Please ensure Javascript is enabled for purposes of website accessibility

3 Investors Pick Their Favorite Dividend Stocks

By Rachel Warren, Jon Quast, and Toby Bordelon – Dec 8, 2021 at 7:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These companies have solid track records of paying out and raising their dividends.

Regardless of what's happening with the market, dividend stocks can be a great way to boost your overall portfolio returns and generate extra investing capital. In this segment of Backstage Pass, recorded on Nov. 12, Fool contributors Toby Bordelon, Rachel Warren, and Jon Quast respond to a member's question and discuss their all-time favorite dividend stocks. 

10 stocks we like better than Verizon Communications
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Verizon Communications wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of November 10, 2021


Toby Bordelon: Richard O asks, this is an interesting question, I think we have a couple of minutes we can give this a little bit of attention. Richard, asks or he says, he considers Verizon (VZ 0.83%) a modern utility and he'd rather owns Verizon in a short-term corporate fund for the next 20 years, dividend 4.9%. Good thought.

Do we have any thoughts on our best stable of modern utilities, or how do we think about that? There's a couple ways you can go with this. First, what does it mean to be a modern utility. I think there's a couple of ways you can go with that, but I'll also maybe take the approach of is there a company or two that you consider a nice stable company?

Probably not going to lose you much money, maybe pays a good dividend, maybe a little better than a bond fund right now if interest rates stay as low as they are, does anything come to mind. I know you haven't had time to think about this, but I wonder if any of you have anything that jumps to the top of your head that is stable and important to people necessary? Maybe get a little bit of income bucket.

Rachel Warren: A dividend-paying stock in general that we like?

Bordelon: Yeah.

Warren: Yeah.

Bordelon: One that's stable, one that might have that idea, or some modern utility. However you want to interpret that, I don't know.

Warren: Well, it's completely different from, I like Verizon for its dividend. I know it's had a bumpy balance sheet over the last several years, but it's track record of maintaining and paying out its dividend has been great, definitely has an above-average dividend yield.

I think the average stock trading on the S&P 500 yields about 1.3%. It's significantly higher than that, and I believe this year will mark its 15th year in a row of increasing its dividend. It's just shy of being, I believe, a Dividend Aristocrat.

This is a company I talk about a lot, we just talked about earlier. It's not so much in the utility space, but Johnson & Johnson is a really great dividend stock.

The company paid a dividend and consistently raised its dividend every year for nearly 60 years. That is covering a whole lot of market events, a lot of ups and downs in the market and world events that have impacted the market and over time it still consistently increased its payout. I think that is a nice dividend stock to consider. Just off the top of my head that's one of my favorite dividend stocks actually.

Bordelon: Nice, thank you. Do you have any favorites, Jon, that come to mind?

Jon Quast: You're making it hard today, Toby. [laughs].

Bordelon: I am. I'm throwing you guys for loops here. 

Quast: Two that come to mind readily are Lam Research and Applied Materials. If you are betting on the semiconductor boom, going back to electric vehicles. If you're not sure that you want to invest in electric vehicle company, but you see the growth in the space, semiconductors are a good way to do that because they require a whole lot more chips than a regular car does.

But this is basically a duopoly here in the manufacturing side of the semiconductor industry. When you look at the growth, the semiconductor industry still has over the next 5-10 years, that gets pretty robust.

You look at what the stocks trade at right now, I think at Lam Research, obviously a little bit better here of a valuation, price-to-earnings ratio of 21. But then you look at the dividend yield, it's not fantastic. Both under 1%, but it's still something.

But then the dividend growth and Lam Research, this is over the past five years, look at how they've bumped up that dividend over time as their profits and earnings are growing.

I think that both Lam Research and Applied Materials could be good investments today if you're looking for something that's not going to lose your money and going to get you a little bit of income on the side.

Bordelon: Thanks for that. Nice options, all those. I might throw out Microsoft, it's a company that the dividend yield is not super great, but I also kind of fit that into the category of a modern day utility because they underpin a lot of what's going on in business. Companies you also might think about.

Shopify comes to mind. I don't actually don't even know if they pay a dividend. But if you think about modern utility, they almost strike me as utility-like given the important they are to the infrastructure of e-commerce. It's how I think of them? That's something to consider too. A lot of possibilities there. 

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Jon Quast owns shares of Lam Research and Shopify. Rachel Warren owns shares of Johnson & Johnson and Shopify. Toby Bordelon owns shares of Microsoft and Shopify. The Motley Fool owns shares of and recommends Lam Research, Microsoft, and Shopify. The Motley Fool recommends Applied Materials, Johnson & Johnson, and Verizon Communications and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.