There are many different ways to create a diversified stock portfolio, but a solid one generally has a mix of growth and value stocks, even if it leans in one direction or the other. There should be some dividend payers in there as well, and retirees might have a stock portfolio consisting entirely of income-generating stocks. But dividend stocks have value for any investor, and not only because they provide income no matter what's happening in the market. Dividend stocks are usually reliable, established companies that you can count on to grow their sales and profits, and they anchor your holdings. 

For many investors, the ideal dividend stock offers a strong yield and also presents the opportunity for stock price appreciation. That's the best of both worlds. Williams-Sonoma (WSM 0.17%) and Starbucks (SBUX 0.47%) have both beaten the market over many years, even without their dividends. Adding in those payouts, they've beaten the market by even higher amounts. They're both still great candidates for future outperformance and dividend growth. 

Starbucks: The world's favorite coffee chain

There are more Starbucks stores than almost any other restaurant chain in the world, and the coffee king has found the balance between delivering customers' favorite beverages and also innovating and creating new drinks to love. It surpassed the 37,000 mark in the 2023 fiscal third quarter (ended Jul. 2), but its story is far from over, and management envisions the chain expanding to 55,000 stores by 2030.

Starbucks has had a rough few years since the pandemic started, but in some ways, the challenges have made it stronger. That's resilience, and it's a feature you want to see in a top stock.

After early pandemic sales declines, Starbucks has landed on its feet. But it's a new world out there, and management is adapting to meet demand. Much of that demand is coming from digital orders these days, so Starbucks is experimenting with pickup-only stores, adding more drive-thrus, and building relationships with its customers online. It upgraded its membership program to reflect a digital focus, and it now boasts more than 75 million global members who account for 57% of its sales.

CEO Laxman Narasimhan began his tenure in April, and so far, so good. Revenue increased 12% year over year in the third quarter. Comps were up 10%, and Starbucks opened 588 net new stores. Operating margin widened from 15.9% in the prior-year period to 17.3% this year.

Starbucks has raised its dividend every year since it started paying one in 2010. Management noted that it has paid 53 consecutive quarterly dividends with a compound annual growth rate of more than 20%.

At the current stock price, Starbucks' dividend yields 2.2% -- comfortably higher than the S&P 500's average yield of 1.54%. Starbucks stock has outperformed the S&P 500 over the past five years without its dividend, as well as in total returns. 

2. Williams-Sonoma: The underrated champion in premium home furnishings

Prior to the pandemic, Williams-Sonoma enjoyed slow but reliable sales growth with strong profitability. In contrast to Starbucks' pandemic performance, the home furnishing giant's sales skyrocketed early in the pandemic, since its target market of affluent consumers were stuck at home and spending more than usual on home improvement. But things have changed since then, and like most consumer retail outfits, Williams-Sonoma is feeling the pinch of inflation.

In its fiscal 2023 second quarter, which ended July 30, comparable brand revenue (which the company uses as its key top-line metric) declined 12% year over year. Its namesake brand was about flat, and the Pottery Barn brand was down 11%, but West Elm, its mass-market furniture company targeting a less affluent clientele, was down 21%. In general, the company's brand diversification offers protection. In this economic climate, brands that target customers who are watching their wallets are feeling the pinch more than many upscale brands.

Despite the gory sales decline, investors were impressed with the company's profitability. Earnings per share of $3.12 came in way ahead of analysts' average estimate of $2.71, and operating margin was a strong 14.6%, right in the middle of the company's 2023 guidance range of 14% to 15%. In other words, management is maximizing its operations considering the dismal operating environment.

The short term isn't looking too good, but management reiterated its long-term guidance for single-digit percentage sales growth and operating income above 15%.

Williams-Sonoma has been paying a dividend since 2006 and has raised it annually since 2010. At the current share price, the dividend yields 2.4%. 

Williams-Sonoma stock has gained about double the S&P 500 over the past five years without its dividend and also by total return. It's up 22% this year and trades at less than 10 times trailing 12-month earnings, a dirt cheap valuation for a market-beating stock.