15 Best Dividend Stocks and How To Invest in Them Today

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Dividend stocks offer the best of both worlds for many investors. First, they pay regular income in the form of a dividend, and this payment often rises over time. Second, they off the potential for capital appreciation. As dividend stocks generally represent ownership in well-established, high-quality companies, they can also be a less risky approach to investing. But you’ll still have to do your homework to understand how dividend stocks operate and when they may or may not be good values.

Keep reading to learn about how dividend stocks work and see examples of some top high-dividend stocks.

See Also: 5 Genius Things All Wealthy People Do With Their Money

Top 15 High-Dividend Stocks You Should Consider

Here are a handful of the best dividend stocks that you should consider for your portfolio. Before buying any stock, be sure it matches you investment objectives and risk tolerance, and consider speaking with a financial advisor.

1. AbbVie

AbbVie Inc. (NYSE: ABBV) is a biotechnology company in the healthcare sector. The company currently offers a solid 3.86% dividend yield. AbbVie has a market capitalization of around $285 billion and a P/E ratio of 47.86. The consensus of 24 analysts rates ABBV a “strong buy.”

2. Chevron

Chevron (NYSE: CVX) is a 145-year-old integrated oil and gas company focused on lower carbon operations. It currently offers a 4.06% dividend yield. Analysts continue to maintain a “strong buy” rating on the stock.

3. Iron Mountain Inc.

Iron Mountain (NYSE: IRM) generates copious cash flow from its business of storing, protecting and managing assets and information for companies around the globe. The company pays a well above-average dividend of 3.38% and analysts have a consensus “strong buy” on the stock.

4. British American Tobacco

British American Tobacco (NYSE: BTI) is the tobacco- and nicotine-product company behind such brands as Lucky Strike, Camel and Newport. The company currently offers a 10.10% dividend yield. It has a market capitalization of $67 billion.

5. Outfront Media

Outfront Media (NYSE: OUT) is a New York-based real estate investment trust that provides advertising space on billboards, transit and mobile. The company currently has an attractive 7.48% dividend yield. It also has a market capitalization of $2.66 billion, and, although it’s not currently profitable, a consensus rating of “buy.”

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6. Plains All American Pipeline

Plains All American Pipeline (Nasdaq: PAA) is a mid-cap energy company with a market capitalization of $12.1 billion and a P/E ratio of 12.31. Plains’ dividend yield returns an impressive 7.37% to investors.

7. Realty Income Corp.

Realty Income Corporation (NYSE: O) can help diversify your portfolio by adding some real estate exposure. This real estate investment trust has increased its dividend 122 times since first going public in 1994. Currently, shares of Realty Income are yielding a generous 5.62%.

8. Home Depot

Home Depot (NYSE: HD) is a customer favorite and seems to thrive whether the economy is expanding with new home builds, or contracting when consumers tend to hunker down and remodel. Currently, the stock yields 2.68% and is favored by analysts, who have a “strong buy” on the stock. [89]

9. Blackstone

Blackstone (NYSE: BX) is a bit more aggressive than most high-dividend stocks, but it relies on the expertise of its asset managers to generate ongoing profits. The stock currently pays a 2.82% yield, and it also offers capital appreciation potential. 

10. JPMorgan Chase

JPMorgan Chase (NYSE: JPM) is the largest bank in the United States in terms of assets, and the fifth-largest in the world. Ongoing revenue from loans, investments, credit cards and other sources of income help prop up the company’s generous dividend yield of 2.40%.

11. American Electric Power

Utilities are a common source of dividend income, and American Electric Power (Nasdaq: AEP) is one of the best. Analysts have a consensus “buy” rating on the stock, which isn’t always the case for utilities. Currently, AEP yields 3.99%.

12. Altria Group

Altria (NYSE: MO) has one of the highest dividend yields available on the New York Stock Exchange, at a staggering 8.91%. The maker of tobacco products has become much more of an income stock than a vehicle for capital appreciation in recent years, as its growth has slowed but its cash flow remains impressive.

13. Johnson & Johnson

Johnson & Johnson (NYSE: JNJ) is one of the many Dividend Aristocrats on this list, denoting a company that has raised its dividend for at least 25 years in a row. The maker of well-known household products like Aveeno, Neutrogena, Band-Aid and Tylenol sports a 3.31% dividend yield.

14. Coca-Cola

Coca-Cola (NYSE: KO) is one of the most recognized brand names in the world. In addition to its namesake soda, Coca-Cola owns more than 200 brands worldwide, from Powerade and Fanta to Simply and Costa Coffee. Yielding 3.13%, analysts have a consensus “strong buy” rating on the stock.

15. Duke Energy

Duke Energy (NYSE: DUK) is another conservative, reliable utility that has consistently paid dividends for 98 years. The Fortune 150 company boasts a current dividend yield of 4.13%.

How Do Dividends Work?

Here’s a simple example to illustrate how dividends work.

Say you bought 100 shares of a company for $10 each. In this hypothetical scenario, the company pays an annual dividend of $0.40 per share. That equates to a 4% dividend yield. You’ve invested $1,000 into the company and it pays you back $40 per year. You can keep the money, invest in another company or reinvest the dividends into the same company. Certain dividend reinvestment plans will automatically reinvest dividends for you.

How To Calculate Dividend Yield

Here’s a formula for calculating dividend yield:

Dividend Yield = Annual Dividends Paid Per Share / Price Per Share

Generally, you can find the dividend yield in a company’s annual report or in the stock quotes published online by companies like The Wall Street Journal and Bloomberg.

How Are Dividends Taxed?

According to the IRS, dividends are classified as either ordinary or qualified. Ordinary dividends are taxed just like ordinary income. Qualified dividends are subject to the capital gains tax rate but must meet specific requirements. Each dividend company you invest in should send you a Form 1099-DIV breaking down the dividend into those categories.

Other considerations apply if you receive large amounts of dividends. For example, you must report dividends over the amount of $1,500 on Schedule B (Form 1040), Interest and Ordinary Dividends. For significant dividend amounts, you may also be subject to the net investment income tax.

How To Choose the Best Dividend Stocks

The best advice is to choose financially strong companies with solid track records of increasing dividends over long periods. These sectors often offer high and consistent dividend payouts:

• Utilities
• Consumer staples
• Telecommunications
• Energy
• Real estate

Focus not only on the dividend yield but also on other factors. Some other features that indicate how well a company is performing include:

• Market capitalization: the total value of a company’s shares
• P/E ratio: a ratio of the company’s share price and profits
• Dividend trends: the trend of dividend yields over time
• Earnings reports: quarterly reports of profit and loss
• Earnings projections: earnings guidance for the future

What Is Too High a Dividend Yield?

Your goal is to invest in dividend stocks, so you’ll naturally gravitate to investments with high yields. If you’re wondering what yield is too high, though, there’s no easy answer except to be wary of one that’s unusually high compared to the company’s earnings.

Increasing dividends could mean the company is very financially healthy. When firms raise their dividends, they pay more out to investors. However, higher dividend yields are not always better. Increased yields over time could mean the stock price is going down. When evaluating dividend stocks, be sure to investigate the price history.

How To Invest in Dividend Stocks

Other than confining your stock picks to those that pay dividends, the process of investing in dividend stocks is the same as investing in other types of stocks.

Open a Brokerage Account

It makes sense to open a brokerage account even before you’ve decided what dividend stocks to invest in. The major brokerages give account holders access to a wealth of educational resources and research to help you explore your options.

1. Select a brokerage to invest with. GOBankingRates’ 10 Best Stock Brokers rankings can help you choose.
2. Decide whether to get a self-directed account that lets you select your own investments, a robo-advisor account that builds a portfolio for you or a traditional brokerage account with an advisor to select and execute your trades.
3. From the brokerage website, click the link or button to open an account, and follow the prompts to submit your information.
4. Fund your account per the application’s instructions, or hold off until you’re ready to invest.

What Are Dividend Funds and How To Decide on the Investment You Want?

Individual stocks are just one option for investing in dividend stocks. The others are mutual funds and exchange-traded funds that invest in dividend stocks. Each has its own pros and cons.

Individual Stocks

Owning an individual stock means you own a piece of the company that issued the share. Individual stocks give you the widest choice of investments, and they may have the greatest potential for appreciation. They’re also easy to trade — you can buy and sell whenever the markets are open. However, individual stocks are risky investments. While you can offset the risk by investing in a variety of stocks, it can be expensive to do so. To help manage this risk and enhance your portfolio, consider exploring the best stocks to add.

Mutual Fund

A mutual fund is a pool of money from many investors that is used to purchase investments. When you invest in a mutual fund, you own a share of the fund but don’t own shares of the companies in the fund.

The benefit of mutual funds is that the holdings are naturally diverse, so they can be less risky than individual stocks. In addition, the holdings are selected by professional fund managers. Dividend funds can be good for investors who want to own dividend stocks but don’t want to spend the time or effort to pick individual stocks. With a dividend stock mutual fund, you’ll receive a blended yield based on the combined payout of all of the stocks in the entire portfolio.

On the downside, funds have management fees that eat into your investment returns. In addition, mutual funds often have a minimum investment requirement, and you can only trade them once a day.

Exchange-Traded Funds

Exchange-traded funds combine features of individual stocks and mutual funds. ETF are pooled funds, like mutual funds, and you buy shares of the fund, not the shares of the companies in the fund. But ETFs trade like stocks.

Like mutual funds, ETFs have the benefit of diversity. And like stocks, they’re easy to trade, and there’s no minimum investment. But as with mutual funds, you’ll pay fees with an ETF, and you won’t have any control over the specific holdings.

Purchase Your Investments

Once you decide the specific stocks or funds you want to buy, head back to your brokerage site to place an order. The exact process differs slightly from one brokerage to another, but generally speaking, you can search specific investments by their ticker symbol and then click a link or a button to buy. From there, follow the instructions to execute the order.

Takeaways

Here are some key takeaways to consider if you’re going to add dividend stocks to your portfolio:

• Always do your research on any company you might invest in.
• Don’t chase dividend yields alone — consider other critical factors.
• Focus on strong, healthy companies with solid track records.

Buying dividend stocks is an excellent strategy for long-term investors who want to grow their portfolios. Electing to reinvest dividends can produce even more gains over time.

Daria Uhlig and Scott Jeffries contributed to the reporting for this article.

Data was compiled on May 10, 2024, and is subject to change.

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