Here are some well-known companies that have a history of paying dividends, listed along with their dividend yields at recent prices and the per-share amount of each dividend:. Dividend yield and amount as of June 24, Dividend amount is most recent per-share quarterly dividend paid.
As you can see, dividend stocks can come from just about any industry, and the amount of the dividend and yield can vary greatly from one company to the next. Before you buy any dividend stocks, it's important to know how to evaluate them.
These metrics can help you understand how much in dividends to expect, how safe a dividend might be, and most importantly, how to identify red flags. Inexperienced dividend investors often make the mistake of looking for the highest dividend yields. While high-yield stocks aren't bad, high yields can be the result of a stock that's fallen because the dividend is at risk of being cut.
That's a dividend yield trap. Sadly, a yield that looks too good to be true often is. It's better to buy a dividend stock with a lower yield that's rock solid than to chase a high yield that may prove illusory. While most dividends qualify for the lower rates , some dividends are classified as "ordinary" dividends and taxed at your marginal tax rate.
Several kinds of stocks often pay high dividend yields and may come with higher tax obligations because of their corporate structures. Of course, this doesn't apply if your dividend stocks are held in a tax-advantaged retirement account such as an IRA , with the caveat that some MLPs can leave you owing taxes even on your IRA.
If you're a long-term investor looking to grow your nest egg, one of the best things to do is use a dividend reinvesting plan , usually called a Drip. This powerful tool will take every dividend you earn and reinvest it -- without fees or commissions -- back into shares of that company.
This simple set-it-and-forget-it tool is one of the easiest ways to put the power of time and compounding to work in your favor. If you're building a portfolio to generate income today, it's important to remember that dividends aren't obligatory for a company the way interest payments are for bonds. And that means that if a company has to cut expenses, the dividend could be at risk.
With this in mind, it's important to build your income portfolio with a margin of safety and to diversify across companies with different risk factors. This won't completely eliminate the risks of a dividend cut, but it will lower them while also giving you a margin of safety to ensure you generate enough income. If this is your goal, focusing on high-quality companies with strong records of dividend growth is far more important than buying higher yields that may turn out to be traps.
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Good dividend investors tend to look for dividend safety, or how likely it is that a company will continue to pay dividends at the same or higher rate. While there are companies that assess and rank dividend safety for different stocks, you can also begin to analyze a corporation's level of safety by comparing earnings to dividend payments.
This, in turn, reduces your income. Dividend safety is also determined by how risky or new an industry is. Even if a company has a low dividend payout ratio , your dividend payment is less safe if the industry is unstable. For instance, COVID rendered industries like retail, airlines, and hotels unstable while consumer goods, healthcare, and technology became more stable choices. Look for companies that have a history of stable income and cash flow. The more stable the money coming in to cover the dividend, the higher the payout ratio can be.
Good dividend investors tend to focus on either a high dividend yield approach or a high dividend growth rate strategy. Both serve different roles in different portfolios. A high dividend yield strategy focuses on slow-growing companies that have substantial cash flow.
This allows them to fund large dividend payments and produces an immediate income. A high dividend growth rate strategy focuses on buying stock in companies that currently pay lower-than-average dividends but are growing quickly. This allows investors to buy profitable stocks at a lower rate and make a large absolute dollar income over a 5- or year period.
During Walmart's expansion phase, it traded at such a high price-to-earnings ratio that the dividend yield looked quite small. However, new stores were opening rapidly, and the per-share dividend increased quickly as profits climbed. In this case, a buy-and-hold strategy would have produced significant income as dividends increased.
Different dividend investors may prefer one strategy over another, depending on whether the goal is immediate, stable income, or long-term growth and profit. When choosing a strategy, determine what level of risk you prefer and how long you are willing to wait for your dividends to produce a substantial income.
Look for dividends that are designated as "qualified" to take advantage of tax benefits. Most income from dividends is taxed as ordinary income. However, qualified dividend stocks held for a longer period of time—usually 60 days or more—are taxed at the lower capital gains tax rates.
If you buy dividend stocks to get the dividend payment and then want to sell them quickly, you'll have to pay your regular tax rate on the dividend income. If you invest through a margin account instead of a cash account , it is possible your broker will take shares of stock you own and lend them to traders who want to short the stock. These traders, who will have sold the stock you held without telling you, are responsible for paying you any dividends that you missed since you don't actually hold the stock at the moment.
The money comes out of their account as long as they keep their short position open, and you get a deposit equal to what you would have received in actual dividend income. Since the cash is not actually a dividend, it is treated as ordinary income. Instead of paying the low dividend tax rate, you'll have to pay your higher personal income tax rate. Pennsylvania Department of Banking and Securities. Our opinions are our own. This article provides information and education for investors. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks or securities.
Looking for an investment that offers regular income? Dividend stocks distribute a portion of the company's earnings to investors on a regular basis. Most American dividend stocks pay investors a set amount each quarter, and the top ones increase their payouts over time, so investors can build an annuity-like cash stream. Investors can also choose to reinvest dividends. Here's more about dividends and how they work. Companies that pay dividends tend to be well-established, so dividend stocks can add some stability to your portfolio.
Want to see high-dividend stocks? Jump to our list of 25 below. Dividend ETFs or index funds offer investors access to a selection of dividend stocks within a single investment — that means with just one transaction, you can own a portfolio of dividend stocks. The fund will then pay out dividends to you on a regular basis, which you can take as income or reinvest. Dividend funds offer the benefit of instant diversification — if one stock held by the fund cuts or suspends its dividend, you can still rely on income from the others.
And that difference can really add up. In general, a good rule of thumb is to invest the bulk of your portfolio in index funds, for the above reasons. But investing in individual dividend stocks directly has benefits. Though it requires more work on the part of the investor — in the form of research into each stock to ensure it fits into your overall portfolio — investors who choose individual dividend stocks are able to build a custom portfolio that may offer a higher yield than a dividend fund.
Expenses can also be lower with dividend stocks, as ETFs and index funds charge an annual fee, called an expense ratio, to investors. To be included, companies must:. Have increased dividends every year for the past 25 years. The Dividend Aristocrats are large companies with reliable dividend payments and high liquidity, and the index as a whole may offer more diversification than high-yield dividend indexes which are typically heavily weighted toward the financials and utilities sectors.
Investors can opt to pick and choose specific Dividend Aristocrats to invest in, or there are ETFs with similar reliability-based criteria. Building a portfolio of individual dividend stocks takes time and effort, but for many investors it's worth it. Find a dividend-paying stock. You can screen for stocks that pay dividends on many financial sites, as well as on your online broker's website.
We've also included a list of high-dividend stocks below. Evaluate the stock. Decide how much stock you want to buy. However, if the stock is riskier, you might want to buy less of it and put more of your money toward safer choices. Among other things, a too-high dividend yield can indicate the payout is unsustainable, or that investors are selling the stock, driving down its share price and increasing the dividend yield as a result. Learn how to buy stocks. Below is a list of 25 U.
The dividend shown below is the amount paid per period, not annually. To compile this list, we take into account the dividend growth rate over the last five years and the dividend payout percentage, in addition to the dividend yield and amount. Company Name.