3 Best Dividend Stocks to Buy Now

Three best dividend stocks for investors to buy now offer portfolio diversification and feature equities with a history of reliable dividend growth that also provide asset appreciation.

Investing a substantial share of a portfolio in a “hot” sector to capture the upward momentum can offer strong gains — however, this strategy works mostly for institutional investors and frequent traders. Long-term investors should diversify their portfolio across equities that are not only in different sectors but equities that are also at different stages of their business cycle.

To find these best dividend stocks for their portfolio, investors must look beyond the main performance metrics when conducting their stock analysis. A high dividend yield might be attractive at first glance but could be the result of a slumping share price. A natural question is whether that share price decline is caused by major long-term deficiencies in the company’s fundamentals or just a temporary pullback.

A share price decline driven by underlying fundamental issues would be a good reason to pass on an equity. A temporary pullback, however, could be an opportunity to take a long position in an equity at a discounted price and reap the benefits of capturing the capital gains from any share price rebound.

The three best dividend stocks on this list have multiple characteristics that make them worthy of consideration right now. All three equities have dividend yields in excess of 4.5% and all three equities have strong fundamentals that make them reliable options for any investor’s portfolio.

3 Best Dividend Stocks to Buy Now: #3

Old Republic International Corp (NYSE:ORI)

Old Republic International Corp is an insurance underwriting business operating primarily in the United States and Canada. It offers a number of specialized insurance products, with the majority of its revenue coming from its General insurance and Title insurance segments. The former accounts for around 60% of the company’s revenue, insuring automobiles, homes, workers’ compensation and other parts of the property-casualty industry. The latter offers title insurance products to real estate investors, making up just under 40% of ORI’s revenue.

Charted below is the share price of ORI for the 12-month period alongside a simple moving average line (SMA) with a 150-day range. Also shown is the earnings per share (EPS) for each quarter in the last year.

Chart provided by StockRover, start your free trial here.

When reading this chart, it’s important to note that the y-axis is numbered in terms of price to fit the share price graph as well as the simple moving average line. But, although EPS is charted relative to the change in price, its actual amounts will not match the label. Announced around Oct 1, or the end of the third quarter of 2020 (Q3 2020), the earnings per share were $0.83 — not 0 or 9.12 as some readers may interpret. However, this does reflect how meaningful the dip in EPS for that quarter was, where in the other quarters charted, earnings per share has averaged $1.74, $1.68 and $1.06 respectively.

Although earnings have dropped in the last 12 months, analysts anticipate a gradual 10% increase in EPS over the next 5 years — compared to the industry average estimate of 4.7%. The “leveling-off” that has occurred in the last month due to the disappointing earnings report may signify an opportunity for investors to buy this long-term stock at bargain prices.

Also noteworthy is the lack of long-term correlation between ORI’s price growth and its change in EPS. While earnings announcements have affected the stock in the short term, a quick look at the moving average line tells us its upward trajectory is, for the most part, uninterrupted.

The company’s current $0.22 quarterly payout has been remarkably consistent, having increased its dividend every year for nearly four decades, making it a member of the Dividend Aristocrats. ORI has paid a dividend for 80 years, most of its nearly century-long existence.

In addition to this long tenure of dividend payments, the company has a trailing yield of 3.5% — much higher than the industry average of 2.3% and S&P 500 average of 1.2%. ORI’s dividend has grown 4.8% in the last year and has room to grow yet, with its low 16.3% payout ratio.

In addition to the $0.22 regular quarterly dividend, ORI paid a $1.00 special dividend in 2018, 2019 and 2021. The financial hardships of 2020 prevented it from paying its compensatory special dividend, but the company’s quarterly distribution has remained totally consistent.

ORI seems priced optimally for a buy. As of market close on September 17, 2021, ORI’s shares are sitting at $22.99. We first recommended ORI in an earlier version of this article in December 2020, when shares were priced $18.34, nearly 21% lower than the stock is today.

3 Best Dividend Stocks to Buy Now: #2

Safety Insurance Group, Inc. (NASDAQ:SAFT)

Safety Insurance Group, Inc. is a company headquartered in Boston, Massachusetts, insuring private passenger automobiles and homes. It was founded in 1979 and although its primary focus is automobiles, SAFT also provides property and casualty insurance products that include homeowner, dwelling fire, business owner and umbrella policies.

Charted below is the share price of SAFT for the 12-month period alongside a simple moving average line (SMA) with a 150-day range. We have also included the earnings per share (EPS) as of the quarterly announcements.

Chart provided by Stock Rover.

The company’s current $0.90 quarterly dividend distribution corresponds to a $3.60 annualized dividend distribution and a 4.5% forward yield, having grown an average of 5.2% per year over the last five years and 6.1% per year over the past 10 years. SAFT’s annual dividend distribution has grown by $0.20 nearly every year in the last 10 years, until 2019 when the company increased its dividend to the current $0.90 amount and has kept it level since.

In addition to its continuous growth, the company’s current 4.5% yield is considerably higher than the 3.0% average yield of all companies in its industry. It outperformed the S&P 500 average dividend yield even more, tripling the average dividend distribution in the index.

The dip in SAFT’s earnings per share to its current $11.55 leaves the company ample opportunity for growth in the near future. Analysts expect EPS to grow 15% in the next five years, versus the property and casualty insurance industry average of 8.6%.

The dropping share price is largely a continued response to poor EPS since April 2021. With its next earnings announcement coming soon, a likely increase in EPS may cause a sharp uptick in share price to match, due to the high correlation between SAFT’s price and its profitability.

With a target price of $86.52 based on discounted cash flow analysis, SAFT is likely undervalued, and despite it fair year-to-date (YTD) return of 6.7%, the company’s price has increased 49.5% in the last five years. Trading at $80.49, it is 7.5% lower than its estimated true value and has the potential to make a strong recovery.

3 Best Dividend Stocks to Buy Now: #1

Valley National Bank (NASDAQ:VLY)

Valley National Bank was founded in 1927 and has since worked in commercial real estate, residential and commercial loans with a core strategy of investing in high-quality credits. 

Historically, it has operated in New York and New Jersey, while headquartered in New York City, New York. But a recent acquisition in Florida has expanded the bank’s market and led to an increase in profit and a successful few years along with it.

Image courtesy Stock Rover.

Since 2014, VLY has kept its quarterly dividend level at $0.11 per share, or $0.44 per share, annually. It maintains a meaningful yet sustainable dividend yield of 3.6% by controlling its loan losses and keeping a successful operation in Florida. The trailing 3.3% dividend yield is higher than the 3.0% industry average, and its 41.1% payout ratio is within the ideal range.

In the trailing 12 months, VLY’s share price has soared. In November 2020, it increased 20.42% and again in February 2021, it climbed 19.98%. This means VLY outperformed the S&P 500 by 8.88% and 17.37%, respectively. In the trailing 12-month period, then, VLY has grown 73.3%.

In addition, and in the midst of the COVID-19 pandemic, the company also posted its highest-ever quarterly earnings of $0.28 per share. Analysts expect these earnings to increase further to a new all-time high of $0.30 per share in the company’s next announcement.

While no longer as cheap as it was earlier in August of last year, VLY has slowed its growth rate since June 2021 — the slowdown is unlikely to last much longer, however, if analysts are correct in their EPS estimates. The company has a successful cost-management strategy that has allowed it to grow net interest income by 27% in the last year and improve its efficiency ratio from 79% to 48%. These results demonstrate financial strength in a year that devastated most other regional banks, indicating VLY’s reliability and potential for long-term success.

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