Investing in dividend stocks can be a good source of income, but the best dividend-paying companies may also help you build your wealth over time. Dividend stocks are stocks that pay dividends to their shareholders regularly, usually in the form of cash payments.

However, not all dividend stocks are suitable investments, and many investors aren’t sure where to begin their search. With that in mind, here are a few dividend-paying equities to consider and some of the essential things to search for when researching top dividend stocks.

Five Dividend Aristocrats to buy

The Dividend Aristocrats Index is a fantastic resource for finding top dividend-paying companies. These stocks are firms that have paid and increased their base dividend in the S&P 500 (^GSPC) for at least 25 straight years.

Here are five excellent dividend stocks to look into purchasing right now:

Lowe’s (NYSE:LOW)

Lowe’s may not appear to be a particularly appealing stock. True, unless you enjoy dividend increases. The firm has paid its dividend yearly for 46 years straight and increased the payout by 471% in the last decade alone. Another significant number to Lowe’s: The average American home is 37 years old. There will be a lot of money spent by the next generation of DIYers at Lowe’s.

Walgreens Boots Alliance (NYSE:WBA)

Walgreens, one of the world’s largest retail pharmacy chains, is in the middle of a significant turnaround. Its strategies will lower expenses, boost digital sales, and perhaps most significantly, provide full-service healthcare clinics in hundreds of its retail outlets over the next few years. As a more integrated healthcare company, it should help Walgreens become even more profitable, allowing its already generous dividend to grow even faster. Walgreens stock has a dividend yield of above 3% and has delivered 45 years of yearly payout growth, which indicates that there’s a lot to like about the stock.

Realty Income (NYSE:O)

This stock might be ideal if you’re searching for a simple means to invest in high-quality real estate for income and growth. The firm owns a diverse portfolio of largely e-commerce-resistant properties that produce strong cash flows from tenants on long-term leases. In addition, Realty Income is one of the newest Dividend Aristocrats members, having joined the index in January 2020 after achieving 25 consecutive years of dividend hikes (along with 50 years of paying investors every month).

Johnson & Johnson (NYSE:JNJ)

Johnson & Johnson is a publicly-traded company that invests in and manages a wide range of well-known companies. J&J owns various outstanding brands, such as Band-Aid, Neutrogena, Tylenol, Zyrtec, Benadryl, and Johnson’s (among others), that provide products people need. In addition, Johnson & Johnson has large and steadily profitable operations in pharmaceuticals and medical devices services, which have helped the firm increase its dividend for 58 years. This diversification across health-related goods brands, pharmaceuticals, and medical devices is unrivaled; it has shown to be an extremely lucrative profit engine.

Target (NYSE:TGT)

Target has always shown that it doesn’t have to compete on price in the cutthroat discount retailing environment. For years, it has outperformed its competitors by a long shot and had some of the industry’s highest gross and operating margins. Its dedication to increasing online sales and broadening in-store choices has kept revenue — and profits – growing at a fast rate. With dividend growth of 49 years and counting, dividend investors may want to add Target to their list of purchases.

Highest dividend stocks

If you want to make money to use today or invest in growing your money, there’s a good chance you’re searching for a large dividend payout. Here are some ideas if you want to maximize the amount of dividends you receive.

To begin, concentrate on dividend yield rather than dividend size. The dividend yield is the portion of your share price that has been paid out in dividends each year. It is more significant than the dollar amount of dividends per share.

After that, don’t make a high-dividend-yielding stock your top priority. First, focus on a firm’s quality and the ability to keep and increase its payout. Only then can you tell if a high dividend yield is long-term viable.

What to look for in dividend stocks

As promised, here are the tools you’ll need to discover excellent dividend stocks on your own.

If you’re a beginner at investing in dividend stocks, it’s a good idea to learn what dividends are and why they might be great investments.
Once you’ve mastered the basics of dividend payment, a few fundamental ideas might assist you in selecting good dividend stocks.

  • Payout ratio: The payout ratio is a stock’s dividend payment divided by its earnings per share. This refers to the proportion of earnings paid out to shareholders by a given corporation. A moderately low payout ratio (perhaps 60% or less) suggests that the dividend will continue.
  • History of raises: It’s a very positive sign when a firm has increased its dividend yearly, more so when it can continue to do so during challenging economic situations like recessions and the COVID-19 pandemic.
  • Consistent revenue and earnings growth: When choosing the greatest dividend stocks to invest in for the long term, stability in the firms you evaluate is crucial. A company’s revenue (which may be up one year and down the next) or broad earnings swings might indicate an issue.
  • Enduring competitive advantages: This may be the most essential feature. There are numerous methods to develop a long-lasting competitive advantage, including utilizing patented technology, having steep barriers to entry, having high customer switching costs, and so on.
  • High yield: A higher yield is obviously preferable to a lower one if all of the other criteria are satisfied, but only if a stock meets the first four. A large dividend isn’t as valuable as it seems; it’s only as strong as the company that backs it up, so make sure both are sound before comparing dividends.

Investing in dividend stocks long-term

Even the most dependable dividend payers can see significant swings in value over short periods. This is because there are too many market influences that may move them up or down in days or weeks. Moreover, many of these influences have nothing to do with the company itself.

So, while the firms listed above are excellent long-term dividend picks, don’t worry about daily price fluctuations. Instead, concentrate on finding firms with stable operations, consistent income streams, and (ideally) a good dividend track record. The future will take care of itself.

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