These stocks have modest yields but boast big gains this year.
So far in 2021, the S&P 500 Index has jumped an impressive 16% as stocks have ridden the rebound in optimism about the American economy. More importantly, a host of dividend stocks in this index have surged even more — in part because of raising or reinstating dividends now that the disruptions of the pandemic are clearly in the rearview mirror. The following list presents the top 10 S&P 500 dividend stocks over the first half of 2021. And before you roll your eyes at how low some of the following dividends might be, keep in mind that the typical S&P 500 stock only yields 1.32% at present. The reality is that many dividend stocks still have a ways to go to get back to pre-pandemic payouts. These S&P 500 stocks are at least putting up a solid share-price performance that proves they are on the right track in 2021.
Hess Corp. (ticker: HES)
Hess is the first of several energy stocks that have had a great run in 2021, thanks to a combination of a rebound in consumption as economic activity gets back to normal and rising prices due to inflationary pressures pushing up crude oil values. That's naturally a great combination for this $25 billion exploration and production company, which boasts reserves of nearly 1.1 billion barrels of oil equivalent worldwide. Energy plays like Hess can admittedly be volatile, particularly as discussions of climate change and carbon emissions create headwinds for the industry, but it's undeniable that Hess and its peers have cashed in over the last year or so.
Year-to-date (YTD) return: 49.2%
Dividend yield: 1.24%
The Gap (GPS)
Retailer Gap, which operates its namesake stores along with Old Navy, Banana Republic, Athleta and Janie and Jack stores, was one of many consumer stocks that took a hit during the early days of the pandemic in 2020 but has snapped back nicely in the last several months. GPS actually eliminated its dividend in 2020 out of an abundance of caution but reinstated that payout this year as sales rebounded. Shares have more than tripled from their lows last year, and with dividends at less than half of projected profits, there's a chance those distributions will not just be safe but keep growing in the years ahead.
YTD return: 55%
Dividend yield: 1.17%
Occidental Petroleum Corp. (OXY)
Keeping with the energy trend, Occidental Petroleum Corp. is yet another oil and gas firm that has done well in 2021. It differs slightly in that, in addition to oil and gas exploration, OXY also engages in petrochemical operations as well as "midstream" transport and storage of related products. Not only does this make OXY a bit more diversified, but it also has allowed the company to capitalize on all elements of the ecosystem as the cyclical economic recovery has lifted operations across the board. Occidental's dividend remains quite meager at a mere penny per share. That said, investors are anticipating a recovery in payouts very soon.
YTD return: 56.8%
Dividend yield: 0.13%
EOG Resources (EOG)
Similar to the aforementioned Hess and Occidental Petroleum, EOG Resources is a crude oil and natural gas exploration firm. It mainly operates around the Texas and New Mexico areas of the U.S. along with China, Oman and Africa. The company has about 3.2 billion barrels of oil equivalent in proved reserves. Like many energy companies, EOG operated deeply in the red in 2020, but a more favorable environment has allowed this stock to swing back to profitability in a big way. The fact that EOG kept its dividend steady at 37 cents a share across the rough environment last year says a lot about its operational excellence and should give investors confidence in these payouts going forward.
YTD return: 56.9%
Dividend yield: 1.99%
Capital One Financial Corp. (COF)
Though typically not part of the conversation when it comes to "big banks", Capital One, $73 billion financial powerhouse, is no slouch and ranks among the top 20 U.S. financial stocks. Its close ties to consumer credit caused it problems during 2020 amid fears of economic turmoil, but as Americans have opened their wallets in earnest over the last several months, COF stock has surged higher. And with dividends at a mere 10% of forecasted earnings, there's a good chance the modest dividends of Capital One will grow nicely in the years ahead.
YTD return: 59.3%
Dividend yield: 1.01%
Devon Energy Corp. (DVN)
Back to energy, DVN operates nearly 4,000 wells drilling for oil and gas across the U.S. There's not much else to say here about the circumstances lifting this S&P 500 dividend stock, as rising demand and prices have paid off in 2021. That said, it's quite noteworthy that Devon not only kept its dividends intact in 2020 but also has amplified its payouts significantly. Consider that, at the end of 2019, DVN stock paid just 9 cents per share quarterly, and it paid 34 cents a share in June. That kind of increase is encouraging in any environment, but it's even more impressive considering the period of turmoil for energy stocks over the last two years.
YTD return: 70.6%
Dividend yield: 1.61%
Diamondback Energy (FANG)
No, FANG is not tied to the popular tech stocks that many investors associate with that four-letter acronym. It's — surprise, surprise — another energy stock engaged in exploration and production. The Texas firm boasts about 1.3 million in proven reserves. Diamondback was given a bit of a bigger boost than other stocks in the sector, thanks to its focus on the Permian Basin and Eagle Ford shale oil fields, where extracting oil and gas through fracking can be more expensive. Firm energy prices allow FANG to operate with consistent profitability.
YTD return: 72.3%
Dividend yield: 1.78%
Nucor Corp. (NUE)
Charlotte, North Carolina-based Nucor Corp. manufactures and sells steel and related products. These goods include hot-rolled steel, galvanized sheet steel products, beams and bar steel for building construction, electrical materials such as conduits, and a host of other products. Needless to say, a company like Nucor is very dependent on broader economic activity — and thankfully, 2021 has seen a recovery in demand across the board. And just like energy stocks that have benefited from rising crude oil prices, inflationary pressures are driving up the cost of steel goods to allow for NUE to command higher margins for its finished goods. That adds up to strong momentum for this materials stock.
YTD returns: 75.5%
Dividend yield: 1.7%
Marathon Oil Corp. (MRO)
Keeping with the trend, Marathon Oil is an independent exploration and production company. It's also engaged in liquefied natural operations, including ownership and operation of three dozen or so gathering and treating plants along with pipelines. Marathon Oil has a rich history, founded in 1887, and has weathered plenty of ups and downs including the pandemic. Though it briefly suspended its dividend and payouts remaining below their 2019 levels, this is a company that has proven its staying power — and the sharp rebound in shares this year hints that MRO is back on track in 2021.
YTD return: 93.5%
Dividend yield: 1.28%
L Brands (LB)
Sitting on top of the list of the top S&P 500 dividend stocks is retailer L Brands. The company operates mainly under the Bath & Body Works and Victoria's Secret brands. LB admittedly canceled its dividend in 2020 amid fears of the pandemic gutting sales, but the company recently reinstated its payday at 15 cents a share. While that's not particularly impressive from a yield perspective, it does show LB is back on the right track — as evidenced by the fact it is among the best-performing stocks in the S&P in 2021.
YTD returns: 97.4%
Dividend yield: 0.2%
The S&P 500's best dividend stocks in the first half of 2021:
— Hess Corp. (HES)
— The Gap (GPS)
— Occidental Petroleum Corp. (OXY)
— EOG Resources (EOG)
— Capital One Financial Corp. (COF)
— Devon Energy Corp. (DVN)
— Diamondback Energy (FANG)
— Nucor Corp. (NUE)
— Marathon Oil Corp. (MRO)
— L Brands (LB)