Dividend-Paying Equities Rank Among the Best Investments in the New Year

By: ,

Highest-Paying Dividend Stocks

Dividend-paying equities rank among the best investments in the new year as traditional fixed-income instruments lose their luster.

As 2020 approaches, dividend-paying equities rank among the best investments in the new year partly due to many of them producing significantly higher yields than traditional 10-Year Treasuries that curently offer 0.92%. Dividend-paying equities also should benefit from a split Congress that usually produces favorable market conditions, the expected appointment of former Federal Reserve Chair Janet Yellen as the next Treasury Secretary and the likelihood of sustained easy-money policies from the U.S. central bank previously discussed by its Chairman Jerome Powell.

The frowing appeal of dividend-paying equities has led certain investors to adjust their asset allocation toward stocks, while reducing holdings in 10-Year Treasuries and other fixed-income investments. For example, Kevin O’Leary, chairman of Boston-based O’Shares ETFs and a wealthy panelist on the “Shark Tank” television program, said in a recent podcast that his family trust has shifted to a 70% allocation in equities and a 30% share of fixed income, compared to its previous 50-50% split in each.


With Congress expected to have Republicans narrowly keep control of the Senate and Democrats continue to reign in the House, the result should be “good for markets” to restrain changes in taxes and policies, said Connor O’Brien, chief executive officer of O’Shares ETFs. Many people who are pleased President-elect Joe Biden announced plans to name Yellen, a “dovish” ex-Fed chair, to lead the U.S. Department of the Treasury, he added.

Dividend-paying Equities Rank Among the Best Investments Due Partly to Policies and Vaccine Rollouts

The Food and Drug Administration (FDA) approved one of two new COVID-19 vaccines for emergency use that have produced 95% effectiveness in final-stage clinical trials. A 23-member FDA panel concluded the benefits outweighed the risks for “emergency use” of a COVID-19 vaccine from dividend-paying Pfizer Inc. (NYSE:PFE), a New York City-based multinational pharmaceutical company, and its partner BioNTech. The United Kingdom approved the same vaccine for emergency use on Dec. 2.

Pfizer, which offers a current dividend yield of 3.57%, requested Emergency Use Authorization from the FDA to begin providing its vaccine initially to high-risk health care providers and caregivers in the United States. The need for that vaccine to be stored at negative 80 degrees will complicate but not prevent its gradual distribution in the months ahead.

Another plus would be a proposed $908 billion bipartisan stimulus package that currently is under consideration in Congress. However, lawmakers still need to pass it, said O’Brien, who added he will take a wait-and-see view of the legislation.

“The election is over, so maybe members of both political parties can reach a compromise to approve a stimulus package,” said O’Brien, who added he does not expect “massive” changes from the White House with the expected swearing in of President-elect Biden on Inauguration Day, Jan. 20.

Dividend-paying Equities Rank Among the Best Investments as Part of a K-Shaped Economic Recovery

Investors tend to look 12 months ahead to find the best investments, O’Brien said. They further should expect a K-shaped economic recovery with an upward arm and downward leg, O’Brien added.

“The thinking by many economists is that some companies and industries will recover nicely and sloop up,” O’Brien said. Others will be challenged, struggle and sloop downward, he added.


The industries that rise should include technology, ecommerce, internet, health care and some industrials, O’Brien predicted. The ones that may sloop downward encompass travel, lodging, restaurants and old-style retail, he added.

Connor O’Brien, CEO of O’Shares ETFs

Dividend-paying Equities Rank Among the Best Investments, Says Money Manager Hilary Kramer

“This is the time in the market cycle where conventional growth sectors hit a wall while value comes roaring back from a miserable pandemic environment,” said Hilary Kramer, host of a national radio program, “Millionaire Maker,” and leader of the GameChangers and Value Authority advisory services. “I’m looking for the financials to outperform technology in terms of profit momentum — the banks are on track to show more year-over-year growth than all of Silicon Valley’s giants except for Amazon.com Inc. (NASDAQ:AMZN).

“Industrials, consumer stocks, materials producers and even the battered energy sector have the hot hand now. Established technology leaders and ‘Big Pharma’ aren’t doing badly, but investors who stuck with what worked in 2020 face a real prospect of getting left behind.”

Dividend-paying Equities Rank Among the Best Investments as Value Shows Strength

But if value has the growth profile of equities, it also has the income profile that bonds are not likely going to deliver until Fed Chair Powell takes his “thumb” off interest rates, Kramer said. She voiced a preference for 2-4% dividend yields from world-class stocks rather than locking in guaranteed after-inflation losses on Treasury debt.

“You don’t have to get fancy, at least to begin with,” Kramer said. “Johnson & Johnson (NYSE:JNJ) has a stronger credit rating than the U.S. government and pays 2.7% right now, which is enough to stay above the Fed’s 2% inflation target and still have a reasonable chance of repaying your principal over the long term.”

Chart courtesy of www.stockcharts.com

Dividend-paying Equities Rank Among the Best Investments and Feature Johnson & Johnson

On the other hand, newly issued 5-year Treasury bonds guarantee that fixed-income investors will lose 1.4% a year even in a current mild inflation environment, Kramer said.

“I’m looking for JNJ to raise the bottom line faster than Facebook Inc. (NASDAQ:FB) next year,” Kramer continued. “On a forward earnings basis, it’s cheaper than the broad market and carries roughly half the multiple of a stock like FB. And it can replace your fixed-income allocation in the short term. Beyond the sizzle factor, why would anyone buy FB when they could be grabbing better growth at half the price?”

Johnson & Johnson, a New Brunswick, New Jersey, maker of medical devices, as well as pharmaceutical and consumer packaged goods, offers a 2.65% dividend yield and trades at a P/E ratio of 23.82%.


Columnist and author Paul Dykewicz interviews money manager Hilary Kramer, whose premium advisory services include 2-Day Trader, Turbo Trader, High Octane Trader and Inner Circle.

Dividend-paying Equities Rank Among the Best Investments and Include Business Services

Investors also may want to consider business services, which thrive on the margins of a recession as executives reach for new partnerships to get through stormy economic waters, Kramer said.

One way to do so is through Cognizant Technology Solutions Corp. (NASDAQ:CTSH), a global staffing giant in Teaneck, New Jersey, that is poised to shine as rhetoric around foreign work visas eases, Kramer opined. It offers a dividend yield of 1.10% and trades at a P/E ratio of 29.10.

Chart courtesy of www.stockcharts.com

HP Inc. (NYSE: HPQ), a technology company in Palo Alto, California, is a “screaming bargain” at 9X projected P/E to show faster growth than FB or JNJ, along with a sizable dividend yield of 3.35%, Kramer said.

Chart courtesy of www.stockcharts.com

Dividend-paying Equities Rank Among the Best Investments for Income Seekers

Growth stocks have continued to outperform value in 2020 and may do so again in 2021, O’Brien said. However, value recently has had a bit of a bounce,” O’Brien continued.

A key question is whether value’s recent rise is a trend or a just a bounce, O’Brien said.

In assessing O’Leary’s equity investment in more than 50 private companies, 20% of them are expected to go to zero and the others could do “really well,” O’Brien said. A micro-economic view of data from the 50-plus companies owned by O’Leary is telling, O’Brien added.


Paul Dykewicz interviews Kevin O’Leary in Las Vegas before the COVID-19 crisis.

Dividend-paying Equities Rank Among the Best Investments as 2021 Arrives

Those that are doing well in 2020 likely have pivoted by using technology to reposition their business, cut their costs, eliminate travel and pursue direct-to-consumer sales, O’Brien said.

Some of the themes are in the portfolio of O’Shares Global Internet Giants ETF (OGIG), a rules-based fund that is designed to provide investors with the means to gain exposure to some of the world’s largest global companies, O’Brien said. Several of its top holdings are ecommerce companies. Unfortunately for income investors, he currently does not offer a dividend yield. 

Dividend-paying Equities Rank Among the Best Investments Without the Risk of Technology Stocks 

“Everyone who blindly says they like tech — and let’s face it, such blind calls have worked well in the past — are ignoring the recent acquisition-fueled earnings and or guidance of cloud companies Splunk (NASDAQ: SPLK) , Workday (NASDAQ: WDAY), Veeva Systems (NYSE: VEEV) and Salesforce.com (NYSE: CRM),” Kramer counseled.

“All were lower after earnings,” Kramer said. “These cloud companies have had a tremendous run, but growth is slowing for them, as well as Amazon Web Services. If we slow down in the adaptation in cloud or distributed computing, tech will fall at current valuations. And the cloud has been around for a while, has gotten large, so the law of big numbers may be at work.”

The law of large numbers is the idea that as an industry or company matures, its growth rate will inevitably slow, Kramer added.

Chart courtesy of www.stockcharts.com

Pension Fund Chairman Eyes Inflation Hedges and Dividend-paying Equities

“For 2021, I’m recommending inflation hedges,” said Bob Carlson, who writes the Retirement Watch investment newsletter and chairs the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. “I expect inflation to steadily increase over the next few years.”

The reasoning partly stems from central banks wanting inflation to increase, Carlson said. The factors that kept a lid on inflation the last few decades are fading and include increased globalization and trade, low wages and higher productivity, he added.

Carlson identified inflation hedges such as gold through the ETF iShares Gold Trust (IAU) and TIPS through the ETF SPDR Portfolio TIPS (SPIP). TIPS does not offer a dividend yield but SPIP currently pays its shareholders 2.15%.

Chart courtesy of www.stockcharts.com


Chart courtesy of www.stockcharts.com

“I also recommend an increase in stocks outside of the U.S.,” said Carlson. “In particular, I like Asian emerging markets. Growth prospects there are better, and there is more room for stock prices to increase. I like T. Rowe Price New Asia (PRASX).”

Chart courtesy of www.stockcharts.com

T. Rowe Price New Asia, which I have owned for many years, not only has been surging but also offers a current dividend yield of 0.63%. 

Pension fund Chairman Bob Carlson answers questions from Paul Dykewicz in an interview before social.

Dividend-paying Equities Rank Among the Best Investments, Woods Shows With Hefty One-Month Return in Three Funds

For the Successful Investing newsletter led by seasoned stock picker Jim Woods, its Income Portfolio in the past month shows the power of dividend-paying equities, both on the domestic and international fronts. That advance is reflected in the WisdomTree U.S. LargeCap Dividend Fund (DLN), jumping 5.39%. It also offers a current dividend yield of 2.64%.

Chart courtesy of www.stockcharts.com

In addition, the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) rose 6.33% and the Vanguard International High Dividend Yield Index Fund ETF Shares (VYMI) spiked 8.64% in the past month. These moves are exceptionally strong for the dividend-oriented segment of the market, and they emphasize the ongoing rotation from growth to value that we’ve seen as we approach the end of this transformational year. Plus, VYM offers a current dividend yield of 3.22%, while VYMI beats that mark with a yield of 3.83%.

Dividend-paying Equities Rank Among the Best Investments as COVID-19 Cases Surge

The COVID-19 pandemic not only caused a severe economic blow in the United States but led to a new surge in cases that included the infection of President Trump and his hospitalization Friday, Oct. 2, until Monday, Oct. 5. The overall weekly hospitalization rate has hit its highest level in the pandemic, with steep increases in individuals aged 65 years and older, according to the Centers for Disease Control and Prevention (CDC). The number of people hospitalized with COVID-19 reached a record 108,108 on Friday, Dec. 11, to mark the 10th straight day above 100,000.

COVID-19 cases have totaled 15,834,965 and led to 294,874 deaths in the United States, along with 70,115,461 cases and 1,592,486 deaths worldwide, as of Dec. 11, according to Johns Hopkins University. America has the dubious distinction of reporting the most cases and deaths of any nation.

The best investments for the new year feature dividend-paying equities, ecommerce, health care and inflation hedges that shine despite the COVID-19 crisis. Investors who understand the past benefits to the market from a division of power in Washington between the two major political parties have a chance to do well with dividend-paying equities in the months ahead.


Publisher’s Note: Are you looking for a great holiday gift? We were going through some areas of our office and found a box of beautiful Rose Pendants that were widely popular a few years ago. These are 24K gold and pure silver — a hard combination to find in any jewelry store. Click here now to learn more about these elegant pendants and put a big smile on a special person’s face this holiday season! But hurry, we only have 57 of the original 78 pendants left!

Roger Michalski, Publisher



Related Posts:

Paul Dykewicz

Connect with Paul Dykewicz

Paul Dykewicz

Paul Dykewicz, www.pauldykewicz.com, is a respected, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other investment reports.

Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. In addition, Paul serves as a commentator about investing, economics, business news, politics and motivational guidance. 

Paul earned a master’s degree in business administration with a focus on finance at Baltimore’s Johns Hopkins University, where he was elected to two terms as president of its Finance Club. He earlier received a master’s degree from Michigan State University’s School of Journalism, where he was inducted into the Kappa Tau Alpha honor society. Paul received a bachelor’s degree from the University of Michigan in Ann Arbor, focusing on political science, business and economics.

Search Dividend Investor