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Dividend stocks can provide investors with predictable income as well as long-term growth potential. However, not all dividend stocks are great investments, and many investors aren't sure how to start their search.
With that in mind, here's a list of dividend-paying stocks you might want to consider. Below our list of stocks, we give you the knowledge you need to pick great dividend stocks yourself. Get a rundown of the most important things to look for when you're evaluating dividend companies.
The Dividend Aristocrats Index, which is maintained by S&P Indices, is a great place to start. This is a collection of several companies that have increased their dividends for at least 25 consecutive years. That means that every company in the index successfully gave investors raises not just during the good times in the market, but also during the dot-com crash of the early 2000s and throughout the financial crisis of 2008-2009. They may be a safer investment than the average dividend-paying stock.
Here are five great companies from that index to start your search, listed in no particular order, followed by details about each company:
Consumer products manufacturer Procter & Gamble (NYSE:PG) has increased its dividend for an astonishing 63 consecutive years. It owns an impressive portfolio of consumer product brands, including Pampers, Downy, Tide, Charmin, Gillette, Head & Shoulders, and Crest, just to name a few. Not only do these brands give Procter & Gamble pricing power over rivals, but most of their products are items people need no matter what the economy is doing.
Telecom giant AT&T (NYSE:T) has increased its dividend every year for almost four decades, and receives utility-like steady income from its core wireless phone and high-speed internet customers. And the company's aggressive moves into entertainment could provide long-tailed growth potential.
This is a real estate investment trust, or REIT, that primarily invests in single-tenant retail properties. Most of the tenants operate recession-resistant businesses like drugstores, dollar stores, and convenience stores, and they all sign long-term leases with gradual rent increases built in. Realty Income (NYSE:O) is one of the newest members of the Dividend Aristocrats, joining the index in January 2020 after reaching 25 consecutive years of dividend increases.
Similarly to Procter & Gamble, Johnson & Johnson (NYSE:JNJ) owns a portfolio of excellent brands that make products people need -- specifically healthcare items. In addition to its Band-Aid, Neutrogena, Tylenol, Zyrtec, Benadryl, and Johnson's brands (among others), Johnson & Johnson has massive and steadily profitable operations in pharmaceuticals and medical devices.
You may be noticing a common theme here -- Target (NYSE:TGT) sells products people need. It has done an excellent job of growing its online and omnichannel sales (such as curbside pickup), and while sales in some of its departments -- such as electronics -- may suffer in recessions, it is generally a well-insulated business in tough times.
Dividend Aristocrats are often excellent companies, but you can find great income investments elsewhere, too.
The Dividend Aristocrats aren't the only place to look. Many excellent companies simply haven't been paying dividends (or haven't been publicly traded) for long enough to be included in the index, although they can still make excellent long-term dividend investments.
Here is a list of dividend-paying stocks with characteristics such as excellent brands, loyal customer bases, and favorable demographic trends that are also worth putting on your radar. Below, see details about each company.
Like AT&T, Verizon (NYSE:VZ) enjoys utility-like income from its wireless communications and high-speed internet customers. Unlike AT&T, Verizon is more focused on its core business and should be one of the biggest beneficiaries of the upcoming transition to 5G mobile technology.
As one of the largest companies in the world, Microsoft (NASDAQ:MSFT) has steadily increased its sales, and an especially attractive feature for dividend investors is its focus on recurring, or subscription-based, revenue sources. The company has a solid balance sheet with more cash than debt and a very low payout ratio that leaves tons of room to grow the dividend. Given its 18-year streak of dividend increases, we wouldn't be surprised if Microsoft joins the Dividend Aristocrats club in another seven years.
Tech giant Apple (NASDAQ:AAPL) has been paying dividends for only a few years now, which is understandable given the rapid growth it experienced in the early years of the iPhone and iPad. Even so, Apple has an incredibly loyal customer base, and since its devices are designed to work well with each other, the company has a nice tech ecosystem that should keep its revenue strong. And Apple's rapidly growing subscription services business is providing a growing source of recurring revenue.
A real estate investment trust (REIT) focused on healthcare properties (particularly senior housing), Welltower (NYSE:WELL) should benefit from a long-tailed demographic trend as the older age groups of the American population gradually get much larger over the next few decades.
As we promised earlier in this article, we are going to give you the tools you need to find great dividend stocks yourself.
If you're new to dividend investing, it's a smart idea to familiarize yourself with what a dividend stock is and why they can make excellent investments.
Once you have a firm grasp on how dividends work, there are a few key concepts that can help you find excellent dividend stocks for your portfolio.
Of course, even the most rock-solid dividend stocks can experience significant volatility over short periods. There are simply too many market forces that can move them up or down in periods of days or weeks, many of which have nothing to do with the underlying business itself.
So while the companies listed above should make great long-term dividend investments, don't worry too much about day-to-day price movements. Instead focus on finding companies with excellent businesses, stable income streams, and (preferably) strong dividend track records, and the long term will take care of itself.
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