Everybody loves dividends, but it turns out not everyone knows exactly what they’ve been missing out on if they aren’t already holding dividend stocks. 

You see, dividends are how publicly traded companies “share the wealth” with their investors. These dividends are mostly paid out on a quarterly basis, but there are still some companies that only pay out dividends once a year. 

And what you might not have realized is that most stocks are now offering dividends. In fact, if you take a look at the S&P 500, approximately 84% (418 members) now offer dividends. 

It’s also far too easy to “overlook” the true power that dividends can lend to your portfolio. 

If we revisit the S&P 500 for the past 50 years, those who invested have seen an average annual increase of about 6.5%. So, if you’d invested $1,000 in the market 50 years ago, you’d have more than $24,000 today. 

But when you add in dividends, that money grows even bigger, faster. 

The average total return jumps by half, weighing in at 9.75%. 

So, if you’d invested that same $1,000 in dividend stocks 50 years ago, your total value today would be $115,000. 

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And that’s one hell of a difference. 

So, if you’re ready to unlock the power of truly passive income, keep reading, because we have five hot dividends you should be banking on. 

A Few More Things To Keep In Mind About Dividends

People love dividends because they are generally a “safe bet.” However, the companies who are offering dividend pay-outs are rarely the rising growth stocks. Instead, the companies that pay them tend to be more stable and established, not “fast growers.” 

And honestly, that should make perfect sense. 

After all, those companies that are still in the rapid growth phase of their life cycles want to retain all the earnings and reinvest them into their businesses.

You also need to pay attention to the tax implications of dividends. 

Cash dividends are the most common, and they’re either taxed at the normal tax rate or at a reduced rate of 20%, 15% or 10% for most US investors. And that’s all different if your dividends are being paid inside of a tax-advantaged account like an IRA.

But if you’re dealing with dividends outside of one of those, the dividing line on how much you’ll be taxed on your pay-outs will be based on how long you’ve owned the underlying security. If you refer back to the IRS, you’ll see that in order to qualify for a reduced taxation rate, you’ll need to have owned the stock for 60 days in a row in the last 121-day window centered around the ex-dividend rate. 

So, now that we’ve dealt with these preliminary matters, let’s dive into the 5 hot dividend stocks I’m banking on this year.

CVS Health Corporation (NYSE: CVS)

Market Cap: $97.33 billion

Dividend yield: 2.68% ($2.00 per year)

Analysts’ opinion: This is a BUY based on 28 analyst recommendations (21.43% Strong Buy, 50% Buy, 28.57% Hold)

CVS Health Corporation (CVS, $74.30) 

Right now, the world is focused hot and heavy on the NASDAQ. And thanks to that, CVS keeps on flying under the radar. But you know that when it comes to Felix, I love stuff that’s flying under the radar. Because that spells opportunity. And it’s one of the reasons that CVS is right on the top of my list. Not only do I think it’s a compelling stock for a ton of reasons, there’s that whole dividend component that means I can get paid both ways.

I mean, when you really dig in, CVS is trading at a bargain price that’s 7x free cash flow. And there are still plenty of positive catalysts right on the horizon to boost the company’s earning power. 

Right now, with everything going on, the market simply isn’t giving CVS enough credit for the strong cash flow it offers, plus the company’s ability to provide some substantial dividend increases and buybacks once they’ve knocked off paying down their debt. 

The way that I look at, CVS is a safe bet. If I lose, I’ll only lose a little bit. But if I win, the potential pot is huge!

CVS’s risk profile is such that if I lose, I’ll likely lose small, but if I win, I’ll win big.

AbbVie Inc. (NYSE: ABBV)

Market Cap: $188.47 billion

Dividend yield: 4.79% ($5.20 per year)

Analysts’ opinion: This is a BUY based on 24 analyst recommendations (25% Strong Buy, 54.17% Buy, 20.83% Hold)

AbbVie (ABBV, $108.52) This personal pick is one that’s on the higher end of the yield spectrum, but it’s not THE highest. But suffice it to say that ABBV had a great 2020. And if I peer into my crystal ball, I’m thinking that we’ll see a big encore in 2021. 

Here’s what really caught my attention: AbbVie’s quarterly revenue is outpacing growth at a rate of more than 52% year over year. Plus, there’s the whole fact that the company is wildly profitable – all thanks to a collection of seriously in-demand therapies in the immunology and rheumatology spaces. 

If you’re trying to place where you know AbbVie from, they’re the makers of Humira, the biological commercial we’ve all seen. And revenue from that wonder drug is still slated to rise. However, don’t let me sugar-coat things for you – “biosimilars” are giving this stock a beating – so it’s not like this is totally without risk. 

But even accounting for that risk, I’m still betting on ABBV. 

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Cisco Systems (Nasdaq: CSCO)

Market Cap: $219.44 billion

Dividend yield: 2.78%

Analysts’ opinion: This is a BUY based on 26 analyst recommendations (19.23% Strong Buy, 30.77% Buy, 50% Hold)

Cisco Systems (CSCO, $51.98) I’m going to be totally honest – this one was one of those “gut instinct” kind of situations. Because there are a few things that make Cisco Systems just a little bit dangerous. And the biggest “unknown” is this: this stock’s performance depends on spending trends for cloud computing infrastructure as well as corporate and telecom networks.

And if 2020 taught us anything, it’s that we don’t know what we don’t know. 

This is a stock that is actually endangered by the working from home trend. However, if vaccines, immunizations and “herd immunity” actually get their claws into the current pandemic, that could change everything. The good news is that if Cisco hikes investments in next-generation enterprise networks, that could be an absolute game changer. It also doesn’t hurt that Cisco is also on a roll when it comes to acquisitions. 

Oh yeah – and there’s one more upside: sales of Catalyst 9000 computer network switches.

So, mark this one down, or – even better – put some cash in this stock. It’s not the safest, but it’s totally still worth it. Especially if you’re really just in it for the dividends. 

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Johnson & Johnson (NYSE: JNJ)

Market Cap: $428.68 billion

Dividend yield: 2.45%

Analysts’ opinion: This is a BUY based on 18 analyst recommendations (33.33% Strong Buy, 38.89% Buy, 27.78% Hold)

Johnson & Johnson (JNJ, $162.83) There are few investments out there safer than a household name. And Johnson & Johnson is definitely a household name. The company was founded in 1886, and it went public back in 1933. Today, it’s got it’s tentacles in several different segments of the healthcare industry. Plus a place in peoples’ hearts. 

Because it’s not just about “pharmaceuticals” – it’s the same folks that bring us Band-Aids, Listerine and Neosporin. 

Then there’s all of the “behind the scenes” stuff they’re into when it comes to medical devices that surgeons rely on. 

Since nothing happens today outside of our pandemic, JNJ is a prevalent player. They asked for an emergency use authorization of their coronoavirus vaccine back on February 6th. And their solution is a single-shot, versus a double-shot deployment. 

That would definitely make a difference in the nation’s fight to keep this virus under control. 

That said, their talk about the vaccine translates into quite a bit of risk. No one is really sure if they’ll get their emergency use authorization. But one thing that isn’t in question is their dividend. 

While many companies struggled in 2020, in April of that same year the healthcare giant decided to give their dividends a 6.3% hike. Which translates to an impressive $1.01 a share. 

That move took their annual dividend growth streak to a whopping 58 years. 

And if you know your history, you know that’s absolutely EPIC. 

RELATED: 3 “Extreme Dividends” to Buy Now

Valero Energy Corp. (NYSE: VLO)

Market Cap: $30.78 billion

Dividend yield: 5.46%

Analysts’ opinion:This is a BUY based on 18 analyst recommendations (20% Strong Buy, 65% Buy, 10% Hold, 5% Underperform)

Valero Energy Corp. (VLO, $75.30) Now that we’re in the midst of a brand new administration, energy stocks of any kind sort of fall into the “gamble” category. Although we’ve seen some improvements this year, this stock IS still off of it’s 52-week lows. But I still see plenty of upside. 

Because when I look at Valero, this is what I see: a stock that’s very well-positioned to start reaping the benefits when that inevitable recovery in refining margins comes back around. Because when you compare Valero to some of their peers, their operating expenses per processed barrel are virtually unmatched. 

When I see that, I see discipline. 

And it’s probably in direct correlation to the company’s ability to generate THE highest average in the realm of free cash flow when you compare it to all of the closest competitors. 

Plus there’s that whole 5.26% yield thing. In case you haven’t been paying attention, this is the highest of any of the stocks with dividends that we’ve discussed today. When I see that, I see dollar signs. And you should, too.