When looking for the best dividend stocks, the yield isn’t everything. If you are an income investor in it for the long run, you know that steadily rising payouts are crucially important, too. After all, you wouldn’t want the target company to pay a 10% yield today and then say for example 2% in the following year.
Of course, dividend stocks have not come close to keeping pace with high-growth tech stocks on a year-to-date basis in 2020. Then again, we should also note that dividend stocks are not typically volatile in nature. Most of them, if not all, are always performing roughly the same or better despite how the economy is faring. For instance, the best example of dividend stocks is those of utility companies. People will still need electricity and water no matter how the broader economy is doing. Although dividend-paying stocks would be less exciting compared to the best tech stocks, there’s still money to be made with the most boring businesses.
More importantly, rising dividends allow investors to benefit from the magic of compounding. As Ben Franklin famously said, “Money makes money. And the money that money makes, makes money.” That’s what makes the high-yielding dividend stocks so attractive to value and long-term investors. If you give these high-yielding stocks one or two decades, it could potentially at least double the investments.
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It’s fair to say that the energy sector hasn’t been the favorite sector for investment this year. With oil futures in the negative territory for the first time earlier this year, I wouldn’t be surprised if investors avoid the oil and gas sector at all costs. But hey, with the economy reopening globally, oil demand is starting to pick up. That said, would investing in an energy company be profitable? Energy Transfer (ET Stock Report) is a natural gas pipeline company operating as a master limited partnership, or MLP. This structure, similar to REIT, allows MLPs to use a passthrough structure to avoid corporate taxes and instead distributes its available cash flows to investors.
The dividend yield from Energy Transfer stands at 15%. Yes, I know you don’t believe what you are seeing here. To be fair, I had the same reaction as you. After all, why would any company be paying so much to their investors when the oil sector is not in a particularly good shape? This led investors questioning its sustainability in the long run. However, the company believes it can maintain its payout through this rough patch because it sees better days ahead. The biggest driver of such a view is that the company expects capital spending to come down significantly in 2021 as it completes its current slate of capital projects. ET stocks have climbed 40% since March and are currently trading at $6.34 per share.Best Dividend Paying Stocks In 2020: Brookfield Renewable Partners
Brookfield Renewable Partners (BEP Stock Report) is one of the best energy stocks to buy in 2020. Like Energy Transfer, it is also an MLP, which allows it to avoid taxes by paying out mandatory dividends. Brookfield Renewable is not entirely an energy company, but more like a hybrid between energy and utility. The company generated energy through wind, solar, hydroelectric, co-generation, and biomass sources.
The rising demand for renewable energy across Canada should allow the company’s stock to continue to outperform the broader market for many years to come. What really makes Brookfield Renewable tick compared to its industry peers is that it can offer investors an attractive mix of growth, stability and income. The company’s dividend yield of 4.6% is also particularly attractive, and looks far more sustainable for an industry leader. Speaking of which, the company currently has a dividend growth streak of 11 years. Also, the management plans to continue to grow the annual distribution at a rate between 5% and 9%. This makes BEP one of the best dividend stocks to own right now.Best Dividend Paying Stocks In 2020: AT&T
Once upon a time, telecom stocks were the equivalent of today’s FAANG stocks. However, investing in telecom giants like AT&T (T stock Report) still continues to be one of the safest ways for income-seeking and conservative investors to make a steady income. AT&T is another dividend aristocrat that’s raised its payout for 36 consecutive years. With a yield of 6.9%, it is an income darling to fixed-income lovers. This is not surprising after all, with bonds yielding close to nothing.
Many believe that 5G will revolutionise how we live. With that in mind, AT&T will be rolling out the first wireless infrastructure upgrades in about a decade. For sure, upgrading the company’s wireless infrastructure to 5G is going to be expensive. And it’s not going to happen overnight. But it’s definitely a new milestone for the company since it is part of a multiyear tech upgrade cycle. Furthermore, new use cases from 5G would lead to a significant uptick in data usage. Given that data is the margin driver for AT&T’s wireless division, this should generate organic growth for the company in the coming few years.