Dividend stocks can play a powerful role in investment portfolios.

Over the long term, dividends tend to make up a significant proportion of total stock market returns.

Believe it or not, between 1970 and 2020, over 80% of the return from the S&P 500 index came from dividends and their reinvestment.


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How to find the best dividend stocks 

When it comes to finding the best dividend stocks, the key is to focus on dividend-paying companies that have consistently increased their dividend payouts in the past and look set to continue increasing their distributions in the future. Often, novice income investors make the mistake of investing in the stocks with the highest yields. This approach can backfire. Studies have shown that over the long term, ‘dividend growth’ stocks tend to outperform the highest-yielding dividend stocks. 

5 top dividend stocks for Q3 

In this guide, we’re going to highlight five top dividend stocks to consider for Q3 2021. The stocks are:

  • Procter & Gamble
  • Coca-Cola 
  • Exxon-Mobil
  • Severn Trent
  • Persimmon

We also highlight a selection of dividend-focused exchange-traded funds (ETFs) and CopyPortfolios for those who prefer to take a more diversified approach to investing. 

It’s important to remember that dividend stocks are long-term investments. In the short term, even the most reliable dividend stocks can experience share price weakness as equity markets rise and fall. 

The best approach to investing in dividend stocks is to spread capital over a number of different companies to reduce stock-specific risk, and invest for the long term. 

You can find information on how eToro pays dividends to clients who own dividend-paying securities here

Procter & Gamble (PG)

Procter & Gamble (PG)

Past performance is not an indication of future results.

  • Procter & Gamble is a leading consumer goods company that is largely focused on personal care. Its brands, which include Gillette, Pantene, Oral-B, and Pampers, are sold in over 180 countries.  
  • Procter & Gamble has paid a dividend for 131 consecutive years now and is classified as a ‘Dividend King.’ A Dividend King is a company that has increased its dividend every year for at least 50 years in a row. 
  • In April, Procter & Gamble announced that it was increasing its quarterly dividend by 10% to $0.8698 per share. For the fiscal year ending 30 June 2021, the company is expected to pay out total dividends of $3.23 per share, which equates to a prospective yield of around 2.4% at the current share price. The consensus earnings per share (EPS) estimate is $5.64, which means that dividend coverage is a healthy 1.75x.
  • Recent Q3 results were good. The company reported net sales of $18.1 billion, up 5% year on year, and diluted net earnings per share of $1.26, up 13% year on year. The company advised that it plans to repurchase approximately $11 billion in common stock for the fiscal year. 
  • Procter & Gamble is exposed to several dominant trends that should drive growth in the long run and help the company increase its dividend payout. One is rising wealth in the emerging markets. Currently, it generates around 30% of sales in these markets. Another is the ‘premiumisation’ trend – the tendency of consumers to buy higher-quality products. 
  • Next earnings release: Q4 results, 29 July, 2021 
  • Five-year share price performance: 60% (as of 25 June 2021) 
Year FY2018 FY2019 FY2020 FY2021E
Dividend per share ($) $2.79 $2.90 $3.03 $3.23
Dividend yield* 2.28% 2.43%

* Yields correct as of 25 June 2021. 


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Coca-Cola (KO)

Coca-Cola (KO)

Past performance is not an indication of future results.

  • Coca-Cola is the world’s largest non-alcoholic beverage company. Its products, which include Coca-Cola, Sprite, Powerade, and Minute Maid, are sold in more than 200 countries and territories worldwide. 
  • Coca-Cola has registered 59 consecutive dividend increases now meaning that it is also a Dividend King. Management last raised the dividend in February, lifting the quarterly payout by 2.4% to $0.42. 
  • This fiscal year, Coke is expected to pay out $1.68 per share in dividends which equates to a prospective yield of approximately 3.1% at the current share price. EPS of $2.18 is expected, giving a dividend coverage ratio of 1.30x. 
  • Coke understands that dividends are important to its investors. In a recent conference call, CEO James Quincey said: “We recognise the dividend is important to our investor base and continue to believe our long-term model can deliver the cash necessary to reinvest to grow the business while also supporting the dividend.” 
  • Coca-Cola’s sales and profits fell during the coronavirus pandemic due to the fact that restaurants and bars were closed and events were cancelled. As the global economy reopens, sales and profits should recover. 
  • Next earnings release: Q2 results, 20 July 2021
  • Five-year share price performance: 22% (as of 25 June 2021)
Year FY2018 FY2019 FY2020 FY2021E
Dividend per share ($) $1.56 $1.60 $1.64 $1.68
Dividend yield* 3.02% 3.09%

* Yields correct as of 25 June 2021.


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Exxon-Mobil (XOM)

Exxon-Mobil (XOM)

Past performance is not an indication of future results. 

  • Exxon-Mobil is one of the world’s largest publicly-traded international oil and gas companies. The company has both upstream and downstream operations and is also active in the renewable energy space. 
  • Exxon-Mobil has a strong dividend history. It is classified as a ‘Dividend Aristocrat’ – an S&P 500 company that has paid and increased its base dividend every year for at least 25 years. Over the last 38 years, its dividend payments have grown at an annual rate of 6.1%. 
  • This year, analysts expect Exxon-Mobil to pay out dividends of $3.49 per share. That equates to a prospective yield of 5.5% at the current share price. The company has advised that cash flow this year is expected to cover both capital expenditures and the dividend while also enabling the company to maintain a strong balance sheet. 
  • Exxon-Mobil recently advised that, going forward, it will be prioritising its highest-return projects. Its aim is to increase cash flows, cover the dividend, and increase the earnings potential of the business in the near and longer term.
  • Exxon-Mobil should benefit from higher oil prices as economic activity picks up post Covid-19. Recently, oil has risen to levels not seen since late 2018 amid improving economic conditions. 
  • Next earnings release: Q2 results, 30 July 2021
  • Five-year share price performance: -30% (as of 25 June 2021) 
Year FY2018 FY2019 FY2020 FY2021E
Dividend per share ($) $3.23 $3.43 $3.48 $3.49
Dividend yield* 5.39% 5.41%

* Yields correct as of 25 June 2021.


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Severn Trent (SVT.L)

Severn Trent (SVT.L)

Past performance is not an indication of future results.

  • Severn Trent is one of Britain’s largest water companies. Every day, it supplies around 2 billion litres of drinking water to UK households. 
  • Severn Trent has a good long-term dividend growth track record. Over the last 20 years, it has increased its dividend payout from 45p per share to 101.6p per share. 
  • For the financial year ending 31 March 2022, analysts expect Severn Trent to pay out 102.8p per share in dividends, which equates to a prospective yield of 4.0% at the current share price. Earnings of 123.6p are expected, giving a dividend coverage ratio 1.2x. 
  • Severn Trent has ‘defensive’ qualities. No matter how the UK economy fares in the near future, people will need access to fresh water. The group also has good visibility of earnings as its earnings are regulated by the UK’s Water Services Regulation Authority (Ofwat).
  • Analysts at HSBC believe that Severn Trent could see accelerated asset growth from the UK’s ‘Green Recovery’ programme – a green investment plan designed to create lasting environmental improvements for future generations. 
  • Next earnings release: Q1 trading update, 15 July 2021
  • Five-year share price performance: 13% (as of 25 June 2021) 
Year FY2018 FY2019 FY2020 FY2021E
Dividend per share ($) £0.87 £0.93 £1.00 £1.02
Dividend yield* 3.99% 4.07%

* Yields correct as of 25 June 2021.


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Persimmon (PSN.L)

Persimmon (PSN.L)

Past performance is not an indication of future results.

  • Persimmon is a leading UK housebuilder. Last year, it built 13,575 homes across the UK despite experiencing disruption during the pandemic. 

 

  • Housebuilders tend to pay out big dividends during periods of economic strength and we are seeing this now with Persimmon. In late April, the group advised that its intention is to return 110p of surplus capital to investors this year by way of two additional interim dividend payments of 55p per share. The first will be paid in August 2021 and the second paid in December 2021.
  • Overall, analysts expect Persimmon to pay out 236.3p per share in dividends this year, which equates to a prospective yield of 8.0% at the current share price. 
  • Persimmon recently advised that it has made a strong start to the year with current forward sales 23% ahead of last year and 11% ahead of the same point in 2019. The company said that its build rates continue at pre-Covid levels and that it remains on track to deliver first-half volumes near those seen in the first half of 2019. “Demand for newly-built homes remains healthy and the group’s sales rates are encouraging,” said CEO Dean Finch. 
  • The long-term fundamentals surrounding the UK housebuilding market remain positive. Nearly 350,000 new homes need to be built per year to eliminate the current housing shortage in the country and the UK government is committed to increasing supply. 
  • Next earnings release: Trading update, 8 July 2021
  • Five-year share price performance: 66% (as of 25 June 2021) 
Year FY2018 FY2019 FY2020 FY2021E
Dividend per share ($) £2.35 £2.35 £1.10 £2.36
Dividend yield* 3.72% 7.98%

* Yields correct as of 25 June 2021.


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Dividend ETFs and CopyPortfolios

Those who prefer to invest in ETFs have a number of options when it comes to dividend stocks.

Dividend-focused ETFs to consider include:

All of these ETFs are available on eToro. 

Investors may also want to consider eToro’s DividendGrowth CopyPortfolio. This is a fully-allocated investment portfolio focused on high-quality dividend-paying companies that have exceptional long-term dividend growth track records.


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