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10 Best Dividend Contenders to Buy in 2021

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·10 min read
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In this article, we will be looking at the 10 best dividend contenders to buy in 2021. If you want to skip our detailed analysis of dividend contenders and investing, you can go directly to the 5 Best Dividend Contenders to Buy in 2021.

According to a report by the S&P Global Dow Jones Indices, dividends have historically been important contributors to the total return of the S&P 500. Between 1926 to 2018, dividends brought in about 33% of the monthly total return of the S&P 500, for instance. Moreover, it has also been estimated that during other time periods, like the 1940s and the 1970s, dividends even went as far as contributing over half of the S&P 500's total return. As such, stable dividend stocks included in the lists of dividend contenders and kings, like Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V), UnitedHealth Group Incorporated (NYSE: UNH), and Johnson & Johnson (NYSE: JNJ), are known to be reliable and profitable investments.

What is a Dividend Contender?

Any company that pays out dividends and has increased its dividend yield for the past 10 years or above, but less than 25 years, is referred to as a dividend contender. Dividend contenders make up a broader list of secure dividend-paying companies, as compared to dividend kings or dividend champions.

Regardless of what category they fall under, dividend stocks are typically able to outperform the broader market. Global X Management Company LLC has estimated, for instance, that high dividend stocks, in particular, have been able to outperform the S&P 500 by about 3% on an annualized basis between 1960 and 2017. Additionally, these same stocks have generated an average annual yield of 6.4% during the same time period, while they have also been able to outperform the market by 0.80% during times of financial instability and rising interest rates. And while past performance can of course not ever be taken to be a guarantee that the same stocks will perform just as well in the present and future, their past performance can be taken to testify to the claim that dividend stocks should be on any investor's list of investment options for 2021.

Photo by Viacheslav Bublyk on Unsplash

Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Let's now look at the 10 best dividend contenders to buy in 2021. The stocks selected for our list below were chosen on the basis of their fundamentals and growth potential based on core business strengths. We also took into account analyst's ratings and hedge fund sentiment to pick out the stocks most popular among the hedge funds tracked by Insider Monkey. They have been ranked on the basis of the number of years of consistent dividend increases, from lowest to highest.

Best Dividend Contenders to Buy in 2021

10. Intuit Inc. (NASDAQ: INTU)

Number of Hedge Fund Holders: 68 Number of Years of Consecutive Dividend Increases: 10 Dividend Yield: 0.5%

Intuit Inc. (NASDAQ: INTU) is a provider of financial management and compliance products and services in the US and internationally. The company ranks 10th on our list of the best dividend contenders to buy in 2021.

This May, Morgan Stanley's Keith Weiss raised his price target on Intuit Inc. (NASDAQ: INTU) shares to $511 from $470, while holding on to his Overweight rating on the stock. Weiss has stated that Intuit Inc. (NASDAQ: INTU) may well be able to see a durable EPS growth of about 20% as well.

In the fiscal third quarter of 2021, Intuit Inc. (NASDAQ: INTU) had an EPS of $6.07, significantly higher than its EPS in the previous quarter of $0.68. The company's revenue was $4.17 billion, up 39.01% year over year and also far surpassing the previous quarter's $1.58 billion revenue. Intuit Inc. (NASDAQ: INTU) has gained about 37.24% in the past 6 months and 38.40% year to date as well.

By the end of the first quarter of 2021, 68 hedge funds out of the 866 tracked by Insider Monkey held stakes in Intuit Inc. (NASDAQ: INTU) worth roughly $4.70 billion. This is compared to 68 hedge funds in the previous quarter with stakes worth approximately $4.69 billion.

Like Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V), UnitedHealth Group Incorporated (NYSE: UNH), and Johnson & Johnson (NYSE: JNJ), Intuit Inc. (NASDAQ: INTU) is a good dividend stock to invest in.

9. JPMorgan Chase & Co. (NYSE: JPM)

Number of Hedge Fund Holders: 111 Number of Years of Consecutive Dividend Increases: 10 Dividend Yield: 2.6%

JPMorgan Chase & Co. (NYSE: JPM) is a provider of consumer and community banking, corporate and investment banking, commercial banking, and asset and wealth management services across the globe. Additionally, it also offers ATM, online and mobile, and telephone banking services. The company ranks 9th on our list of the best dividend contenders to buy in 2021.

This July, Credit Suisse raised the price target on JPMorgan Chase & Co. (NYSE: JPM) shares from $170 to $177, with analyst Susan Roth Katzke retaining the firm's Outperform rating on the stock.

In the second quarter of 2021, JPMorgan Chase & Co. (NYSE: JPM) had an EPS of $3.78, beating estimates by $0.62. The company's revenue was $30.48 billion, also beating estimates by $762.45 million. JPMorgan Chase & Co. (NYSE: JPM) has gained 14.25% in the past 6 months and 21.44% year to date.

By the end of the first quarter of 2021, 111 hedge funds out of the 866 tracked by Insider Monkey held stakes in JPMorgan Chase & Co. (NYSE: JPM) worth roughly $5.25 billion. This is compared to 112 hedge funds in the previous quarter with stakes worth approximately $6.96 billion.

Like Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V), UnitedHealth Group Incorporated (NYSE: UNH), and Johnson & Johnson (NYSE: JNJ), JPMorgan Chase & Co. (NYSE: JPM) is a good dividend stock to invest in.

8. Mastercard Incorporated (NYSE: MA)

Number of Hedge Fund Holders: 151 Number of Years of Consecutive Dividend Increases: 10 Dividend Yield: 0.5%

Mastercard Incorporated (NYSE: MA) provides transaction processing and payment-related products and services to consumers in the US and internationally. The company ranks 8th on our list of the best dividend contenders to buy in 2021.

Baird's David Koning has raised the firm's price target on Mastercard Incorporated (NYSE: MA) shares as of this July, from $454 to $482. The firm and analyst have an Outperform rating on the stock as well, with Koning commenting that he expects Mastercard Incorporated (NYSE: MA) to beat Q2 earnings and revenue estimates.

In the first quarter of 2021, Mastercard Incorporated (NYSE: MA) had an EPS of $1.74, beating estimates by $0.18. The company's revenue was $4.16 billion, up 3.64% year over year and beating estimates by $163.07 million. Mastercard Incorporated (NYSE: MA) has also gained 15.52% in the past 6 months and 8.13% year to date.

By the end of the first quarter of 2021, 151 hedge funds out of the 866 tracked by Insider Monkey held stakes in Mastercard Incorporated (NYSE: MA) worth roughly $17.09 billion. This is compared to 154 hedge funds in the previous quarter with stakes worth approximately $17.9 billion.

Like Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V), UnitedHealth Group Incorporated (NYSE: UNH), and Johnson & Johnson (NYSE: JNJ), Mastercard Incorporated (NYSE: MA) is a good dividend stock to invest in.

7. Pfizer Inc. (NYSE: PFE)

Number of Hedge Fund Holders: 65 Number of Years of Consecutive Dividend Increases: 11 Dividend Yield: 3.9%

Pfizer Inc. (NYSE: PFE) is a biopharmaceuticals company operating globally under a range of brands including Vyndaqel/Vyndamax, BeneFIX, and Genotropin. The company's PfizerBiontech vaccine against COVID-19 is also amongst the first and most effective vaccines out there, and it ranks 7th on our list of the best dividend contenders to buy in 2021.

This June, Argus analyst David Toung reiterated a Buy rating on Pfizer Inc. (NYSE: PFE) shares alongside a $55 price target. Toung has commented that the market is not fully realizing the potential sustainability of Pfizer Inc.'s (NYSE: PFE) COVID-19 vaccine franchise and its contribution to the company's revenue.

In the first quarter of 2021, Pfizer Inc. (NYSE: PFE) had an EPS of $0.93, beating estimates by $0.15. The company's revenue was $14.58 billion, up 21.23% year over year and also beating estimates by $961.32 million. Pfizer Inc. (NYSE: PFE) has gained about 12.23% in the past 6 months and 11.44% year to date as well.

By the end of the first quarter of 2021, 65 hedge funds out of the 866 tracked by Insider Monkey held stakes in Pfizer Inc. (NYSE: PFE) worth roughly $2.01 billion. This is compared to 63 hedge funds in the previous quarter with stakes worth approximately $1.84 billion.

Like Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V), UnitedHealth Group Incorporated (NYSE: UNH), and Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE) is a good dividend stock to invest in.

ClearBridge Investments, an investment management firm, mentioned Pfizer Inc. (NYSE: PFE) in its first-quarter 2021 investor letter. Here's what they said:

“Our underweights in health care and staples contributed to relative performance during the period. As we continue to focus the portfolio on high-conviction ideas, we sold Pfizer in late 2020, in the health care sector.”

6. The Home Depot, Inc. (NYSE: HD)

Number of Hedge Fund Holders: 68 Number of Years of Consecutive Dividend Increases: 12 Dividend Yield: 2%

The Home Depot, Inc. (NYSE: HD) is an American household products and improvement retailer that owns and operates the Home Depot stores providing a range of home maintenance and decoration items. It ranks 6th on our list of the best dividend contenders to buy in 2021.

Credit Suisse raised its price target on The Home Depot, Inc. (NYSE: HD) shares as of this May, from $319 to $330. Analyst Lavesh Hemnani retained the firm's Outperform rating on the stock as well, citing The Home Depot, Inc.'s (NYSE: HD) strong Q1 report for the increased price target and positive rating.

In the fiscal first quarter of 2022, The Home Depot, Inc. (NYSE: HD) had an EPS of $3.86, beating estimates by $0.81. The company's revenue was $37.50 billion, up 32.7% year over year and also beating estimates by $2.87 billion. The Home Depot, Inc. (NYSE: HD) has gained about 14.92% in the past 6 months and 23.66% year to date as well.

By the end of the first quarter of 2021, 68 hedge funds out of the 866 tracked by Insider Monkey held stakes in The Home Depot, Inc. (NYSE: HD) worth roughly $4.35 billion. This is compared to 79 hedge funds in the previous quarter with stakes worth approximately $4.92 billion.

Like Microsoft Corporation (NASDAQ: MSFT), Visa Inc. (NYSE: V), UnitedHealth Group Incorporated (NYSE: UNH), and Johnson & Johnson (NYSE: JNJ), The Home Depot, Inc. (NYSE: HD) is a good dividend stock to invest in.

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Disclosure: None. 10 Best Dividend Contenders to Buy in 2021 is originally published on Insider Monkey.