends to its shareholders for 51 consecutive years, the longest record in the real estate investment trust industry.
Unitholders receive a 5.22% distribution. Deutsche Bank has set a $95 price target, higher than the consensus estimate of $91.60. Tuesday’s closing price was $81.16 per share.
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People’s United Financial
This off-the-radar financial institution looks to be offering investors huge value at current trading levels. People’s United Financial Inc. (NASDAQ: PBCT) is a bank and financial holding company. It engages in the provision of commercial banking, retail and business banking, and wealth management services to individual, corporate and municipal customers.
The Commercial Banking segment consists of commercial real estate lending, commercial and industrial lending and commercial deposit gathering activities. The Retail Banking segment comprises consumer lending and consumer deposit gathering activities, as well as merchant services. The Treasury segment covers the securities portfolio, short-term investments, brokered deposits, wholesale borrowings and the funding center.
Investors receive a 6.98% dividend. Baird’s $15 price target is above the $12.23 consensus target. People’s United Financial stock ended Tuesday trading at $10.32 a share.
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All five of these stocks have sizable upside to the Wall Street targets. They all pay at least a 4% dividend, and those are all very dependable dividends for sure. With even moderate appreciation in the shares prices, investors should be looking at double-digit total return potential. In a market that is very long in the tooth, that makes sense now.
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