Dividend stocks don't usually offer the most explosive upside potential. Instead, these stocks offer a steady stream of income, courtesy of their high dividend yields. But sometimes even these so-called safe picks aren't so safe.
For instance, we took a look at a few high-paying dividend stocks last month including wireless giant AT&T (NYSE: T), as well as gas and oil giants Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX). Not only are the fundamentals poor for all three but they could all be forced to halt paying their high paying dividends this year if their pandemic woes don't soon end.
This time, let’s take a look at the three best dividend stocks to buy now.
1. Pfizer (NYSE: PFE)
Dividend Yield: 4.32%
Market Capilzaition: $202.87 billion
Pfizer has been in the drug-making game now for more than 170 years. With having a long successful track record of developing drugs and vaccines, it isn't surprising to see Pfizer pay such a large dividend.
However, the Brooklyn, New York-based firm hasn’t seen much stock market appreciation in recent years; Pfizer’s sales have declined as it lost exclusivity for some key drugs.
But Pfizer might be able to put that in the past--now that it has a highly effective vaccine on the market--which could help save the world from the coronavirus pandemic. The pharmaceutical giant expects its Covid-19 vaccine, which was co-developed by its German partner BioNTech SE (Nasdaq: BNTX), to bring in roughly $20 billion in sales for 2021. Overall it could generate $60 billion in revenues for 2021, about 40% higher than last year.
Also, people may need to get their Covid-19 vaccines annually for the foreseeable future. In fact, Pfizer chief financial officer Frank D’Amelio thinks that it's "increasingly likely that an annual revaccination is going to take place.”
Currently, the stock is down just 1% year-to-date.
2. McDonald’s (NYSE: MCD)
Dividend Yield: 2.27%
Market Capitalization: $167.78 billion
Last year was one of McDonald’s worst sales years on record in more than a decade--but it still kept its dividend and is worth buying.
Overall, McDonald’s saw its revenues slip 9% from a year earlier to $19.2 billion in 2020, the lowest figure it's posted since 2005, data from Macrotrends shows. The decline came as people avoided going out during the pandemic and cooked for themselves at home.
Meanwhile, a couple of things that boomed during the pandemic were digital ordering and drive-thrus. With or without the pandemic ending in 2021, the fast-food giant is looking to further capitalize on those two areas. Kevin Ozan, the chief financial officer of McDonald’s said on an earnings call that the company would spend $500 million on modernizing 1,200 locations in the U.S, which would include upgrades on drive-thru operations and digital ordering.
Globally, McDonald’s is planning on opening up more than 1,300 new stores.
Also, McDonald’s launched a new chicken sandwich in February; some analysts are bullish about the fast-food giant’s menu.
“U.S. same-store sales in January improved high-single digits, driven by all day parts as consumers received stimulus checks and restrictions eased,” Trust Securities wrote in a note in early January, as cited by MarketWatch.
“We expect this momentum to continue throughout ’21, driven by the return of Spicy Chicken McNuggets, the launch of a new chicken sandwich (end of February) and new loyalty program later in the year.”
Trust rates McDonald’s shares a buy with a $243 price target.
So far McDonald’s shares are off to a solid start this year, up 5% YTD. Currently, the stock is trading at around $225 per share.
3. The Coca-Cola Co. (NYSE: KO)
Dividend Yield: 3.16%
Market Capitalization: $226.77 billion
Like McDonald’s, Coke watched its sales pullback during the pandemic.
As a result of the stadium, restaurant, and movie theater closures, Coke’s revenues in 2020 slipped 11% from a year earlier to $33 billion.
But the worst may soon be over for Coke, as the U.S. continues to administer Covid-19 vaccines across the country rapidly. If all goes well, the U.S might be able to return to some degree of normalcy by summer--which will bode well for Coke.
In fact, NFL commissioner Roger Goodell said on Wednesday that he expects stadiums to be packed with fans again for the 2021 season, which is slated to start in early September. Just 1.9 million fans were present in NFL stadiums in 2020, down significantly from over 16 million in the prior year.
Plus, the MLB season is returning this week and fans will be allowed back. Although most teams are operating at limited capacity, that should help Coke see much improvement in the second quarter, compared to the same period last year when sports were put on hold.
In March, RBC analyst Nik Modi upgraded Coke from Sector Perform to Outperform. He also raised his price target on the soft drink giant from $55 to $60, noting that Coke should benefit from the economy reopening and “fairly efficient vaccine distribution.”
"We believe improved consumer mobility and proof points that the reorganization results in better execution will drive both earnings upside and multiple appreciation," Modi wrote, as cited by Benzinga earlier this month.
So far this year, shares of Coke are down 3%.