Several metrics matter for investors looking for the best dividend stocks to buy and hold in 2020. For example, dividend stability reflects a long and steady track record of payouts, while dividend growth points to a company in sound financial health, working hard to make its stock more attractive to new and existing income investors. Also, a company with stable earnings is more likely to pay steady, and possibly rising dividends. The dividend payout ratio (dividend per share divided by earnings per share) can help the investor assess whether the dividend is sustainable, whereas a ratio greater than 100% may warn of a potential cut.
Apple’s growth in the last two decades was driven by the worldwide rollout of wireless broadband connectivity. Additionally, it dominated new categories of consumer electronics devices, broadbands, wireless tablet computers, and wearables. The company’s shares have returned over 12400% in the past 20 years, and over the past decade, it went up by nearly 1000%. Apple approximately gained 165% for the last three years, with diluted EPS at 13.1% compounded annual growth rate in the five-year period between 2014 and 2019. This was reduced by roughly 30%, from $6.617 billion in 2012 to $4.648 billion at the end of 2019 before the split.
Since 2018, Apple has returned roughly $80 billion a year to shareholders through combined share buyback and dividends compared with a range of $40 to $45 billion annually in 2015 and 2017. For the first three quarters of 2020, it delivered $65 million, which mostly will surpass $80 billion by the end of the year, without pausing share buyback during the pandemic.
In the mid of October, Apple launched the iPhone 12, which is arguably its most important refresh since the best-selling iPhone 6 was released in 2014. The company hopes that faster speeds offered by 5G wireless connection will kick off a consumer upgrade cycle, which Apple desperately needs to revive dull sales of its leading products.
Apple pays dividends quarterly, and the last cash dividend was paid of $0.205 per share on November 12, 2020. The pay-out ratio is currently around 25%.
In comparison with Samsung, during the past 13 years, the highest dividend was 3.78%, while the lowest was zero, and the median was 1.52%. The payout ratio in the third quarter was 0.26, dividend per share in September 2020 was $0.30.
Apple is part of the technology sector, which includes companies such as IBM, and Dell Technology Inc. Its current EPS is an indicator of the company’s profitability. Zack’s Investment research report forecasts earnings growth in 2021 as 22.54%, which is high compared to the industry average of 16.8%.
International Business Machines Corporation (IBM) is the largest computer maker, business and technology services provider, and IT financier in the world. IBM designs, develops, and manufactures computer systems, software, storage systems, and microelectronics. Furthermore, IBM Research ranks as the world's largest information technology research organization with more than 3,000 scientists and engineers working from 8 labs in 6 countries around the world. Moreover, IBM which is known as big blue has a great record of paying increased dividends to shareholders.
IBM reported adjusted earnings per share and revenue that beat analysts’ expectations for the third quarter of 2020; although it is down in comparison with the third quarter of 2019. In October, IBM announced a major restructuring aimed at focusing on what the company sees as a $1 trillion growth opportunity in hybrid cloud computing. This move comes as the company aims to capitalize on the rising demand for cloud computing services as the work-from-home economy expands amid the COVID-19 pandemic.
Moreover, the company's stock has mostly traded sideways since the end of April, while the rest of the market has continued to rise after bottoming out in the second half of March. Shares of IBM have provided a total return of -7.5% over the past 12 months, a stark contrast to the S&P 500's total return of 18.6%, as of October 13, 2020.
Despite the second quarter of 2020 earnings reporting that exceeded analysts' expectations in mid-July, the stock continued its sideways momentum in the following months in which the adjusted earnings per share fell from 31.3% on a 5.4% drop in revenue, compared to the same quarter a year ago. This is marked as the largest decline in at least four years as it is impacted by the pandemic.
Additionally, IBM paid an annual dividend of $6.52 per share, with a dividend yield of 5.23%. Its next quarterly dividend payment will be made on December 10 to shareholders of record. For the last 20 consecutive years, the company has grown its dividends by an average of 5.35% each year; in which it pays out 50.90% of its earnings as a dividend.
One of the main competitors to IBM is Dell, which paid last time on October 22, 2013, with a P/E ratio of 22.49%. Another competitor is HP, which pays dividends quarterly. The company has grown its dividends by an average of 0.77% each year. It also pays out 116.28% of its earnings as a dividend.
3M Co. is a technology company, which manufactures industrial, safety and consumer products. One of the safety manufactured products is the masking system, which has been having a vast role during 2020 due to the Covid-19 pandemic.
3M has paid dividends to its shareholders without interruption for more than 100 years and increased the annual dividend for 61 consecutive years. Furthermore, shares of 3M declined 11.6% in the first half of 2020 according to data provided by S&P Global Market Intelligence. Additionally, 3M declared on August 2-for-1 stock split in the form of stock dividends to be distributed to shareholders of record as of September 22, marking its fourth split in the last 33 years.
Besides, the earnings of the third quarter would be reported on a split-adjusted basis; in which the previous outlook for earnings of $1.56 to $1.60 per share was moved to 78 cents to 80 cents for the period with a quarterly cash dividend of 66% per share, marking it as its 348th quarterly payout in a row; and the shares of the Dow component 3M moved up $1.45 to end at $141.90.
Additionally, 3M’s next quarterly dividend payment will be made to shareholders on December 12.
Another competitor to 3M is General Motors with a dividend yield of 0.37%. Its annual dividend is $0.04, and the P/E ratio is 31.64%, which is much lower than the percentage of 3M.
Mastercard Inc. operates as a technology company, for payment solutions. It also provides value-added products and services comprising cyber and intelligent products. Additionally, it offers information and analytics, and consulting services. The company was founded in 1966 with a headquarter in New York operating in the US and internationally.
Mastercard has rebounded sharply after the coronavirus peak in late March of this year. Although the pandemic caused lots of damage to the travel, retail, and entertainment industries by the end of March, the company has finished the third quarter with a 14.3% gain. Through late August, Mastercard shares had rebounded as much as 84% from March’s low of 199.99, which edges out a 64% gain by the S&P 500 over the same time frame. Moreover, it had an annual dividend of 1.6 per share with a dividend yield of 0.47%, growing its dividends by 20.20% each year on average. The coming dividend was declared on December 8 and will be paid on February 9, 2021.
Mastercard pays higher than its competitor Visa, which pays $0.30 per share quarterly. On the other hand, American Express pays 0.43% per share quarterly.
Nike Inc. is a multinational corporation that is engaged in the design, development, manufacturing, and worldwide marketing and sales of athlete footwear, apparel, equipment, accessories, and services.
Nike has consistently generated increasing revenues and earnings over the past 10 years. Furthermore, its dividend has increased by an average of 15.8% per year over the past three years. It has been paying dividends every quarter on January 5, April 5, July 5, and October 5.
In August, Nike declared a quarterly cash dividend of $0.245 per share on the company’s outstanding Class A and Class B common stock payable on October 1 to shareholders.
Additionally, it announced a 12% hike to its dividend that will push the annual payout to $1.10 per share in 2021 compared to $0.70 per share in 2017.
Nike’s competitors, like Adidas and Under Armour, do not pay dividends, which gives a privilege to Nike for those who are interested in their stocks. Puma has distributed dividends of EUR 0.50 per share for the financial year 2019, an overall increase in the dividend payout of 42.8% in 2019 compared to the previous year.
One way to balance risk and reward in your investment is by diversifying your portfolio. However, not all high-dividend stocks are smart investments. Thus, you should dig deeper for information before making any decisions.