best dividend stocks

Top Dividend Stocks for Stable Investment Returns

In today’s market, where things can change fast, many investors look to dividend stocks for steady income and growth. But what makes some dividend stocks better than others? How do you find the ones likely to bring in great returns? Let’s uncover the secrets to building a strong portfolio that can handle ups and downs.

Key Takeaways

  • Dividend Kings are companies that have paid and raised their base dividends for at least 50 consecutive years1
  • Dividend Achievers are companies with 10-plus straight years of dividend increases1
  • Focusing on dividend yield, payout ratio, and dividend growth history can help identify the best dividend stocks2
  • Screening for undervalued, quality dividend stocks with strong management and economic moats is key2
  • Diversifying across sectors and market capitalizations can provide stability during market turbulence3

What Makes a Dividend Stock Attractive?

When looking at dividend stocks, there are key factors to keep in mind. These include the dividend yield, dividend growth, and dividend sustainability. Also, a company’s management commitment to the dividend strategy and its economic moats are important for understanding the dividend’s future.

Yield, Growth and Sustainability

A high dividend yield can catch your eye, but make sure it’s backed by earnings and cash flow4. Seeing dividends grow over time shows a company’s financial health and its dedication to shareholders. The dividend payout ratio is key too, showing how much profits go to shareholders4. Some companies like REITs and MLPs often have high payout ratios and yields4. Dividend stocks offer chances for high dividend growth and more dividends4.

Management Commitment and Economic Moats

Looking at a company’s management and its competitive edge is crucial for dividend investors. Teams that support their dividend policies and have strong economic moats tend to keep dividends steady through ups and downs4. Companies with lasting advantages can consistently make profits, supporting reliable dividend payments.

“Dividend stocks are typically seen as a safer option compared to growth stocks.”4

But remember, dividend stocks aren’t always risk-free. The way management handles dividends affects the stock’s stability4. It’s smart to look at more than just dividend yield. Consider total return, stability, and growth potential too4.

3 Signs of a Healthy Dividend Stock

When looking for the best healthy dividend stocks, smart investors should check for three key signs. These signs show if a company can keep and increase its dividend payouts over time.

  1. Payout Ratio Below 80% – A payout ratio under 80% means the dividend is safe and can be kept5. For instance, a company making $1 million in profit and paying $200,000 in dividends has a 20% payout ratio5. If the payout ratio is over 80%, it might mean the dividend could be cut in tough times.
  2. Consistent Annual Dividend Increases – Companies that regularly increase their dividends show they value their shareholders. This steady dividend growth is a sign of strong finances and confidence in the company’s future.
  3. Robust Balance Sheet and Steady Cash Flows – Good dividend stocks have strong balance sheets and steady cash flows to keep paying dividends, even when times are tough. Companies with little cash might find it hard to keep their dividends5.

By looking at these three signs, investors can find dividend stocks that offer stable and growing income over time.

Even the best dividend stocks might reduce or stop paying dividends if their business and cash flow decline5. It’s important to watch a company’s financial health to see if its dividend is likely to last.

best dividend stocks to Buy Now

Dividend stocks are a top pick for those looking for steady returns6. Big names like Exxon Mobil (XOM), Verizon Communications (VZ), and Johnson & Johnson (JNJ) stand out.

Exxon Mobil (XOM)

Exxon Mobil has upped its dividend for 41 straight years, offering a 3.33% yield6. After buying Pioneer Natural Resources, Exxon cut costs to keep its dividend strong6. It’s now 18% off Morningstar’s $138 fair value, making it a great buy in oil and gas.

Verizon Communications (VZ)

Verizon leads with a 6.47% dividend yield7. Despite struggles in adding new customers, Verizon’s price hikes boosted revenue without losing many customers7. Morningstar sees Verizon’s wireless market getting better, which should help its profits and dividend7. It’s 24% below Morningstar’s $54 fair value, offering a strong dividend return.

Johnson & Johnson (JNJ)

Johnson & Johnson, another dividend leader, has a 3.27% yield and a solid economic moat from Morningstar7. With a strong healthcare portfolio, steady cash flow, and talc litigation resolved, it’s undervalued at 10% below Morningstar’s $164 fair value7. J&J’s dividend hikes and buybacks are seen as smart moves by Morningstar analysts, making it a top choice for income and growth.

These three stocks offer great dividend yields, strong market positions, and good values. They are great picks for investors looking for steady, long-term gains.

Comcast (CMCSA)

Comcast is a top name in telecommunications and media. It’s a great choice for investors looking for steady returns8. With a stock price of $37.86, it has a market cap of $149 billion, showing its big impact8. Its dividend yield is 3.28%, a bit lower than the industry average, but it has a strong track record of raising dividends for 17 years8.

Comcast is known for its strong economic position. It keeps growing revenue even as it loses some customers. This shows its strong hold in the telecom sector8. With a top-notch dividend safety rating and returns risk rating, it’s seen as a solid investment choice8. It’s expected to grow its dividend by 7.55% in 2023 and 7.02% in 20248.

Comcast’s dividend history is impressive, with an average yield on cost of 0.74% over two years8. Its shares bounce back quickly from market drops, showing their strength8. With a focus on shareholders and strong finances, Comcast is a top pick for those wanting stable dividends8.

In summary, Comcast is a top telecom stock with a strong economic edge and a solid dividend track record8. It’s a mix of financial stability, growth, and a focus on shareholders that makes it a great investment89.

Medtronic (MDT)

Medtronic is the biggest company making only medical devices. It’s a key partner for hospitals with its wide range of products10. For 46 years, it has raised its dividend, making it a dividend aristocrat10.

Now, Medtronic stock has a price-to-earnings ratio of 16.7, lower than the S&P 500 Index10. This makes it a good buy for investors looking for steady returns. It’s expected to give a 10.6% total return over five years10.

Medtronic has shown it can grow even in tough times, with earnings growth of 5% to 12% during the Great Recession10. For 2024, it aims for 4.75% to 5% organic revenue growth and earnings between $5.19 and $5.21 per share10.

Also, Medtronic has made nine big buys since 2021, spending over $3.3 billion10. It now works in over 140 countries, making it a top name in medical device stocks10.

Medtronic is great for investors wanting steady returns. It has a long history of growing dividends and looks good for the future1011.

Medtronic has consistently demonstrated its commitment to rewarding shareholders through a steadily growing dividend, even during challenging economic times. This makes the company an appealing option for investors seeking long-term, stable investment returns.”

Duke Energy (DUK)

Duke Energy is a top pick for investors who focus on dividends. It’s one of the biggest utilities in the U.S. Duke Energy works in areas where regulations help it stay strong. This gives it a solid economic edge and steady returns for shareholders12.

The company plans to pay out 65% to 75% of its earnings as dividends. With a strong balance sheet and smart dividend strategy, Duke Energy is a go-to for those wanting steady income and growth12.

According to Morningstar, Duke Energy stock is 8% cheaper than its fair value of $112 per share. This suggests a bright future for the company. Its $73 billion investment plan for 2024-28 focuses on clean energy. This aims to reach net zero carbon emissions by 205012.

Despite challenges like regulatory and environmental risks, Duke Energy has a solid base for long-term success. Its stable earnings, favorable regulations, and focus on core operations support this12.

Metric Value
Dividend Yield Percentage 3.75%
Dividend Payout Ratio (FWD) 64.78%
Years of Consecutive Dividend Increase 19 years
Dividend Safety Rating A+
Yield Attractiveness Rating A
Returns Risk Rating A+
Returns Potential Rating B
Dividend Growth CAGR
  • 2023: 2.01%
  • 2024e: 0.99%
  • 2025e: 0.00%
Average Yield on Cost 1.16%
Estimated Dividend Payout Amount $1.0250
Price Target Upside (Sell-side Analysts) 6%
Beta (5Y Monthly) 0.4

Duke Energy is a prime choice for those looking at regulated utility stocks for stable returns and dividend growth. Its strong setup, including a favorable regulatory environment, smart dividend strategy, and clean energy focus, makes it a promising long-term investment121314.

Duke Energy (DUK)

“Duke Energy is considered one of the cheapest utilities stocks, with Morningstar highlighting its growth potential and constructive regulatory environments.”

PNC Financial Services (PNC)

PNC Financial Services is a big bank in the U.S. It’s the top pick for dividend stocks15. The company has a strong mix of fees and a solid balance sheet for today’s interest rates16. PNC’s plan to return capital, including dividends, is seen as good by Morningstar. The stock is 11% lower than the $175 fair value estimate16.

PNC Financial Services (PNC) is committed to paying out dividends to its shareholders. It recently upped its common stock dividend to $1.60 per share, a 3% jump from last quarter’s $1.5515. PNC also offers preferred stock options with quarterly dividends from $850.00 to $2,209.97 per share15.

PNC Financial Services has shown strong financial performance and stability. Over the last year, it had a good return on investment, with a dividend yield higher than many peers16. The company keeps its dividend payout ratio in a healthy range. Its quarterly earnings and revenue growth have been steady16.

Compared to other top dividend stocks, PNC Financial Services has a history of steady dividend growth. It has an average annual dividend growth rate that beats many in the financial services sector16. PNC’s stock is also less volatile, with a low beta value. This makes it a good choice for investors wanting stable returns16.

Overall, PNC Financial Services is a standout regional bank stock. It offers a mix of dividend growth and stability. This makes it a strong pick for investors building a portfolio of dividend-paying stocks17.

Kinder Morgan (KMI)

Kinder Morgan (KMI) is a top name in the oil and gas midstream sector. It offers a 5.8% dividend yield, making it a top choice for investors18. The company has a wide range of assets, including natural gas, liquids, oil, and LNG. Its main strength lies in its U.S. gas pipeline business18.

Recently, Kinder Morgan showed strong financial results. In the first quarter of 2024, earnings per share (EPS) jumped by 10% to $0.33. Distributable cash flow (DCF) per share also increased by 5% to $0.64, compared to the same period last year18. Net income went up to $746 million, and DCF reached $1,422 million, showing growth from the previous year18.

Most of Kinder Morgan’s cash flow comes from fees, making it very stable18. The company sees growth in areas like artificial intelligence and data centers. Morningstar predicts a 2-3% increase in dividend growth18.

Looking at Kinder Morgan’s dividend history, the dividend has grown about 2% annually. This shows the company’s dedication to rewarding its shareholders19. With a $3.3 billion growth project backlog, Kinder Morgan is set to keep growing its dividend and providing solid returns18.

Kinder Morgan stands out with its high dividend yield, steady cash flow, and growth potential18. It has a strong financial profile, with a net-debt-to-adjusted-EBITDA ratio of 3.9x. The company aims for a DCF payout ratio of 50% in 2024, showing its ability to maintain and increase its dividend18.

Devon Energy (DVN)

Devon Energy is a top player in the U.S. oil and gas sector20. It offers a 4.1% dividend yield over the last year20. This makes it a great choice for those looking for steady returns21. The company is set to generate $3.3 billion in free cash flow by 2024, with a yield of 10.5%20. This is expected to rise to $3.2 billion in 2025, with a 10.3% yield20.

Devon Energy uses a “fixed plus variable” dividend plan to match returns with the commodity cycle20. In 2024, it aims to use 30% of its free cash flow to pay off debt. The rest, 70%, will go to shareholders through dividends and buybacks20. This plan, along with its cost benefits and a narrow economic moat from Morningstar20, makes it an attractive choice for investors wanting steady dividends.

Devon Energy’s stock is currently 16% below Morningstar’s $56 fair value estimate20. Yet, its financial strength and focus on returns make it a standout in the oil and gas sector21. For those interested in the energy sector and stable dividends, Devon Energy is a strong consideration202122.

Dow Inc. (DOW)

Dow Inc. (DOW) is a top chemical producer worldwide, known for its wide industry reach. It stands out because of its low costs in making ethylene and propylene in North America23. As profits rise, experts at Morningstar think Dow’s stock will move towards its $68 fair value23.

Dow Inc. keeps its dividend payments steady, offering a good yield. Over the last three years, it paid $2.80 per share, showing a 60% payout ratio23. This focus on dividends makes Dow Inc. a strong pick for those looking for stable returns.

Dow’s diverse chemical products help it stay strong23. Based in Midland, Michigan, Dow Inc. uses its efficiency and leadership to add value for shareholders23.

For those interested in the chemicals sector and dividend growth, Dow Inc. is a standout choice. Its solid history and bright future make it a good addition to a dividend-focused portfolio23.

“Dow Inc. is a lean chemicals giant that delivers consistent dividends to its shareholders, making it an attractive investment for income-oriented investors.”

Key Highlights

  • Dow Inc. (DOW) offers a dividend yield of 5.0%23.
  • The company provides an annual dividend of $2.80 per share23.
  • Dow Inc. is a leading producer of various chemicals used across different industries23.
  • The company’s headquarters are located in Midland, Michigan23.

Dow Inc. shines with its efficiency, cost benefits, and steady dividend payouts. It’s a dependable and appealing choice for those seeking dividends in the chemicals sector23.

High-Dividend Stocks by Yield

Investors looking for high-dividend stocks should consider some top picks. Stocks like Pennymac Mortgage Investment Trust offer a 14.68% yield24. Franklin BSP Realty Trust and International Seaways also stand out with yields of 13.56% and 13.43% respectively24.

But, be careful with stocks that offer very high yields. These dividends might not last long24. Make sure to check if the dividends are supported by the company’s financial health.

Company Dividend Yield (%) Market Cap ($M) Price per Share ($)
Euronav NV (EURN) 34.38% 3,645 38.77
Ecopetrol S.A. (EC) 25.05% 1,120 10.82
Diversified Energy Company (DEC) 13.49% 2,570 9.08
BW LPG Limited (BWLP) 18.93% 1,295 15.51
Oxford Lane Capital Corp. (OXLC) 17.50% 784 5.04

This table shows a variety of high-dividend stocks across different sectors. They have forward dividend yields over 13%24. The market caps range from $22.94 million to $3.645 billion, and share prices from $5.04 to $38.7724. It’s important to check if the dividends are sustainable and fit your investment goals.

When looking at high-dividend stocks, pay attention to the dividend yield. This is the yearly dividend amount divided by the stock’s price, shown as a percentage24. To pick the best stocks, analyze factors like forward dividend yield, market size, trading volume, and avoid stocks under $5 or with small market caps24.

Dividend Stocks vs Dividend Funds

Investors have two main ways to earn regular income: picking dividend stocks or choosing dividend funds. Each method has its own pros and cons. It’s important for investors to think about their financial goals and how much risk they can handle before picking a strategy.

The Benefits of Dividend Stocks

By investing in dividend stocks, investors can pick companies known for paying good dividends and growing over time. This way, they might earn more than by investing in dividend funds25. For example, looking for mid-cap and large-cap U.S. companies with dividends over 4% shows 73 options25. Choosing these stocks could help investors earn a stronger income than a broad market fund.

The Advantages of Dividend Funds

Dividend funds, like index funds or ETFs, provide instant diversification and a steady income. They hold many dividend-paying stocks, reducing the risk of picking just one stock26. These funds can give investors income for their expenses and may protect against market downturns26. They also have lower investment minimums, making them easier for more people to invest in.

But, dividend funds might have higher fees than buying stocks on your own25. For example, the Vanguard High Dividend Yield Index Fund Investor Shares (VHDYX) has a 0.15% expense ratio25. The American Funds Investment Company of America (AIVSX) has a 0.57% expense ratio25. These fees can reduce an investor’s earnings over time.

The decision between dividend stocks and funds depends on what an investor wants to achieve, how much risk they can take, and if they want to manage their investments themselves. Both methods can help income-focused investors build wealth over the long term252627.

How to Invest in Dividend Stocks

Investing in dividend stocks is a great way to earn steady returns. To make a successful dividend stock portfolio, pick companies with strong finances, healthy payout ratios, and a history of growing dividends28.

Start by finding companies with good dividend yields. But, don’t just look at the high yields. Choose companies with low payout ratios, strong cash flow, and a history of growing dividends29.

  1. Check a company’s financial health: Look at its balance sheet, debt, and profits to make sure it can keep paying dividends.
  2. Look at the dividend history: See how much the company has paid out in dividends, its growth, and any changes to its dividend policy.
  3. Think about the company’s competitive edge: Pick companies with strong market positions, unique technology, or high barriers to entry to protect their dividends.

It’s important to spread your investments across different sectors and industries. This helps reduce the risk of losing money if one company or industry does poorly29.

Keep in mind the tax on dividend income. Qualified dividends from domestic and some foreign companies are taxed less than regular income. Nonqualified dividends are taxed like regular income30.

Investors can also look into dividend-focused mutual funds or ETFs for a mix of dividend-paying companies. These options offer diversification and expert management but might not always perform well if dividend cuts happen29.

Investing in dividend stocks needs careful thought and a disciplined approach. By picking companies with solid finances, sustainable dividends, and growth potential, you can create a portfolio that gives steady income and grows over time28.

Company Dividend Yield Annual Dividend
Altria 9.4%28 $3.9228
Devon Energy 6.9%28 $2.8728
Dow 5.2%28 $2.8028
IBM 3.6%28 $6.6428
Verizon 6.3%28 $2.6628
AT&T 6.2%28 $1.1128
Prudential Financial 4.9%28 $5.0028
Philip Morris 5.6%28 $5.2028
Walgreens Boots Alliance 4.3%28 $1.0028
3M 6.3%28 $6.0028

“Dividend-focused funds may underperform those not limiting their investments to dividend-paying stocks due to risks associated with dividend reductions or stops.”29

By following these steps and doing your homework, you can build a dividend stock portfolio that gives steady returns over the long term29. Remember, investing in dividend stocks is not a one-size-fits-all strategy. It’s important to adjust your investment plan to fit your financial goals and how much risk you can take.

Conclusion

Dividend stocks can be a key part of any investment plan. They offer a steady flow of31 income and the chance for long-term32 wealth. By picking stocks with strong advantages and teams focused on returns, you can create a portfolio for steady gains32.

Using individual stocks or funds focused on dividends is a solid way to earn31 income and grow32 wealth over time. Companies that regularly pay dividends usually have solid finances and a history of making profits31. This makes them great for investors looking to31 keep their money’s value as prices go up.

To succeed in dividend investing, it’s important to know about yield, growth, and how long a company can keep paying dividends. Also, look at the company’s management and its economic strengths. This way, you can make a portfolio that meets your financial goals and how much risk you can handle3231. Whether you like to pick stocks yourself or go for funds focused on dividends, this strategy can help you reach your3231 goals for dividend investing and building wealth over the long run.

FAQ

What makes a dividend stock attractive?

Attractive dividend stocks have a high yield and strong growth potential. They also have sustainable payouts. These are supported by healthy balance sheets and steady cash flows.

What are the key signs of a healthy dividend stock?

A healthy dividend stock shows three key signs. First, its payout ratio is under 80% of earnings. Second, it has a history of raising dividends every year. Third, it has a strong balance sheet and steady cash flows to keep the dividend stable through ups and downs.

What are some of the best dividend stocks to buy now?

Top dividend stocks to think about include Exxon Mobil, Verizon Communications, Johnson & Johnson, Comcast, Medtronic, Duke Energy, PNC Financial Services, Kinder Morgan, and Devon Energy.

What are the pros and cons of investing in individual dividend stocks vs. dividend-focused funds?

Investing in individual dividend stocks lets you customize your portfolio and aim for higher yields. But, it requires more research and active management. Dividend funds offer instant diversification and a steady income. However, they might have higher fees and lower yields than picking stocks yourself.

How should investors research and select dividend stocks for their portfolio?

When looking at dividend stocks, focus on yield, dividend history, payout ratio, and balance sheet strength. Also, consider management’s commitment to returns and the company’s competitive edge. Think about diversification and tax effects when building your dividend portfolio.

Source Links

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  16. PNC Financial (PNC) Announces a 3% Hike in Quarterly Dividend – https://finance.yahoo.com/news/pnc-financial-pnc-announces-3-125200240.html
  17. PNC Financial Services Group (NYSE:PNC) Is Paying Out A Larger Dividend Than Last Year – https://finance.yahoo.com/news/pnc-financial-services-group-nyse-123649601.html
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