5 Best Dividend Stocks to Buy in September 2021

The last year hasn’t been great for investors who rely on regular income from their investments. The yields on fixed income are way below that of inflation with one-year CD rates not even offering 1% while the annual inflation is running above 5%. Dividend investors haven’t had a good year either as many companies cut down on dividends last year. While many have restored dividends some are yet to do. Also, the S&P 500’s dividend yield is running below the historical average. What are the five best dividend stock that you can buy in September 2021?

1. Annaly Capital Management (NYSE: NLY)

Based on the current payout, NLY offers a dividend yield of 10.16% which looks quite attractive. The stock is however up only about 5% for the year and is underperforming the markets by a wide margin. NLY is a REIT (real estate investment trust) that generally pay high dividends. All said, with a double-digit dividend yield, NLY looks among the best dividend stocks to buy in September 2021.

NLY is a good dividend stock with double-digit yield

Wall Street analysts have a mixed forecast for NLY stock and it has received seven buys and five hold ratings. Its median target price is $9 which is a premium of 3.9% over current prices. The stock’s street high target price of $9.50 is a premium of 9.7% while the street low target price of $8.25 is a discount of 4.7% over current prices.

Here it is worth noting that while NLY has historically been giving good dividends, the stock hasn’t delivered capital appreciation. On the contrary, it is down 19.74% over the last five years. Even if we add the dividends that an investor would have earned all this while, the total returns would fall short of that of the S&P 500 by a wide margin.

That said, if you are looking at a stock that pays a good dividend, NLY still looks among the best stocks to buy, of course, if you are not too interested in the capital gains and are happy collecting the double-digit dividend yield.

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2. Verizon (NYSE: VZ)

Verizon stock is down 7.7% so far in 2021 and is underperforming the markets by a wide margin. Earlier this year, Warren Buffett disclosed a big stake in Verizon. Berkshire Hathaway holds a 3.8% stake in Verizon which is currently valued at $8.6 billion. The company is the seventh-largest holding for Berkshire Hathaway. The largest, of course, Apple, where Berkshire holds a 5.5% stake valued in excess of $140 billion. Meanwhile, despite Buffett’s love for the stock, it has been underperforming the markets.

Verizon is among the dividends stocks that Buffett likes

Notably, while Berkshire Hathaway does not pay a dividend, Buffett has invested in several dividend stocks, Verizon being one of them. The conglomerate collects billions of dollars every quarter as dividends from investee companies. Coming back to Verizon, it currently pays a dividend yield of 4.72% which looks quite attractive.

While Wall Street analysts are not too bullish on Verizon stock, it is among the ways to play the 5G story. If you are looking at a dividend stock that also gives you 5G exposure, Verizon could be among the best bets.

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3. Edison International (NYSE: EIX)

Edison International is a power company based in California and has both renewable and non-renewable facilities as part of its portfolio. The stock pays a healthy dividend yield of 4.6% which is thrice that of the S&P 500. Like some of the other high dividend stocks, it is also underperforming in 2021 and is down 7.8% so far in 2021.

Edison is a good dividend stock in the utility industry

Overall, Edison is a good dividend stock in the utility industry. Utility companies are known to pay higher dividends and the sector is defensive in nature. With the US stock markets looking a bit shaky amid the Evergrande crisis and an impending tightening by the US Federal Reserve, defensive stocks like Edison could be well placed.

Wall Street analysts also see an upside in the stock and its median target price of $70 implies an upside of 21.2% over the next 12 months. Overall, if you are looking at a utility stock with a high dividend yield, Edison looks like a good bet.

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4. IBM (NYSE: IBM)

US tech companies, especially the growth names are very frugal with dividends. Either they don’t pay any dividend at all, or the yield is even below that of the S&P 500. This is despite them earning massive profits every quarter. That said, legacy companies in the tech space pay high dividends as they don’t have as many growth avenues as the growth names.

IBM is a good dividend stock in the tech industry

With a dividend yield of 4.85%, IBM is among the best dividends stocks in the tech industry. The stock has gained 9.1% so far in 2021. While it is still underperforming the markets, the underperformance is lower than some of the other dividend stocks.

IBM has been taking measures to improve its growth and also acquired Red Hat to enhance its product offering. The company is working on a turnaround strategy to revive its growth. If the efforts pay off, the stock could deliver good returns in the long term. Also, in the meanwhile, investors would collect the fat dividend. The stock trades at an NTM (next-12 months) PE of 11.6x which looks reasonable.

Wall Street analysts have given IBM a median target price of $149.50 which represents an upside potential of 10.5% over current prices. Of the 17 analysts covering the stock, four rate them as a buy while 11 rate them as a hold. The remaining two analysts rate IBM as a sell. Overall, IBM is among the dividend stocks that can also offer capital upside potential apart from the high dividend yield.

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5. Chevron Corporation (NYSE: CVX)

Crude oil prices have strengthened this year which has helped buoy the earnings of energy companies like Chevron. Last year, several companies had to either cut down or suspend their dividends altogether as energy prices plummeted. As energy prices increased, dividends are back and some of the energy companies are now paying a hefty dividend yield.

Chevron is a good dividend stock to play higher oil prices

Brokerages including Goldman Sachs see crude oil running higher from these levels. If crude oil strengthens further, it could mean more capital gains for Chevron investors. Also, the company might take a more favorable view of the dividend.

Earlier this month, Credit Suisse reiterated CVX stock as a buy. However, JPMorgan downgraded the stock from a buy to neutral. I”n some ways, we think that CVX is a victim of its own capital discipline success, as higher guided Energy Transition spending moving forward does not appear to have offsets elsewhere in the portfolio. As a result, we now see the company’s dividend coverage breakeven creeping closer to $55/bbl Brent, which is a bit above the group average,” it said in its note.

Chevron is pivoting towards low carbon business

Notably, Chevron has announced that it would spend $10 billion towards the low carbon business by 2028 which is $7 billion higher than the previous forecast. However, the higher spending would reflect in the stock only over the long term.

All said, with a dividend yield of over 5.5%, Chevron looks among the best dividend stocks to buy. Wall Street analysts are also bullish on the stock and its median target price of $124 implies an upside of 28.1% over current prices. The street high target price of $155 is a premium of 60%. Overall, CVX looks like a good dividend stock in the energy industry.

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