5 High-Yield Dividend Stocks That Outperformed S&P 500 in 2021
The year 2021 has turned out to be profitable so far for those who had invested in Wall Street. All the three major indexes – the S&P 500, the Dow Jones Industrial Average and the Nasdaq – touched record highs this year. Several factors, including fiscal stimulus packages, the Federal Reserve’s dovish monetary policy stance and robust economic expansion, supported the markets.
Yet, investors seem to be getting defensive of late. This is not just because of persistent inflation, disruptions due to Omicron and concerns related to supply chains, product shortages and labor issues. The S&P 500 Index (considered to be the best measurement for stock market performance) has been performing exceptionally well – 28.2% gains in 2019, 18.5% in 2020 and 26.1% to date (as of Dec 23) for 2021. So, the investors are now skeptical about the continued robust stock market performance next year.
You must be wondering which investment strategy to follow for generating profitable returns irrespective of the stock market performance. One of the easiest ways is to choose stocks that offer a high dividend yield. We have selected these five high-yield dividend stocks – PetroChina Company Limited PTR, Prudential Financial, Inc. PRU, Iron Mountain Inc. IRM, ONEOK, Inc. OKE and MPLX LP MPLX – for you to consider. These stocks are expected to offer stability and assured income to your portfolio.
Why High-Yield Dividend Stocks?
Dividend-paying stocks always attract investors as these act as a steady source of income. Most of the time, cash dividends return more than what can be earned from deposits in savings accounts. This has become all the more important now as the interest rates are at near zero.
While zeroing in on dividend stocks, you should focus on dividend yield (annual dividend per share/stock’s price) as this reflects the percentage return on the invested amount. Nonetheless, as the dividend yield is based on the stock’s price performance, a lower share price indicates a higher yield, making the stock attractive.
But before buying such a stock, you must ensure that it is not a dividend trap. A decline in the company’s stock price may be on account of fundamental weaknesses, and if those persist, there is a high chance of further price fall.
Thus, aside from a high dividend yield, you must take into account a few other factors before making any investment decision.
Our Picks
While the above-mentioned five stocks have a dividend yield of 4% or more, these have also outperformed the S&P 500 Index so far this year and have a market capitalization of more than $10 billion. Also, all five stocks have a Zacks Rank #3 (Hold) or better. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
PetroChina is the largest integrated oil company in China. It was established as part of a restructuring of China National Petroleum Corporation, a state-owned entity, which currently holds a stake of 81.03% in PetroChina.
With a market cap of $81 billion, PetroChina's prospects are impressive in the downstream sectors. Strong growth in China’s middle class and automobile ownership is expected to fuel the consumption of refined petroleum products.
In the first nine months of 2021, PetroChina's upstream (or exploration & production) segment posted an operating income of RMB 58.4 billion, nearly trebling from the year-ago profit of RMB 20 billion. Further, the company’s natural gas business offers lucrative growth prospects in the coming years as China moves from coal to natural gas.
Over the past few quarters, PetroChina's Natural Gas & Pipelines business has been benefiting from a decrease in operating expenses, optimal utilization of its marketing channels and resources, together with pipeline asset restructuring gains.
At present, PetroChina has a dividend yield of 8.1% and a Zacks Rank #2 (Buy).
Headquartered in Newark, NJ, Prudential is a financial services leader that offers a wide range of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services.
Prudential has emerged among the top five individual life insurance companies in the United States with new recurring premium sales, greater scale, expanded product offerings and broader distribution capabilities. Given PRU’s leading position in the universal, term and variable life insurance and expanding Retirement business, premium growth is expected to continue in the coming quarters.
Further, Prudential is undertaking several strategic initiatives, including disposing of some of its international operations, to focus on higher-growth markets. To that end, the company has concluded the divestitures of Korea and Taiwan businesses. PRU, thus, is focusing on strengthening its footprint in Japan, Malaysia and Brazil as these are expected to continue to be attractive markets.
The company is expanding through strategic acquisitions as well, which are expected to complement its existing set of capabilities and bolster its presence in emerging markets. Further, Prudential’s vast distribution network, compelling product portfolio and superior brand image will give it a competitive edge.
PRU has a market cap of $40 billion. The company’s dividend yield currently stands at 4.25% and the stock has a Zacks Rank of 3.
Iron Mountain provides records & information management services and data center space & solutions in more than 50 countries. This S&P 500 member operates as a real estate investment trust (REIT) and serves more than 225,000 customers (reflecting a well-diversified revenue generation base) from various industries through its 1,460 facilities.
Based in Boston, MA, Iron Mountain enjoys a steady stream of recurring revenues from its core storage and records management businesses. The company has enjoyed a consistent box retention rate of 98%, with more than 50% of its boxes staying in the facilities for 15 years on average. This durable business also drives significant cross-selling synergies across different segments and delivers robust cash-flow growth.
The company is supplementing its storage segment’s performance with expansion in its faster-growing businesses, the most notable being the data center segment. IRM expanded its global data center portfolio via Fortrust, I/O, Credit Suisse and EvoSwitch acquisitions. With a market cap of $15 billion, the company is making organic growth efforts on the back of expansion projects and developments.
Iron Mountain had total liquidity of $1.6 billion as of Sep 30, 2021, including cash and cash equivalents of $161.4 million and a weighted-average maturity of 6.7 years. With this, IRM has ample financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities.
At present, Iron Mountain has a dividend yield of 8.1% and a Zacks Rank #3.
ONEOK, based in Tulsa, OK, is an energy company engaged in natural gas and natural gas liquids (NGLs) businesses. The company, which has a market cap of $26 billion, is making efforts to boost its performance. Total wells connected in 2020 were 335, while OKE expects to connect 295-365 wells in the current year.
With production volumes resuming normalcy, ONEOK is poised to benefit from long-term fee-based commitments in its Natural Gas Gathering and Processing, and Natural Gas Liquids segments. Given the current market conditions, the company lifted its 2021 adjusted EBITDA guidance to $3,325-$3,425 million from the earlier range of $3,050-$3,350 million.
ONEOK continues to invest in organic growth projects to expand in the existing operating regions and provide a broad range of services to crude oil as well as natural gas producers and end-use markets. Further, capital expenditures (less allowance for equity funds used during construction) have been steadily declining, with these projected to be band of $525-$675 million for 2021. Last year, capital expenditures were $2,195.4 million.
ONEOK is making efforts to lower emissions from its operations. For the same, it will take measures like electrification of certain natural gas compression assets and methane reductions along with identifying opportunities to collaborate with other utilities and power generators to achieve its aim.
OKE’s dividend yield currently stands at 6.45%. It carries a Zacks Rank of 3.
MPLX is a master limited partnership that provides a wide range of midstream energy services, including fuel distribution solutions. The company also has processing and fractionation facilities for natural gas and NGLs.
MPLX, based in Findlay, OH, is least exposed to commodity price fluctuations since the partnership with Marathon Petroleum Corporation generates stable fee-based revenues from diverse midstream energy assets via long-term contracts. The partnership is well-poised to capitalize on the growing demand for fresh midstream assets like pipeline networks and processing and fractionation units.
MPLX’s $9 billion acquisition of Andeavor Logistics LP is expected to position its midstream business for long-term success. The acquisition increased the company’s footprint in the prolific Permian Basin. For 2021, MPLX expects total capital spending of $650 million, lower than the previously mentioned $800 million. MPLX’s focus on lowering cost structure will ensure higher profit margins over the long term.
Currently, MPLX carries a Zacks Rank #3 and has a dividend yield of 9.77%. The company has a market cap of $29 billion.
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Iron Mountain Incorporated (IRM) : Free Stock Analysis Report
ONEOK, Inc. (OKE) : Free Stock Analysis Report
Prudential Financial, Inc. (PRU) : Free Stock Analysis Report
PetroChina Company Limited (PTR) : Free Stock Analysis Report
MPLX LP (MPLX) : Free Stock Analysis Report
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