Our Favorite High-Yielders for 2021: A Report Card

At the end of 2020, I did not make any predictions about the year to come. At that time, the outcome of the November general election was still being disputed and COVID-19 vaccines were yet to be distributed.

For those reasons, I expected a chaotic start to the year with repercussions impossible to predict. I did not have to wait long to be proven correct. One week later, an angry mob stormed the Capitol building while the daily case count for COVID-19 hit its all-time high (at that time).

Instead of offering predictions, I wrote about “Our Three Favorite High-Yielders for 2021.” I noted that, “While momentum stocks are all the rage, high dividend payers have been neglected. Their yields are high while their share prices are low.”

I am pleased to report that all three stocks recommended in that article performed quite well in 2021. On a total return basis (share price appreciation plus dividends paid), these three picks produced an average gain of 44% last year compared to a total return of 29% for the SPDR S&P 500 ETF Trust (SPY).

Below is a brief summary of how each of them fared. And next week, I’ll have three new equity income recommendations for 2022.

Altria Group

At the start of last year, cigarette manufacturer Altria Group (NYSE: MO) was trading near $41 after bottoming out below $32 during the depths of the coronavirus pandemic. As I observed then, “cigarette consumption increased in 2020 as homebound workers stepped outside to enjoy a quick smoke.”

As we all know, old habits die hard. In 2021, global cigarette consumption continued to rise as most workers stayed home. Over the first nine months of last year, Altria recorded a 4.5% increase in adjusted/dilute EPS (earnings per share) compared to 2020. As a result, MO posted a total return (share price appreciation plus dividends paid) of 24% last year.

I don’t know what 2022 has in store for Altria, but I doubt that cigarette consumption will decline much. In fact, Statista estimates that global cigarette sales revenue will continue to rise over the next five years. If so, then Altria should remain one of the stock market’s most reliable high dividend players.

Iron Mountain

I expected real estate investment trust (REIT) Iron Mountain (NYSE: IRM) to perform well last year, but even I was surprised by its exceptionally strong results. After finishing 2020 below $28, IRM ended 2021 above $52 for a 78% gain last year. In addition, the REIT pays an annual dividend yield of nearly 5%.

Oddly, IRM took a quick dive during the first week of 2022. That may be due to a large shareholder waiting until the new year to lock in their gain. That way, they would not have to pay capital gains tax on their profit until April 2023.

If so, then that presents a buying opportunity. The company continues to execute its strategy of converting its underperforming storage facilities into data processing centers. Demand for bandwidth should only grow as 5G technologies and blockchain users compete for limited cloud computing capacity.

Enterprise Products Partners

2020 was a disaster for the entire energy sector. The price of oil collapsed as the coronavirus pandemic greatly reduced demand for gasoline. Not only was that bad news for oil producers, but it also hurt the master limited partnerships (MLPs) such as Enterprise Products Partners (NYSE: EPD) that transport and store crude oil and natural gas.

Fortunately for the energy sector, the economy roared back to life faster than expected as did the price of oil. After finishing 2020 below $49 a barrel, the price of oil jumped more than 50% to end 2021 one penny shy of $77. The net result for EPD was a total return of 20% last year.

I don’t expect the price of oil to go up another 50% this year. If it does, the entire global economy is in trouble since energy is a net cost to most developed nations. But I do expect demand for gasoline to remain strong as the coronavirus pandemic gradually recedes.

Of course, last year was highly unusual in many respects. I don’t know what 2022 has in store for us, but I do know that there are proven systems for making money in the stock market no matter what the circumstances. Click here for our special report.