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    Investors Rush into Dividend Stocks in 2021

    Kevin Roche β€” Analyst

    Kevin Roche β€” Analyst

    June 9, 2021

    dividend stocks

    June 9, 2021

    No meme stocks in this section. Why’s that? Dividend stocks are making a comeback.

    ELI5: What are dividends?

    Dividend stocks at the end of the tunnel

    During the pandemic, companies were forced to preserve cash by suspending/lowering their dividends. With the economy recovering and companies emerging in a stronger position, companies are once again distributing cash back to investors.

    • Increase dividends: Dividend-paying companies increased their payouts by over $20b in the first quarter of 2021 – the largest increase since 2012.
    • Buyback stock: US companies bought back over $500b worth of shares this year, the most in 22 years.

    The dividend frenzy isn’t likely to slow down anytime soon either – banks are set to resume paying dividends on June 30 after being forced to stockpile cash during the pandemic. The economy is improving and investors are pouring into dividend-paying stocks again.

    Money flooding into dividend stocks

    Not everyone is a fan of dividend investing. It’s tax inefficient, and dividends can have negative impacts on the company. In some cases, management teams prioritize maintaining dividend payments β€” which could lead to bad decisions like:

    Whether you like them or not, returns of dividend stocks have been hard to ignore: Dividend aristocrats, 65 S&P 500 companies that have increased their dividends every year for the last 25 years, is up nearly 17% this year β€” beating the broader market for the first time since 2018.

    Investors: Not your typical growth company

    Companies that pay dividends are often lower-growth, mature companies. Unlike your Teslas and GameStops of the world, these companies:

    • Distribute excess cash back to investors instead of reinvesting back into growth.
    • Have slower stock appreciation than growth stocks.

    For many investors, these stocks are an important strategy for building a steady stream of cash flow. With the US economy expected to grow 6.4% this year, the outlook for dividend-paying stocks is looking attractive.

    Some of the highest paying dividend ETFs:

    • Global X SuperDividend ETF (NYSE:SDIV): 8.70%
    • VanEck Vectors BDC Income ETF (NYSE:BIZD): 8.16%
    • iShares Emerging Markets Dividend ETF (NYSE:DVYE): 7.82%

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