When it comes to dividend stocks, I like to consider multiple criteria, not just dividend yield, dividend growth record, or other factors. Focus too much on dividend yield, and you could become overexposed to potential yield traps.
Focus too much on dividend growth track record, and you may end up buying too many of the lower-yield dividend growth stars of yesteryear, forsaking any up-and-coming names offering higher forward yields that could be Dividend Kings in the making.
With this in mind, weighing yield against dividend growth history, as well as by dividend payout ratios, I have come across three stocks that, at today's prices, seem like ideal choices for a dividend stock portfolio: Dillard's (DDS +1.27%), Nexstar Broadcast Group (NXST 2.34%), and Target (TGT +1.47%).
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Dividends and buybacks have made Dillard's a long-term winner
Between December 2020 and December 2025, shares in department store retailer Dillard's rallied more than 1,200%. With that level of outperformance, the stock not only handily beat the S&P 500 index, but Nvidia and Bitcoin as well.
NYSE: DDS
Key Data Points
Yes, a significant portion of Dillard's substantial gains stemmed from the company's post-COVID recovery. However, what has sustained the continued rally has been its aggressive share repurchase and dividend growth policies.
Dillard's has a 15-year track record of dividend growth, with payouts increasing by an average of 12.9% annually over the last five years. Although it's questionable whether this stock will rally another 11-fold between now and 2030, a 4.8% forward yield, coupled with further return of capital efforts, suggests further solid gains ahead.
A pending merger could help sustain Nexstar's dividend growth streak
Nexstar Media Group is America's largest owner of broadcast television stations. Nexstar has successfully continued to maximize the profitability of these legacy media assets, largely through aggressive cost-cutting.
NASDAQ: NXST
Key Data Points
As a result, Nexstar has increased its dividend aggressively in recent years. Currently, the stock has a forward dividend yield of 3.5%, but a payout ratio of just 45%. Plenty of cash flow remains for debt repayment, share repurchases, as well as new acquisitions.
Speaking of mergers and acquisitions, a pending deal to acquire Tegna, if approved by regulators, could lead to further earnings growth, thanks to potential cost synergies. Nexstar could, in turn, use this further earnings growth to sustain its dividend growth streak, which now spans 12 years.
As a new catalyst emerges, Target remains a solid dividend and turnaround stock
Previously, I've lauded Target's bona fides as a high-yield dividend stock and as a turnaround play. Since late last year, shares in the department store retailer have rallied, but don't assume you have missed the boat here. Primarily, this is because, in addition to existing catalysts, a new catalyst has emerged.
NYSE: TGT
Key Data Points
Target has become a "target" of activist hedge fund Toms Capital. Only time will tell if this activist fund pushes for major changes at the company, but the additional pressure could help increase the chances that management succeeds with existing turnaround efforts.
In turn, this could be a major positive for both share price and dividend growth. Currently, Target has a forward yield of 4.1%, with a payout ratio of just under 60%. Target is a Dividend King, with 57 years of consecutive annual dividend growth under its belt.
