5 Best High Dividend Stocks to Buy in December 2021

Returns from stocks consist of capital gains and dividends. While the capital gains are volatile, dividends are much more predictable even as there is no surety that the company would pay them. Dividend stocks are especially popular among investors who are looking for regular income from their investments. Here are the five best dividend stocks that you can buy in December 2021.

1. AT&T (NYSE: T)

If you are looking for a stock with a high dividend yield, telecom giant AT&T should be on your radar. That said, while T stock has an attractive dividend yield of 8.6%, it hasn’t created stockholder wealth. The stock is down 17.3% in 2021 and has lost 45% over the last five years. Even after accounting for the dividends, the stock has delivered negative returns over the last five years.

Barclays sees a turnaround in T stock

Meanwhile, after AT&T’s frustrating underperformance, Barclays believes that the stock has bottomed out. The firm upgraded the stock to overweight from neutral and said “While execution concerns are justified, we do not see why those concerns warrant a wider discount now than say anytime in the last decade.” It added, “Even if we assume industry gross additions to slow to 2018 levels of ~31mm and AT&T’s share of gross adds to be consistent with its market share (worse than present trends), its net adds next year should be in the 1mm range.”

T has a high dividend yield

T’s high dividend yield looks quite attractive. Barclays finds the stock attractive on a relative basis but held back on upgrading the stock due to the uncertainty over the Warner Media deal. Now, the brokerage believes that the time is ripe to bet on T stock. “However, the timeline is getting more aligned with the opportunity due to upcoming catalysts such as proximity to the 2022 guidance cycle across telecom companies and potential decision on Warner Media deal structure,” said Barclays while assigning a $30 target price on the stock.

With an NTM (next-12 months) PE multiple of 7.5x, T looks like an attractively priced dividend stock. The stock looks in for a rebound and looks a good buy at these prices.

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2. Altria Group (NYSE: MO)

Tobacco major Altria Group is another good dividend stock. The stock is up 11% for the year and is underperforming the markets. The stock has lost 30% over the last five years. Tabaco stocks have been out of favor with funds that have been pivoting towards ESG investing. Also, globally there is a growing clamor for reducing tobacco usage. Altria has been trying to diversify its revenue base and also invested in Canadian cannabis company Cronos. However, even that investment did not pay off well and the stock has fallen sharply amid the sell-off in cannabis stocks.

Altria has a dividend yield of 7.5%

Altria has a dividend yield of 7.5% which looks attractive. Also, unlike some of the cyclical companies, whose dividends are quite volatile, Altria has a defensive business. Wall Street analysts have assigned a median target price of $53 to Altria which is a premium of 10.3% over current prices. Of the 18 analysts covering the stock, nine each rate it as a buy and hold.

If you are comfortable investing in tobacco shares, and also crave higher dividends, Altria is one stock that should be on your radar.

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3. Kinder Morgan (NYSE: KMI)

Kinder Morgan is an oil and gas pipeline company and is among the largest energy infrastructure companies in North America with interests in around 83,000 miles of pipeline. Pipeline companies usually pay good dividends and KMI also has an attractive dividend yield of 7.1%. The stock has come off its 2021 highs and is up less than 10% for the year. The recent correction in KMI stock amid concerns over the omicron variant looks a good opportunity to own this stock.

KMI has a dividend yield of 7.1%

KMI has a median target price of $19 which is a premium of almost 25% over current prices. However, Wall Street analysts are not too bullish and only six of 26 analysts covering KMI have rated it as a buy. 16 analysts have a hold rating while the remaining four analysts have a sell rating on the stock.

Here it is worth noting that, unlike upstream oil and gas companies, pipeline companies tend to have much more predictable earnings. If you are looking for a high dividend stock in the energy industry, KMI should be on your radar.

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4. Pfizer (NYSE: PFE)

While broader markets have been falling, Pfizer stock has been hitting new highs. The stock is up 60% for the year and the rally gained momentum over the last month after the emergence of the omicron variant. Initial reports suggest that Pfizer and Moderna’s COVID-19 vaccines are effective against the omicron variant with a booster dose. Pfizer expects COVID-19 to become an endemic which would mean it would continue to reap revenues from the vaccine. Apart from the COVID-19 vaccine, the company is also developing several other drugs which would add shareholder value.

Pfizer’s dividend yield is higher than S&P 500

Pfizer has a dividend yield of 2.6% which is almost double that of the S&P 500. While the yield is not as attractive as the other companies that we discussed, the stock has also delivered strong capital gains. If you are looking to add a healthcare stock with a high dividend yield, PFE should definitely be on your radar.

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5. Merck (NYSE: MRK)

Staying within the healthcare industry, Merck looks like another good dividend stock to buy. The company’s COVID-19 pill, which has been named molnupiravir has been shown to lower hospitalization and death rates in moderate and severe coronavirus cases.

The key advantage of the medicine is that it can be taken orally. With a large number of people still showing vaccine hesitancy, the pill can help in the fight against the coronavirus. With parts of Europe grappling with rising cases of omicron, there is a high probability that Merck’s COVID-19 pill would get conditional approval. That said, Reuters has reported citing sources that regulators in Europe won’t grant the approval before Christmas.

Merck’s dividend yield is attractive

Merck has a dividend yield of 3.6% which looks attractive. Goldman Sachs upgraded Merck stock last week and said that markets are undervaluing its growth prospects and termed the stock’s risk-reward attractive.

While markets have been worried about a revenue cliff as Merck’s cancer drug Keytruda would end the exclusivity period in about seven years, the company is trying to fill up the revenue cliff. It has closed the acquisition of Acceleron Pharma for $11.5 billion which would add to its portfolio of drugs.

With a high dividend yield and attractive valuations, Merck looks like a good healthcare stock to buy in December.

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