5 Best High Dividend Stocks to Buy in October 2021

While the US Federal Reserve has said that it is on track to begin tapering this year, interest rates are still quite low which is leading to low yields on fixed income instruments. High dividend stocks could be one way through which investors can build a portfolio of assets that generates regular income.

Here are the five best high dividend-paying stocks that you can buy in October 2021.

1. AT&T (T)

When it comes to price action, AT&T has far from being a rewarding stock. It has lost almost 14% in 2021. The stock has lost almost one-third of its market cap over the last five years. The underperformance looks even more painful considering the fact that the broader markets have given a double-digit CAGR over the period. Currently, T stock trades near its 52-week lows even as the broader markets are near their all-time highs.

T is a high dividend stock to buy

That said, if you are looking at a high dividend stock, T stock should be on your radar with a dividend yield of over 8.2%. After the crash in the stock, there is also a possibility of recovery. Wall Street analysts have set a consensus target price of $31 for T stock which is a premium of 22% over current prices.

Earlier this month, KeyBanc had upgraded T stock from underweight to sector weight. “AT&T is inexpensive, though we continue to feel like AT&T is a value trap and have our concerns on all three SW-rated Wireless Carriers on their ability to execute their strategies, whereas we feel the competitive advantage goes to Cable until proven otherwise,” it said in its note.

T stock trades at an NTM (next-12 months) PE of only about 8x. The stock looks attractive at these valuations and is also a play on the 5G transformation. Overall, T looks among the best high dividend stocks to buy in October.

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2. BP (NYSE: BP)

Energy prices have rebounded in 2021 and crude oil is trading near multi-year highs. While a lot of energy companies had cut their dividends last year as crude oil prices tumbled, they have since restored them.

Notably, the continued momentum in the global economy has been fuelling an increase in crude oil demand. However, unlike in the past, the OPEC+ block has been quite disciplined with the supply. Weather-related disruptions in the US have also played a spoiler with crude oil supply. Since the earnings of energy companies like BP are sensitive to energy prices, their stocks have been rising amid the spike in energy prices.

The $100 per barrel price level for crude oil no longer looks like a pipe dream and even Russian President Vladimir Putin has said that the price level cannot be ruled out. Bank of America and Goldman Sachs also have a bullish view of crude oil prices.

BP hasn’t fully restored dividend yet

Meanwhile, BP’s current dividend is below what it was paying before the cut last year. That said, despite that its current dividend yield is 4.4% which is over thrice that of the S&P 500. If you are looking at a high dividend stock in the energy industry, BP would fit the bill.

While higher energy prices would drive BP’s growth in the short term, for the long term, BP is focusing on renewables to fuel its growth. The company has been exiting some of the fossil fuel business and has been investing aggressively in renewable energy. While these projects might not lead to immediate returns, they would add long-term shareholder value as the world transitions towards a low carbon future.

At current prices, BP looks among the best high dividend stocks that you can buy in October 2021.

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3. BHP Billiton (NYSE: BHP)

Higher commodity prices have lifted the earnings of metal and mining companies. Most mining companies now pay a variable dividend that is linked to their underlying profits. While historically both BHP and rival Rio Tinto pursued a progressive dividend policy, they had to change the policy amid the slowdown in the mining industry in 2015.

While BHP stock was strong in the first half of 2021, it has since pared gains and is now down almost 14% for the year. Global iron ore prices have tumbled over the last year which has taken a toll on BHP stock. However, we should see a rebound in iron ore prices next year as the underlying demand from the steel industry is still quite strong.

BHP stock has a double-digit dividend yield

At current prices, BHP has a dividend yield of 12.3% which looks quite attractive. There aren’t a lot of stocks in current markets which pay such a high dividend yield. While BHP’s dividend is contingent upon the commodity price environment,  the stock looks quite attractive after the crash. It is among the best dividend stocks to buy for the long term as the company has a good payout policy.

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4. Coca-Cola (NYSE: KO)

While mining and energy companies have a volatile dividend, consumer staple companies tend to pay stable dividends. Coca-Cola, which also forms part of Berkshire Hathaway’s portfolio, is among the best high dividend stocks that you can buy in October.

Now, KO stock hasn’t been performing well and with a YTD gain of only about 3%, it is underperforming the markets by a wide margin. However, if you are looking for a high dividend stock with a predictable payout, KO would fit the bill.

KO has a stable dividend

A stable earnings outlook makes KO among the best high dividend stocks to buy in October. At current prices, the yield is 3.1% which is over twice that of the S&P 500. As the economies reopen, outdoor cola sales should also pick up which bodes well for beverage companies like KO. The company is also transforming its portfolio and pivoting towards snacks and healthier beverages which would add long-term shareholder value.

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5. Annaly Capital Management (NYSE: NLY)

With a YTD gain of only about 4%, Annaly Capital Management stock is underperforming the markets. However, the stock somewhat compensates for the dismal price action with its double-digit dividend yield which currently stands at 10.3%.

The company is structured as a REIT and is into the mortgage and corporate middle-market lending. The company has a diversified pool of assets which makes it attractive. Overall, with a high double-digit dividend yield, NLY is among the stocks that should be on your radar in October.

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