Dividend stocks can be defined as stocks owned by companies that regularly distribute cash to their shareholders. Although dividend stocks can provide income, they can also be a valuable way to build wealth over the long-term. Investors are often not aware of the benefits of dividend stocks and don’t know where they should start. This is why we have compiled a list of top dividend stocks that you might consider.
Five dividend stocks to purchase
Dividend Aristocrats lists are a great place for finding top dividend stocks. Dividend Aristocrats companies are those that are both included in the S&P 500 index , and have paid or raised their base dividend for at most 25 consecutive years. Here are five of the best dividend stocks that you can buy now:
Lowe’s (NYSE.LOW): This home-improvement giant might not seem like an exciting stock. That’s true if dividend growth is your thing. Since going public in 1961, the company’s dividend has been increased every year. The payout has risen by an incredible 556% in the past decade. Investors who are concerned about the housing crash that occurred in the second half 2022 should not be. If housing supply is low and it’s difficult to buy, people will be more likely to put their money into the home they already own. Lowe’s has another important stat. The average U.S. home can be between 31 and 60-years old, depending on its state. Lowe’s is where the next generation of DIYers will shop.
Walgreens Boots: Alliance – Walgreens, one of the largest global retail pharmacy operators, is delivering on its turnaround plans. The company has saved billions of dollars and its efforts to be a more integrated health care company are paying off. All of this combined will make this company even more profitable. Management recently raised the long-term target for its U.S. health segment. Walgreens stock offers a strong dividend yield that is well above 4.5%, and 47 consecutive years of dividend growth.
Property Income (NYSE.O): This stock could be a good choice if you are looking for an easy way to invest high-quality real property for growth and income. The company holds a variety of properties that are resistant to ecommerce and generate strong cash flows from tenants who sign long-term leases. Realty Income is also an Aristocrat in Dividends, with 27 years of consecutive dividend increases since 1994 and 53 years of paying a dividend every year.
Johnson & Johnson: Johnson & Johnson is home to a number of great brands that provide products, primarily healthcare products. Johnson & Johnson’s profitable and stable operations in medical devices and pharmaceuticals is just one of its many well-known brands. Combining these two factors has allowed Johnson & Johnson to increase its dividend 60 years consecutively. This unmatched mix of consumer health brands and pharmaceuticals has proven to be a major profit engine. Management thinks that the “conglomerate” structure of the company has made it difficult to concentrate its resources. They announced plans in 2021 to break up the consumer products division into a separate entity. Splitting the companies is likely to occur in 2023 with existing shareholders receiving shares from both.
Target (NYSE:TGT): Target has been consistently more profitable than its competitors over the years. They have one of the highest operating margins and gross margins in retailing. Its efforts to expand its ecommerce business and in-store offerings have kept sales at a solid pace. Target’s investors had a difficult year in 2022. High expectations were tempered by the reality of retailing. Target shares fell more than 36% between December and January. Target continues to be one of the best-run retailers and is a solidly profitable business, despite having a challenging year. Target should be on the shopping list of dividend investors with its 50-year history of growth and shares trading at an impressive discount to their highs.
These are just four of the top dividend stocks that you can buy
Dividend Aristocrats may not be the only place to start. There are many great companies that haven’t been paying dividends or haven’t traded publicly for a long time enough to make the list. However, they can still be excellent long-term dividend investors. These four dividend-paying stock options are also worth considering. They have great brands, loyal customer bases and follow favorable demographic trends.
Brookfield Infrastructure Corp.(NYSE:BIPC): Sometimes, the most valuable stocks are those hidden from view. Brookfield Infrastructure owns all aspects of water, energy, utility and communication infrastructure around the globe. Brookfield shares a significant portion of its assets, which generate steady, inflation- and recession-resistant cash flows. Brookfield Infrastructure has been a hidden dividend jewel since 2008, when it had a dividend yield close to 3.5% at the current prices. The goal is to increase the payout 5%-9% each year.
Microsoft: Microsoft, one of the biggest companies in the world has seen steady growth. The company’s emphasis on subscription-based revenue streams, or recurring, is particularly appealing to dividend investors. The company’s balance sheet is strong, with less debt than cash and a very low payout rate that allows for a large increase in the dividend. Microsoft could easily become a Dividend Aristocrat due to its 12-year record of increasing dividends. While the stock’s 1.1% yield might not be too exciting, 2022 has been a hard year for the stock. However, it has a long-term track of exceeding total returns.
American Express (NYSE.AXP): Financial services like business and consumer lending are another area where you can find a few top dividend stocks. American Express is one such stock. American Express, although not a Dividend King, has a track record that spans decades of raising and maintaining its dividend regardless of economic conditions. Its high-quality lending standards and focus on consumers with higher incomes are responsible for this success. They are also less likely to default during low economic times. American Express appeals to investors who are interested in owning a leading financial services company but also have concerns about the economic environment. This is a excellent stock to purchase during market downturns, and then keep for the bull market recovery.
Clearway Energy: Renewable energy is often viewed as a place for growth investors but also offers great opportunities for dividends. Clearway Energy, which operates and owns utility-scale solar and wind assets, is a great example. Clearway Energy is an investment company that acquires, operates, and invests in renewable energy facilities. The power is sold to utility companies under long-term agreements. Over the last few years, the dividend yield was above 4.5%. The payout has increased 84% over the same period. Clearway Energy is an excellent option if you want to make more from renewables.
Highest dividend stocks
You’ll be looking for big dividend payouts, whether you want to earn income you can use today or capital that you can reinvest in order to increase your wealth. These are some ways to maximize the dividends you receive.
First, do not focus on dividend amount but dividend yield. The dividend yield, which is the percentage of the share price paid in dividends every year, is more important that the dividend amount per share.
Next, don’t make owning high-dividend-yielding stocks your No. 1 priority. First, focus on the business quality and whether or not the company can maintain and/or increase its payouts. Only then can you determine if high dividend yields are sustainable.
What to look out for in dividend stocks
If you are new to dividend investing, it is a good idea to get familiar with dividend stocks. They can make great investments. These key concepts will help to identify excellent dividend stocks that you can add to your portfolio after you’ve mastered the basics of dividends.
Dividend payout ratio: A stock’s payout ratio refers to the amount that a company pays per share in dividends, divided by its earnings per shares. This is the share of earnings that a stock pays shareholders. A low payout ratio (e.g. 70%) is an indicator that the dividend is viable.
History Of Dividend Raisings: It’s very encouraging when a company increases its dividend year after another, especially when it can do so in times of recessions like the COVID-19 epidemic.
High earnings growth and steady revenue: When choosing the best dividend stocks for long-term ownership, you should prioritize stability. Stability in dividend stocks is key to long-term success.
Stable competitive advantages: This feature is probably the most crucial. It can be a proprietary technology, high switching costs or a strong brand name.
High yield: Last on the list. Although a higher yield is preferable to one with a lower rate of return, it must be met first. A high dividend can only be as strong as the company that supports it. Therefore, compare dividend yields with to ensure the business is in good health and that the payout is steady.
Dividend stocks are long term investments
Even the best dividend stocks can have significant volatility in short periods. There are just too many market forces which can make them move up or down in a matter of days or weeks. Many of these have nothing to do the underlying business. The companies above can make excellent long-term dividend investments. However, don’t fret too much about the price swings. Instead, you should be looking for companies with strong dividend track records, stable income streams, excellent businesses and excellent business models. The long term will take care.
