Our 5 Best Dividend Stocks Of 2020

Among the many hazards wrought by 2020, many fixed income investors found that dividend stocks were among the myriad things that could no longer be counted on. As the global coronavirus pandemic spread, it forced an array of top income-producing stocks to either suspend their payouts or drastically slash them, scaring income-seeking investors away.

Despite this massive shock to the global economy, there still were many top dividend stocks that continued to provide income in 2020. Some are even emerging stronger from this global health crisis.

Below, we have compiled a list of the five best dividend stocks from our universe of income-producing names, to give investors an idea of their strong business models and steady cash flows. 

This strength during one of the harshest economic environments of this century, also shows that these stocks could prove a great addition to any long-term income portfolio going forward.

1. Home Depot/h2

Home improvement companies have outperformed the broader market this year, benefiting from stay-at-home protocols which prompted many Americans to put more money into their homes during the pandemic.

In this sector, Home Depot (NYSE:HD) proved to be one of the best dividend stocks for income investors.

Just before the deadly pandemic hit, the Atlanta-based, home improvement retail chain was already being rewarded for its $11-billion spending effort to modernize the company’s stores, upgraded digital options and enhance offerings for its key trade customers. Armed with these upgrades, there is a good chance that Home Depot’s sales will continue to expand, providing more income to its investors.

The company is a reliable dividend payer. Over the past decade, its quarterly dividend has expanded 380%. And, with a healthy payout ratio of 50%, it has much more room to grow. With an annual dividend yield of 2.2%, the company pays a $1.5 a share quarterly payout.

The stock has gained 25% this year. It closed on Friday at $270.45.

2. Microsoft/h2

Tech giant Microsoft's (NASDAQ:MSFT) shares provide a dual benefit to stakeholders—rock-solid income stream along with ongoing growth potential.

That income and growth combination proved extremely resilient during 2020, as the pandemic boosted demand for the company’s products and services as employees and vendors worked outside of offices during lockdowns. More corporate customers have been signing up for Microsoft’s Office productivity software as well as accelerating their transitions to cloud infrastructure.

Helped by this unexpected demand surge, Microsoft shares have gained more than 38% this year. During the year, investors also got a 10% hike in their payout which pushed the Redmond, Washington-based company's quarterly dividend to $0.56 a share. MSFT currently trades at $218.59, yielding 1.02%.

3. Nike/h2

Sportswear giant Nike (NYSE:NKE) also proved to be a great dividend stock during the pandemic because of the company’s strong financial position and successful online strategy.

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Nike’s brand strength along with the resilience of its business model was evident from the company’s quick turnaround after the March dip, producing powerful returns for those who bought its shares when they were trading at multiyear lows.

This positive momentum has greatly helped the stock, which rose more than 37% this year, soaring to a record high last week. Shares closed on Friday at $137.28.

As well, last month, Nike boosted its quarterly dividend by 12%, at a time when other global brands had either slashed or suspended their payouts to preserve cash. The company pays $0.275 a share quarterly dividend, yielding 0.80%.

4. Enbridge/h2

With bond yields plunging in 2020, investors in search of reliable fixed-income turned their attention to high-yielding stocks with a good track record of paying dividends.

North America’s largest gas and oil pipeline operator, Enbridge (NYSE:ENB), proved to be a good fit on that measure. The Canada-based energy company's massive moat and its crucial position in North America’s energy supply chain make it an attractive choice for dividend seekers.

Enbridge's cash flows are well diversified across an array of businesses and geographies, helping the utility to weather the economic downturn better than other companies in the sector.

While the pandemic hurt oil consumption across the board, Enbridge’s gas transmission, distribution and storage businesses, which account for about 30% of its cash flow, shielded the utility and saved its payout. The company pays a quarterly dividend of $0.6525, with a rich annual yield of 8%. 

Over the past three years, Enbridge has been carrying out a restructuring plan. It's selling assets, focusing on its core strengths, and paying down its debt. These measures are likely to benefit long-term investors whose goal is to earn steadily growing income.

5. Walmart /h2

With its massive scale, solid balance sheet and growing sales, mega retailer Walmart (NYSE:WMT) continued providing steadily growing income to investors this year.

The company has hiked its payout every year since it began paying dividends in March 1974, placing it in the elite club of 53 S&P 500 stocks dubbed “dividend aristocrats.” That's the designation given to companies that have a record of boosting dividends regularly for 25+ years.

During the pandemic, Walmart has proven it’s one of the safest dividend stocks to own. The Bentonville, Arkansas-based retailer continues to benefit from the many ways the pandemic has reshaped consumer needs and spending patterns.

The stock now has an annual dividend yield of 1.48%; the company pays a quarterly dividend of $0.54 a share. This year, Walmart shares have posted a total gain, including distributions, of 23%. The stock closed at $145.95 on Friday.

Written By: Investing.com