With 2020 thankfully almost over, many investors are looking to next year. While there is some hope that a return to normal could be achieved by the summer, one thing is for sure: the stock market is very overbought and some of the momentum stock trades are very crowded and could be poised to get hit hard. With interest rates remaining at generational lows, top-quality dividend stocks may be the way to go for 2021.
Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 66 companies that made the cut for the 2020 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. Keep in mind, just because they are on this list now doesn’t mean in the future they won’t be forced to reduce their dividend.
We decided to screen the Dividend Aristocrats list looking for companies in sectors that are in demand, or those in sectors that are perhaps out of favor but still look like good ideas for 2021. Five stocks hit our screens, all of which are Buy rated at top Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This is a top telecom and entertainment play. AT&T Inc. (NYSE: T) is the largest U.S. telecom company and provides wireless and wireline service to retail, enterprise and wholesale customers. The company’s wireless network serves approximately 124 million mobile connections, with 77 million postpaid subscribers.
While AT&T’s traditional wireline voice business has undergone a period of secular decline due to wireless substitution and cable competition, the company through WarnerMedia has become a diversified media and entertainment business.
The third-quarter results showed solid subscriber growth in the company’s market focus areas of wireless and fiber broadband, while continuing to reflect strong cash flows, financial strength and business resiliency. AT&T also updated guidance and now expects 2020 free cash flow of $26 billion or higher, with a dividend payout ratio with a percentage in the high 50s.
AT&T also is currently accepting bids for the firm’s DirecTV stake, and while it will be a big loss, it will help the firm continue to cut expenses.
Investors receive a 7.32% dividend. BofA Securities team has a $36 price target for the shares, and the Wall Street consensus target is $31.14. AT&T stock closed on Wednesday at $28.75.