With March almost over, many investors are looking to the second quarter and beyond. While there is some hope that a return to normal could be achieved by the summer, one thing is for sure. The stock market is very overbought, and some of the momentum stock trades are very crowded and have been hit hard. With interest rates remaining very close to generational lows, top-quality dividend stocks may be the way to go for the rest of 2021.
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Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 65 companies that made the cut for the 2021 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. Keep in mind that, just because they are on this list now, it doesn’t mean in the future they won’t be forced to reduce their dividend.

We decided to screen the Dividend Aristocrats list looking for companies in sectors that are in demand, or stock in sectors that are perhaps out of favor but look like good ideas for the rest of 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.

AT&T

This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.

While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.

In an attempt to lower its large debt load, AT&T recently agreed to sell a stake in its pay-TV unit to private-equity firm TPG and carve out the struggling business, pulling the telecom giant back from a costly wager on entertainment. The transaction would move the DirecTV and AT&T TV services in the United States into a new entity that will be run jointly by the new partners. AT&T will retain a 70% stake in the business. TPG will pay $1.8 billion in cash for a 30% stake.

Investors receive a 6.91% dividend. BofA Securities has a $36 price target for the shares, while the Wall Street consensus target is $29.55. AT&T stock closed trading on Thursday at $30.08 a share.

This stock is one of the top pharmaceutical stock picks across Wall Street and one of the highest yielding. 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 in June of 2019 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 last 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 5.01% dividend. SVB Leerink recently lifted the price target from $128 to $140. The consensus price target is $122.00, and AbbVie stock closed at $103.48 on Thursday.

Cardinal Health

This is also a solid way for more conservative growth and income investors to play the health care sector. 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 3.22% dividend. The $69 BofA Securities price objective compares to the $63 consensus figure. Cardinal Health stock ended Thursday trading at $60.39.

This energy giant is a solid way for more conservative investors looking to be positioned in the energy sector. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas.
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With the strongest financial base of the majors, coupled with an attractive relative asset base, many on Wall Street feel that Chevron offers the most straightforwardly positive risk/reward. Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium-term drivers (Noble integration, Permian, TCO/WPMP expansion, Gulf of Mexico exploration, Vaca Muerta) that should support production levels in the coming years.

Analysts feel comfortable that the 4.98% dividend yield will remain at current levels. BofA Securities has set its price target at $130. The consensus target is $118.24, and the last Chevron stock trade on Thursday was reported at $105.07.

Walgreens

This huge drugstore chain is a safe retail play for investors now. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.

The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services. This segment operates nearly 10,000 U.S. retail stores under the Walgreens and Duane Reade brands and six specialty pharmacies.

The Retail Pharmacy International segment sells prescription drugs, as well as health and wellness, beauty, personal care and other consumer products, through its pharmacy-led health and beauty stores and optical practices, as well as online and via an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides and Ahumada banners in the United Kingdom, Thailand, Norway, the Republic of Ireland, the Netherlands, Mexico, and Chile. It also has 550 optical practices, including 165 on a franchise basis.

The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.

Investors in Walgreens Boots Alliance stock receive a 3.62% dividend. The Baird price target is $55. The posted consensus target is $46.837, and shares closed Thursday at $51.71 apiece.

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These five stocks have reasonable upside to the Wall Street targets, and they all pay at least a 3.5% dividend that is very dependable, given their Dividend Aristocrat status. With even moderate appreciation in the shares prices of these top companies, investors should be looking at double-digit total return potential. In a market that is very long in the tooth, that makes a ton of sense now.

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