When it comes to investing in dividends, there is no shortage of choices. In fact, a quick check shows that there are over 3,000 dividend-paying stocks on the major U.S. exchanges. Among all of those stocks, there are some companies that pay very high dividends and some that only pay out a small amount. Some pay quarterly, and some pay monthly. And finally, some companies focus on income while other companies' main focus is growth over time. With that in mind, here are three great dividend stocks in very different categories.
Income or growth?
In your portfolio, should you target income or growth? The short answer to that question is "both". The main goal of dividend investing should not be to simply create a good income stream, but to have that income grow over time.
Some companies are focused mainly on creating income, such as business development companies (BDCs) and mortgage REITs. Since these companies pay out most of their earnings, it makes sense that their dividends are higher than most. BDCs like Prospect Capital and mREITs like PennyMac Mortgage Investment Trust can create an excellent stream of income, which can be reinvested for growth, if desired.
Other companies like Diebold focus more on growing their business while providing a modest income stream to shareholders. The goal behind this is to grow the business over time, and the dividend will grow with it.