10 Best Long-Term Dividend Stocks to Buy and Hold
In this article we take a look at 10 best long-term dividend stocks to buy and hold. You can skip our detailed analysis of the performance of dividend stocks over the last several years, our criteria for choosing the dividend stocks in the list and go directly to 5 Best Long-Term Dividend Stocks To Buy and Hold.
Dividend investing remains one of the best long-term strategies to make wealth. The coronavirus crisis shook the markets worldwide, sending the world into a recession, resulting in millions of job losses. Moody’s chief economist Mark Zandi recently said that about 22 million jobs lost in the U.S. immediately after the coronavirus pandemic won’t be regained until early 2024. In May 2020, the UN Department of Economic and Social Affairs forecasted that the global economy would shrink about 3.2% in 2020, amounting to a whopping $8.5 trillion in losses. A latest study by the Centre for Risk Studies at the University of Cambridge Judge Business School says that the coronavirus crisis could set the world back up to $82 trillion over the next 5 years, especially in case of a deep economic depression. Given that we are in for a long rollercoaster ride full of economic uncertainty and surprises, investors are scrambling to find some great dividend-paying companies that have sustainable yields with strong track record of growth.
Selecting The Best Long-Term Dividend Stocks in 2021
That’s why in this article we will list the best long-term dividend stocks to buy and hold based on a criteria that gives priority to companies which can sustain their business during rough times and still continue to pay steady dividends to their shareholders. We chose the best long-term dividend stocks in our list which have a market cap of at least $20 billion, a dividend yield of at least 2.5% and have at least 15 years of consecutive dividend hikes. We also added an additional filter and chose only those companies that were able to post revenue growth in 2020, one of the most difficult periods in our history. If a company was able to not only survive but increase its revenue and dividend in 2020, we believe its worthy of income investors’ attention. Lastly, we sort our chosen companies based on the number of hedge funds are bullish on the selected stocks as of the end of the fourth quarter.
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Should You Look For High Yields?
Most beginner income investors tend to look for extremely high dividend yields, but we believe that is not an ideal strategy. After all dividends are tradeoffs: a company paying a dividend often avoids investing capital into its product pipeline or future growth projects and instead prefers to pay back its shareholders. However, Insider Monkey has been consistently writing about some of the best dividend stocks to buy in 2021 and beyond which not only have decent yields, but also strong growth prospects.
Extremely high yields are often unsustainable. What we are looking for are companies that have consistently increased their dividends and have strong balance sheets, enough to digest short-term economic shocks and uncertainties.
Dividend-Paying Stocks' Performance
Before we dive into our list of 10 best long-term dividend stocks to buy and hold, take a look at some data points that point to the benefits of dividend investing. According to a report by RidgeWorth Investments, compounded dividends on average accounted for about 50% of stock total returns from 1930 until 2010. The report highlighted the “performance cushion” dividends provided during difficult economic periods like 1930s, 1970s and 2000s.
Average investors have to tread the financial markets with extreme caution. Even experts are having a hard time making sense of the rapidly changing world. The hedge fund industry’s 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 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter's stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 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 16. 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 start our list of 10 best long-term dividend stocks to buy and hold.
10. Realty Income Corporation (NYSE: O)
Number of Hedge Funds: 24
Value of Hedge Fund Holdings: $238.9 million
Realty Income ranks 10th on our list of 10 best long-term dividend stocks to buy and hold. California-based REIT Realty Income invests mostly in single-tenant commercial properties the U.S., U.K. and Puerto Rico. The company is one of the very few REITs which pay monthly dividends. As of December 2020, the company has declared 606 consecutive common stock monthly dividends since inception. Earlier in February, Realty Income said in it expects an acquisition volume of more than $3.25 billion in 2021, which translates to adjusted FFO per share guidance of $3.44-$3.49. This was above the Wall Street’s forecasts.
As of the end of the fourth quarter, John Overdeck and David Siegel's Two Sigma Advisors owns over 987,000 shares of the company.
9. T. Rowe Price Group Inc. (NASDAQ: TROW)
Number of Hedge Funds: 35
Value of Hedge Fund Holdings: $360 million
Maryland-based T. Rowe Price offers wealth management, account management and retirement planning services. As of the end of 2019, the firm has about $1.3 trillion worth of assets under management. The company was founded in 1937 by Thomas Row Price Jr., the famous American investor who is known for defining and promoting the strategy of investing in growth stocks. The company has increased its dividend consistently for the last 35 years.
Billionaire Israel "Izzy" Englander's Millennium Management increased its hold in TROW by 99% in the fourth quarter of 2020.
8. Walgreens Boots Alliance Inc (NASDAQ: WBA)
Number of Hedge Funds: 36
Value of Hedge Fund Holdings: $609 million
Walgreens is one of the major pharmacy operators in the world. The company operates Walgreens pharmacies, Alliance Boots pharmacy-led health and beauty stores, optical stores and related operations. In 2020, the company increased its dividend for the 45th straight year. The company recently tapped Starbucks’ chief operating officer for its CEO role. WBA shares have gained about 21% since the start of the year. The company ranks 8th on our list of the best long-term dividend stocks to buy and hold.
As of the end of the fourth quarter, Stephen Dubois' Camber Capital Management owns 3 million shares of the company.
7. McCormick & Co (NYSE: MKC)
Number of Hedge Funds: 36
Value of Hedge Fund Holdings: $1.8 billion
Maryland-based McCormick & Co sells food products like spices, seasoning mixes, condiments and flavored products. The stock is up by about 4% over the last 12 months. The company has raised its dividend for 35 consecutive years. In the fourth quarter, the company’s adjusted EPS came in at $0.79, missing the analysts’ estimate by $0.10. Revenue in the period totaled $1.56 billion, which shows a 5.4% growth. For fiscal 2021, the company expects to see a 7% growth in its revenue.
Amana Mutual Funds Trust said the following about MKC in their Q1 2020 Investor Letter:
“Spice merchant McCormick has held up reasonably well, but we thought it might do better given the surge in home cooking. Of course, the restaurant and institutional business has fallen off.”
6. Kimberly-Clark Corp. (NYSE: KMB)
Number of Hedge Funds: 37
Value of Hedge Fund Holdings: $1.4 billion
Texas-based Kimberly-Clark is one of the important members of our list of 10 best long-term dividend stocks to buy and hold. The company operates various segments, including personal care, consumer tissues and professional products. The maker of Huggies diapers and Kleenex tissues recently received a cautious outlook from Morgan Stanley after the company announced Q4 results. However, the investment firm said that the company’s outlook for 2021 was “reasonable” given the low visibility and uncertainty.
The company has increased its dividend consistently for the last 48 years.
Ric Dillon's Diamond Hill Capital owns 2.1 million shares of the company as of the end of the fourth quarter of 2020.
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Disclosure: None. 10 Best Long-Term Dividend Stocks to Buy and Hold is originally published on Insider Monkey.