The best dividend stocks should be a part of every income-oriented investor’s toolbox. Dividends can provide a steady income stream and a hedge against inflation. In the long run, the best dividend stocks tend to outperform the S&P 500.
Investors who focus purely on high dividend stocks can turn a relatively safe investment into a risky one. This guide presents 10 dividend stocks for solid long-term gains, representing a diverse mix of industries and including small-cap, mid-cap and large-cap stocks.
The best dividend stocks show consistent growth, both in yearly dividend raises, but also in increased revenue that allows the dividends to be well covered. These 10 best dividend stocks are varied by industry and size, but all show the potential for dividend growth and are well-priced for the time being. Let’s take a deeper look at the case for investing in the above dividend stocks. Read on to find the best dividend stocks this month. The company is the best dividend stock to buy right now because the company is valued below its potential and should soon see increased profit margins. The company operates in two segments: construction materials and waterproofing technologies. While the company saw revenue and EPS decline in the third quarter, year over year, Carlisle maintained solid profit margins. The company’s market capitalization is $12.4 billion, so it is at the lower end of being a large-cap stock. The company hopes to continue to grow those margins as it focuses on its core strengths of building materials. It recently announced it plans to sell off its Carlisle Interconnect Technologies business, which sells high-performance wire and cable, and other related products such as sensors, connectors, complex harnesses and racks, to various industries, including medical, defense, and aerospace companies. The company is also focusing on more green materials and in 2022, sold $3.5 billion in LEED qualified and manufactured products. In the short term, revenue fell 7%, year over year in the quarter, with housing starts way down. The company improved EPS, though, to $5.29, up 9.5% over the same period a year ago. In the long run, the company decided a pivot toward a pure-play building materials company would provide higher returns. The dividend appears solid, with a cash dividend payout ratio of only 14.84%, there is plenty of room for continued dividend increases.
AbbVie, in the third quarter, saw revenue decline by 6%, year over year to $13.9 billion, with blockbuster immunology drug Humira seeing sales decline by 36.2% to $3.5 billion. However, the rest of the company’s portfolio did well, particularly the two main immunology drugs that the company sees taking up Humira’s slack, Skyrizi and Rinvoq. AbbVie’s dividend yield is a little more than 4%, and counting its time as Abbott Labs (NYSE: ABT) before its spinoff as a separate company in 2013, AbbVie has increased its dividend for 51 consecutive years. Since its spinoff, it has boosted its dividend by more than 285% and its current yield is around 4.3%. AbbVie has already announced it will raise its dividend next year by 4.7% to $1.48 per share. Even with the increased dividend, the payout ratio will be right around 50%, meaning there’s still room for continued dividend raises. Humira’s sales will decline as more biosimilars launch, but it will likely remain a blockbuster drug for a few years and the company has nine other therapies which are on track to have at least $1 billion in sales this year. Looking past that, the company has 90 programs in its pipeline, including 50 in mid- or late-stage development, so all that Humira money has been put to good use in securing the company’s future.
SunCoke’s main source of revenue is its production of coke, a coal-based fuel with high carbon content and relatively few impurities. Most coke is used in iron ore smelting to make steel but it is also used as a fuel in stoves and forges when air pollution is a concern. The company owns coke-making facilities in the U.S. and Brazil and is the largest independent coke supplier in North America, with a total U.S. cokemaking capacity of 4.2 million tons. The company’s revenue grew to $520.4 million in the quarter, up $3.6 million over the same period last year. However, EPS fell sharply in the third quarter to $0.08, due, the company said, to tax-law changes in the U.S. and Brazil. The company did manage to pay down its net debt to $380 million. The company’s business is directly tied to steel production in the U.S. and that is expected to be flat in the short-term, thanks to high interest rates that are slowing the construction sector, particularly in residential construction. However, increased infrastructure spending is expected to continue, ameliorating the effect of high interest rates on steel production, particularly in the long term. In the short term, the stock is trading at slightly under nine times earnings, providing a solid buying opportunity. The company just raised its quarterly dividend by 25% to $0.10, giving it a yield of around 4%. Its cash dividend payout ratio is only 18.17%, there’s plenty of opportunity for continued increases.
The company operates in five segments, Utilities, Transport, Midstream, Data and Corporate and all but Midstream saw growth in the company’s third quarter, led by a 17% rise by Utilities in funds from operations (FFO). Brookfield reported overall FFO of $560 million in the quarter, up 7%, year over year. Net income fell by 7.9% to $104 million, due to acquisitions the company hopes will drive growth, led by its $13.3 billion purchase of Triton international, the world’s largest owner and lessor of intermodal containers. The company raised its dividend by 6% last year to $0.3825, giving it a FFO payout ratio of 52.3%. Thanks to the company’s new acquisitions, FFO is expected to increase in the near future, providing ample opportunity for more dividend increases. The company has shown a total return of around 42% over the past decade. The company’s dividend, thanks to its share drop this year, has risen to 5.4%.
Realty Income’s shares took a slight hit recently when the company announced it was acquiring Spirit Realty via merger in an all-stock deal worth roughly $9.3 million. The market saw the move as increasing the company’s debt, but the transaction makes perfect sense as it further diversifies the REIT’s already diversified portfolio. Realty said the move should be 2.5% accretive to its annual adjusted FFO per share. The debt that Realty is taking on from Spirit is older debt that is at low interest rates, and in return, the company gains 2,064 retail, industrial and other properties across 49 states, which were leased to 345 tenants operating in 37 industries. The company, because of its consistent dividend increases and its unusual method of monthly dividend payments, has garnered a loyal following among investors who like the idea of having dependable dividend payments each month. The company’s size gives it an advantage because if one industry is lagging, the company leases properties to other industries that are likely thriving. Even before the Spirit deal, its 1,303 clients were spread across 85 industries. High interest rates have hit REITs hard for several reasons. One, they make it harder to borrow to buy more properties. Two, they could make life difficult for the company’s tenants and they, in turn, might need rent referrals or may even default on their rent payments. Three, high interest rates make a REIT’s high yield seem less attractive compared to treasury bonds or other high-yielding investments. However, given the company’s strong track record, dependable clients and 98.8% occupancy rate, the current dip in Realty’s shares make it a bargain. Realty’s dividend currently yields around 6.4%, making it the best-paying dividend stock on this list. The large-cap company owns 13,100 real estate properties, which it leases on a long-term basis to commercial clients. The stock has delivered a total return of more than 89% over the past decade. The company’s dividends are well covered, particularly for a REIT, with an adjusted FFO payout ratio of 75.1% as of the third quarter. In the quarter, the company reported revenue of $1.04 billion, up 24%, year over year and AFFO per share of $1.02, compared to AFFO per share of $0.98 in the same period last year.
Lowe’s operates more than 1,700 home improvement stores in the U.S. The slowing of housing starts due to increased interest rates have cut into the company’s revenue, but not its margins. The company said it expects its yearly revenue to drop between 2% to 4% this year, with sales expected to land between $87 billion and $89 billion. However, through six months, it reported EPS of $8.34, up 2%, year over year. The company raised its dividend by 5% this year to $1.10 per quarterly share, equaling a yield of around 2.24%. The dividend is well covered, with a payout ratio of 24.1%, so there’s no reason not to expect continued increased dividends. The company, despite short-term macroeconomics that have kept its share price down, stands to gain in the long-term once interest rates stabilize or lessen. Lowe’s has also made inroads into the Pro contractor business that competitor Home Depot has dominated. In the first half of the year, Lowe’s Pro business has grown faster than Home Depots. With that additional business, the company’s operating margin has improved to 15.6%, compared to 14.4% in the first quarter. The company has also beefed up its presence in rural areas and with less competition in those areas, it is seeing greater operating margins as well. Over the past decade, the stock has delivered a total return of around 359%, nearly double that of the S&P 500 average over that period.
Microsoft is poised for continued growth and there doesn’t seem to be many roadblocks in the tech giant’s way. The company’s adoption of AI, through its purchase of ChatGPT creator OpenAI, is a long-term investment that is already paying off. The company has been adding AI features to its Bing browser and suite of Office products. In the second quarter, the company reported revenue of $56.5 billion, up 13%, year over year. In the first quarter of fiscal 2024, sales of $56.5 billion for the period ended Sept. 30 were up 13% year over year, net income rose 27% over the same period last year, to $22.3 billion and EPS was reported as $2.99, also up 27%, year over year. Often overlooked is how the company’s newly introduced Security Copilot, which uses generative AI to improve cybersecurity, is a product coming along at a crucial time to help fight phishing attacks, stopping them before they do much damage. The company’s $68.7 billion purchase of Blizzard Activision, with its landmark Candy Crush and Call of Duty games, which just cleared regulatory hurdles, really drives the company past its Xbox platform and enables it to jump the line to be the top of the gaming industry. With all that growth, the company’s dividends should keep increasing, especially since the current payout ratio is only around 32%.
Coca-Cola is an income stock that somehow manages to be a growth stock at the same time. In the third quarter, the company saw improvement all around. Revenue was up 8%, year over year to $12 billion, EPS was reported as $0.71, up 9% over the same period last year and cash flow rose $8.9 billion to $861 billion. The company also raised top-line and bottom-line guidance for the year. The company’s continued growth comes even after it has slowed its rate of price hikes with sales volume rising 2% in the quarter. The large cap has increased its dividend for 61 consecutive years, making it a Dividend King (stocks that have raised their dividends for 50 or more consecutive years). The company has been able to continue to increase its dividend because it continues to grow revenue and earnings per share (EPS) and it has a current yield of around 3.2%. In some ways, the company may be benefiting from inflation. Customers who used to eat out more for dinner at a higher-end restaurant are eating more fast-food meals, and that likely means more Coke beverage sales.
Seagate is going through a rough patch. In the first quarter of fiscal 2024, the company reported revenue of $1.454 billion, down 28.5% and an EPS loss of $0.88, compared to positive EPS of $0.14 in the same quarter a year ago. The company does seem to be trimming its losses over the past three quarters, so it is not unlikely that it will return to profitability early next year. The company’s shares are up despite struggling economic conditions for the data storage company, though. That’s because despite an economic downturn in China that has affected orders, the company sees a strong future in hard drives because of the increasing need in the U.S. for cloud computing. The company has raised its dividend by 842% over the past decade and its current yield is just under 4%.
Banner released third-quarter numbers on Oct. 18 and while its numbers were down year over year, they showed improvement sequentially. The banking company reported net income of $45.9 million, or $1.33 in EPS, up 16% in both cases, sequentially but down 7%, year over year. Revenue in the quarter was listed as $154.4 million, up 2% sequentially but down 5%, compared to the same quarter a year ago. Revenues for Q3 2023 increased 2% to $154.4 million, compared to $150.9 million in the preceding quarter, and decreased 5% compared to $162.0 million in the third quarter a year ago. The company has increased its dividend by 220% over the past decade and in January, raised it 9.1% to $0.48, where it is now. The company’s dividend is well protected with a payout ratio of around 33.9%.
Dividend stocks distribute a portion of the company’s earnings to shareholders, as determined by the company’s board of directors. Dividends are usually distributed quarterly, but can be done monthly, every six months or yearly. They are either paid out in cash or are reinvested in additional stock. The dividend yield is the dividend per share and is expressed as dividend/price as a percentage of a company’s share price, such as 2.5%. Common shareholders of dividend-paying companies are eligible to receive a distribution as long as they own the stock prior to the ex-dividend date. A key factor at looking at dividend stocks is their payout ratio, sometimes called the dividend payout ratio. The payout ratio shows how much a company pays shareholders in dividends as a percentage of its total earnings. In other words, if a company is paying too high a payout ratio, the dividend is likely to be unsustainable. Dividend stocks can provide stability to an investor’s portfolio. Through quarterly distributions, investors can count on regular payments to use for bills, to reinvest in those same dividend stocks or to invest in something else. There are no guarantees in the stock market, but dividends, and dividend stocks tend to be more consistent than stocks that do not pay out dividends. Buying a stock with an above-average dividend yield also allows investors to think more in long-term concerns, because even if the stock falters, unless it’s a huge loss due to a financial crisis, the dividend will still be paid. Dividend ETFs are a great way for new investors to increase their income with less risk. They also provide a monthly cash flow for investors that is already diversified. Take the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG), the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) or the Vanguard High Dividend Yield ETF (NYSE: VYM). All three have low expense ratios at 8% or below and double-digit returns over the past five years. ETFs can take the guesswork out of when to get into a dividend stock and when to exit, if the company’s financials may point to a potential dividend cut. We’ve established that finding the best dividend stocks to invest in is a laborious task. The process requires significant research and analysis, considering the number of companies that operate in this market. To streamline the process, consider using AltIndex – which is one of the best alternative data providers. Read on to find out how AltIndex can help you become a successful dividend investor in 2023. Choosing the right dividend stock can seem complex. It’s not just about picking a stock with a high dividend yield. That can be a recipe for disaster because stocks with ultra-high yields often have too high a payout ratio and a dividend cut is likely, along with a subsequent tumble in the stock price. These stocks are known as dividend traps and there are plenty of examples in recent years where a company with a high-yielding dividend had to cut its dividend and the stock plunged, such as General Electric, AT&T, Royal DutchShell and more recently, Medical Properties Trust. The best way to avoid a dividend trap is to compare the stock to others in its sector, to see if the dividend seems too good to be true. Companies with rising payout ratios can turn into dividend traps. A good rule of thumb is a payout ratio should be between 30% and 60%. Stocks with higher payout ratios may be struggling to generate enough profits to cover its dividend payments. Sometimes, though, a very low payout ratio may mean the same thing, that the company needs all of its profits to keep afloat. There are exceptions to the high payout rule. Real Estate Investment Trusts (REITs), for tax purposes, are expected to return at least 90% of their taxable income to shareholders, so they tend to have higher payout ratios. One method investors use is looking for stocks with a consistent record of dividend increases. Those that have raised their dividends for at least 25 consecutive years are known as dividend aristocrats and those that have raised their dividends for 50 or more consecutive years are dividend kings. If you’re not invested in a diversified dividend ETF, it’s important to choose your dividend investments in a way that’s balanced by industry and by size. That reduces the risk, for example, if an economic trend, government decision or new regulation hits one industry particularly hard. Smaller companies tend to grow their dividends at a faster rate, but because they have less cash flow, they can often have more risk. Larger companies are more likely to be able to sustain regular dividend increases, but their dividend yields tend to be lower. AltIndex is a subscription service that uses artificial intelligence (AI) and can be used to help you identify dividend stocks that have the potential to outperform the market. The service comes with several features that can be used to find good dividend stocks, including: To get the most advanced features from AltIndex, investors will want to use the pro plan, which costs $99 a month. Focusing on dividend stocks can be a great way to upgrade your portfolio. The key to investing in dividend stocks is finding companies with healthy balance sheets that have a likelihood of increasing or at least continuing their dividends. It’s also important to make sure the dividends are safe in terms of a company’s payout ratio. One way to address the safety of a particular stock is to take a deep dive on the company’s earnings. AltIndex can help with that as it has a new feature that helps break down a company’s earnings, tracking over time, a company’s revenue, net income, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), as well as cash flow, Any dividend stock you are considering can be researched on the site and compared to competitors using AltIndex’s AI-fueled research. 10 Best Dividend Stocks to Invest in 2023
A Closer Look at the Top Dividend Stocks to Buy
1. Carlisle Companies – Best Dividend Stock to Buy Right Now
2. AbbVie – Best Dividend Stock for Long-Term Growth
In the quarter, Skyrizi’s sales increased by 52.1%, year over year to $2.126 billion while Rinvoq saw revenue of $1.110 billion, up 59.8% over the same period last year. AbbVie, in 2022, said it sees the duo being responsible for $15 billion in annual revenue and looking at the pair’s scale of growth that doesn’t seem unreasonable.3. SunCoke Energy – Best Dividend Stock for Contrarian Investing
SunCoke’s guidance puts yearly net income to be between $49 million and $68 million, down from earlier estimates of between $59 million and $76 million. 4. Brookfield Infrastructure – Trending Dividend Stock for Tech Growth
The company is also expanding on its data center properties. This past summer, it bought Data4 and Compass and it has a deal in the works to spend $775 million to purchase data colocation company Cyxtera, following that company’s bankruptcy. The plan is to combine Cyxtera with Brookfield’s other U.S. colocation company, Evoque.5. Realty Income Corp. – Popular Dividend Stock for Monthly Returns
The new company says it will be the fourth largest REIT in the S&P 500 Index in regard to its $63 billion enterprise value. In the long run, that means the stock will be included in more index funds, potentially driving up the stock’s price and providing more liquidity for Realty Income to expand with more properties.6. Lowe’s – Popular Dividend Stock for Safe Returns
Even if the housing market doesn’t rebound any time soon, that means we would have more housing properties that are aging and in need of repair and that would mean more home improvement sales. Home improvement projects tend to be postponed, but not canceled, so that bodes well for future earnings growth.
The company’s Intelligent Cloud platform reported quarterly sales of $24.3 billion, up 19%, year over year, while its Productivity and Business Processes grew 13% over the same period last year to $18.6 billion. The only segment without big growth was Personal Computing, which rose 3%, year over year to $13.7 billion. 8. Coca-Cola – Established Dividend Stock Counteracting Inflation
The company continues to see a bit of a pandemic-related rebound. Much of Coca-Cola’s business is in places outside the home, such as movie theaters or restaurants. The company’s strong brand presence gives it a moat that few other companies can match. The only concern I have with the dividend is the payout ratio is slightly above 64%, a little high, but considering the company’s expected revenue growth this year and strong track record, that’s a small concern. It is consistently listed among the top dividend stocks.9. Seagate Technology – Best Dividend Stock for a Tech Rebound
In the meantime, the company is tightening its belt and improving its balance sheet, including restructuring some of its debt. Every big technological trend has helped the company’s business and it isn’t folly to expect that AI and cloud computing connected to AI will increase the need for additional storage.
The stock is down more this year, but, with it trading at less than eight times earnings, it is a potential bargain for dividend seekers. The company’s dividend of $0.48 equals a current yield of around 4.5%.What are Dividend Stocks?
Why Invest in Dividend Stocks?
Are There Dividend ETFs?
Where to Get Dividend Stock Tips
How to Pick the Best Dividend Stocks to Invest in
How to Avoid a Dividend Trap
Look for a consistency of dividend increases
Diversification is important
AltIndex Review – Dividend Stock Picks and Insights
Conclusion
References
FAQs
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