5 Dividend Aristocrat Stocks That Are Quietly Offering Huge Total Return Potential

Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 66 companies that made the cut for the 2020 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. Keep in mind, just because they are on this list now, that doesn’t mean in the future they could reduce their dividend.

Typically. some investors are drawn to companies in which the dividend story seems intact, but the sector they reside in is in some peril. The best example being energy. There has been some chatter, albeit muted, that Exxon Mobil Corp.’s (NYSE: XOM) may be mulling a cut of its large dividend, which currently comes in at a stunning 9.59%. That would for sure rock the share price, especially now, with oil trading below $40 a barrel.

We decided to screen the Dividend Aristocrats list looking for companies in sectors that are positive now or could be good ideas for 2021. Five stocks hit our screens, all of which are Buy rated at top Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AbbVie

This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.

One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so last June it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of this year.

AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.

Shareholders receive a 5.19% dividend. Morgan Stanley has a $108 price target on the shares. The Wall Street consensus price target is $109.81, and AbbVie stock closed trading on Tuesday at $90.91.

Cardinal Health

This is another way to play the health care sector for more conservative growth and income investors. Cardinal Health Inc. (NYSE: CAH) is one of the largest drug and medical product distributors. The company generates approximately two-thirds of its profit from the pharmaceutical business and nearly one-third from its medical business.

The pharmaceutical distribution business supports retail/mail/hospital/physician clients, as well as drug manufacturers. The medical business manufactures its own portfolio of medical products and distributes brand-name products to hospitals and physicians.

Shareholders receive a 4.18% dividend. BofA Securities price objective is a gigantic $64, and the consensus target price is $58.94. Cardinal Health stock was last seen trading at $46.55.

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