If you have started to research how to invest in stocks, you will have probably come across the term “dividend stocks.” Dividend stocks are a subcategory of stocks that provide additional investment income on top of a stock’s increase in value.
Learn what dividend stocks are, how to invest in them, and discover a list of the best dividend stocks that you could add to your portfolio in 2020.
What are Dividend Stocks?
Dividend stocks are shares in publicly-traded companies that pay out a regular dividend.
A dividend is a distribution of a part of a company’s earnings to its shareholders. Dividends are used to reward shareholders for investing in the business.
Dividends are typically expressed in dollars per share, but when analyzing dividend stocks, most people will look at the dividend yield to compare investment opportunities. The dividend yield is the dividend per share divided by the price of the stock and shown as a percentage.
Dividends can be paid monthly, quarterly, semi-annually, or annually.
An Example
The technology company Apple currently has a dividend yield of 0.84% and is expected to pay $3.28 per share as a dividend. Conversely, IBM has a dividend yield of 5.41% and with an expected dividend payment of $6.52 per share.
Between the two dividend stocks, IBM is the better choice if you are looking for a higher regular investment income in the form of dividends. However, IBM’s high dividend yield does not necessarily mean that IBM is a better company or that it will outperform Apple. It simply means IBM has decided to pay out a higher percentage of their earnings to their shareholders than Apple.
Dividend stocks are a popular choice for investors as they are a combination of common stock and a fixed income investment as the holder receives “interest” in the form of dividends and can benefit from price appreciation over time.
Most investors reinvest the dividend payments they receive – often automatically using investment apps – to bolster their portfolio’s returns. By reinvesting all dividend payments, you can potentially boost your portfolio’s performance as you will be increasing the size of your investment periodically.
How to Invest in Dividend Stocks
Investing in dividend stocks works in the same way as buying any other type of stock.
The steps are as follows:
- Register for an online brokerage account or online investment service.
- Fund your account via wire transfer.
- Choose the dividend stocks you want to invest in.
- Decide how much you want to invest in each.
- Place buy orders for each of the stocks and wait for them to be filled, which typically takes a few seconds.
And there you go! You are now a dividend stock investor.
Top 10 Best Dividend Stocks
If investment income is what you are after, dividend stocks pose an ideal investment opportunity as they provide investment income – in the form of dividends – as well as potential capital appreciation when the price of the stock rallies.
Below, you will find a list of ten of the best dividend stocks – ranked by market capitalization – that you can buy on a US stock exchange today.
| Company Name | Dividend | Dividend Yield |
|---|---|---|
| AT&T Inc. (T) | $2.08 | 6.84% |
| Verizon Communications Inc. (VZ) | $2.46 | 4.41% |
| Pfizer Inc. (PFE) | $1.52 | 4.27% |
| JPMorgan Chase & Co. (JPM) | $3.60 | 3.60% |
| The Coca-Cola Company (KO) | $1.64 | 3.55% |
| Cisco Systems, Inc. (CSCO) | $1.44 | 3.10% |
| Merck & Co., Inc. (MRK) | $2.44 | 3.07% |
| Bank of America Corporation (BAC) | $0.72 | 3.01% |
| Johnson & Johnson (JNJ) | $4.04 | 2.72% |
| The Procter & Gamble Company (PG) | $3.16 | 2.54% |
AT&T Inc. (T)
AT&T is one of the country’s leading technology and communications enterprises and one of the largest publicly-traded companies in the world. The blue chip stock pays 6.84% in dividend yield.
- Price: $30.25
- Market Cap: $215.531bn
- Earning Per Share: 1.97
- P/E Ratio: 15.36
- Dividend Yield: 6.84%
Verizon Communications Inc. (VZ)
Verizon is a US leading telecommunications company that offers TV, internet, telephone, and mobile services. The communications giant’s stock pays a dividend yield of 4.41%
- Price: $56.30
- Market Cap: $232.969bn
- Earning Per Share: $4.43
- P/E Ratio: 12.71
- Dividend Yield: 4.41%
Pfizer Inc. (PFE)
New York-based Pfizer is one of the largest pharmaceutical companies in the world. The company’s stock pays a dividend yield of 4.27%.
- Price: $36.25
- Market Cap: $201.363bn
- Earning Per Share: $2.80
- P/E Ratio: 12.95
- Dividend Yield: 4.27%
JPMorgan Chase & Co. (JPM)
New York-based JPMorgan Chase is a leading financial services company that offers a wide range of financial products and services to customers in the US and abroad. The banking giant currently pays a dividend yield of 3.60%.
- Price: $98.16
- Market Cap: $299.152bn
- Earning Per Share: $7.47
- P/E Ratio: 13.14
- Dividend Yield: 3.60%
The Coca-Cola Company (KO)
The Coca-Cola Company is a global leader in producing and distributing non-alcoholic beverages. The Atlanta-based conglomerate’s stock comes with a dividend yield of 3.55%.
- Price: $46.82
- Market Cap: $201.087bn
- Earning Per Share: $2.32
- P/E Ratio: 20.18
- Dividend Yield: 3.55%
Cisco Systems, Inc. (CSCO)
San Jose-based Cisco is a global leader in IT, networking, and cybersecurity products and services. The tech stock pays a dividend yield of 3.10%.
- Price: $46.75
- Market Cap: $197.393bn
- Earning Per Share: $2.52
- P/E Ratio: 18.54
- Dividend Yield: 3.10%
Merck & Co., Inc. (MRK)
Merck is a New Jersey-based multinational pharmaceutical company and one of the leading pharma corporations in the world. The company’s stock currently has a dividend yield of 3.07%.
- Price: $79.87
- Market Cap: $201.6bn
- Earning Per Share: $3.94
- P/E Ratio: 20.25
- Dividend Yield: 3.07%
Bank of America Corporation (BAC)
Charlotte-based Bank of America is a leading global financial institution that offers a wide range of financial services and products. The banking stock currently pays a dividend yield of 3.01%.
- Price: $23.22
- Market Cap: $201.448bn
- Earning Per Share: $2.08
- P/E Ratio: 11.17
- Dividend Yield: 3.01%
Johnson & Johnson (JNJ)
Johnson & Johnson is a New Jersey-based corporation that produces medical devices, pharmaceuticals, and consumer products. The leading healthcare stock pays a dividend yield of 2.72% to its shareholders.
- Price: $94.58
- Market Cap: $35.211bn
- Earning Per Share: – $1.50
- P/E Ratio: n.a.
- Dividend Yield: 2.72%
The Procter & Gamble Company (PG)
Procter & Gamble is a Cincinnati-based consumer goods company that operates a wide range of brands, including Ariel, Febreze, Head & Shoulders, Oral-B, and Pampers. The company’s stock trades on the New York Stock Exchange and pays a dividend yield of 2.54%.
- Price: $125.63
- Market Cap: $311.015bn
- Earning Per Share: $1.86
- P/E Ratio: 67.69
- Dividend Yield: 2.54%
Highest-Paying Dividend Stocks in the S&P 500
If dividend yield is the main thing you look at as an investor, you will be happy to hear that there are a number of publicly traded companies that pay dividends north of 10%.
Below you will find five of the highest-paying dividend stocks in the S&P 500 index:
| Company Name | Dividend | Dividend Yield |
|---|---|---|
| ONEOK Inc. (OKE) | $3.74 | 12.96% |
| CenturyLink (CTL) | $1.00 | 10.07% |
| Iron Mountain (IRM) | $2.47 | 9.05% |
| Simon Property (SPG) | $5.20 | 8.27% |
| Altria (MO) | $3.36 | 8.10% |
| Williams Cos. (WMB) | $1.60 | 8.04% |
| Ventas (VTR) | $1.80 | 5.11% |
ONEOK Inc. (OKE)
ONEOK is a Tulsa-based diversified natural gas corporation that focuses on gathering, processing, fractionating, transporting, storing, and marketing natural gas and NGLs. The Fortune 500 company trades on the New York Stock Exchange and pays a whopping 12.96% dividend yield.
- Price: $28.67
- Market Cap: $12.76bn
- Earning Per Share: $1.92
- P/E Ratio: 14.92
- Dividend Yield: 12.96%
CenturyLink (CTL)
CenturyLink is a Louisiana-based technology company that provides communications, network services, security, cloud solutions, voice, and managed services. The S&P 500 company pays a double-digit dividend yield of 10.07%.
- Price: $9.80
- Market Cap: $10.756bn
- Earnings Per Share: $1.13
- P/E Ratio: 8.71
- Dividend Yield: 10.07%
Iron Mountain (IRM)
Iron Mountain is a Boston-based enterprise information management services company that focuses on storing, protecting, and managing digitized information and assets. The company currently pays a sizable dividend yield of 9.05%
- Price: $27.27
- Market Cap: $7.851bn
- Earnings Per Share: $1.05
- P/E Ratio: 25.97
- Dividend Yield: 9.05%
Simon Property (SPG)
Simon Property Group is the largest retail real estate investment trust in the US. The Indianapolis-based company is also the country’s leading shopping mall operator. The company’s stock trades on the NYSE and pays a dividend yield of 8.27%.
- Price: $62.40
- Market Cap: $19.079bn
- Earnings Per Share: 6.46
- P/E Ratio: 9.66
- Dividend Yield: 8.27%
Altria (MO)
Virginia-based Altria Group is one of the world’s largest producers and distributors of tobacco and tobacco-related products. The tobacco industry giant’s stock trades on the New York Stock Exchange and pays 8.10% in dividend yield.
- Price: $41.54
- Market Cap: $77.197bn
- Earnings Per Share: -$0.48
- P/E Ratio: n.a.
- Dividend Yield: 8.10%
Williams Cos. (WMB)
The Williams Companies is a Tulsa-based energy company that primarily focuses on natural gas processing and transportation. The S&P 500 company pays a substantial dividend yield of 8.05% to its shareholders.
- Price: $19.77
- Market Cap: $23.985bn
- Earnings Per Share: $0.11
- P/E Ratio: 183.06
- Dividend Yield: 8.04%
Ventas (VTR)
Ventas is a Chicago-based real estate investment trust that focuses on the ownership and management of healthcare facilities across the US, UK, and Canada. The company’s stock is listed on the New York Stock Exchange and pays a dividend yield of 5.11%.
- Price: $36.16
- Market Cap: $13.49bn
- Earnings Per Share: $2.09
- P/E Ratio: 17.32
- Dividend Yield: 5.11%
Best Monthly Dividend Stocks
Some companies pay their dividends annually, some semi-annually, and some quarterly. Then, there are also companies that pay out monthly.
For dividend stock investors who want to receive their payouts as often as possible, we have composed a list of three stocks that pay high monthly dividends.
| Company Name | Dividend | Dividend Yield |
|---|---|---|
| Main Street Capital (MAIN) | $2.46 | 7.77% |
| STAG Industrial (STAG) | $1.44 | 4.86% |
| Shaw Communications (SJR) | $0.87 | 4.86% |
Main Street Capital (MAIN)
Main Street Capital is a Houston-based debt and private equity company that invests in small and medium-sized private companies. The company’s stock trades on the New York Stock Exchange and boasts a hefty 7.77% dividend yield, which it pays out on a monthly basis.
- Price: $31.78
- Market Cap: $2.062bn
- Earnings Per Share: -$1.31
- P/E Ratio: n.a.
- Dividend Yield: 7.77%
STAG Industrial (STAG)
STAG Industrial is a Boston-based real estate investment trust that focuses on the acquisition and operation of single-tenant, industrial properties in the US. The New York Stock Exchange-listed company stands out among dividend stocks for offering a dividend yield of 4.86%, paid out monthly.
- Price: $30.21
- Market Cap: $4.493bn
- Earnings Per Share: $0.75
- P/E Ratio: 40.33
- Dividend Yield: 4.86%
Shaw Communications (SJR)
Shaw Communications is a Canadian telecommunications enterprise that provides telephone, internet, TV, and mobile services. With a dividend yield of 4.86%, it is one of the highest-paying dividend tech stocks you will find on the New York Stock Exchange.
- Price: $18.15
- Market Cap: $9.376bn
- Earnings Per Share: $0.07
- P/E Ratio: 245.27
- Dividend Yield: 4.86%
Should You Invest in Dividend Stocks?
Dividend stocks enable you to earn investment income on top of the capital appreciation of your stock portfolio. In a sense, they are a combination of stocks and fixed income investments, making them a very attractive investment.
Dividend stocks have several advantages, since 1926 dividends have accounted for about 42 percent of investor returns, while being less volatile than the market. To some extent the dividend acts like an anchor, slowing the stock down. The beauty of dividends is that you get paid, whether or not the market is up.
Howard Silverblatt, Senior Analyst at Standard & Poor’s
Whether you will invest in dividend stocks or not is up to you, but most experts agree that a diversified stock portfolio should also include dividend stocks.
[the_ad id='7247']* All stock data is from July 17, 2020.
