Dividends can be a great way to give your investment portfolio a boost of income, something many people look for during periods of high inflation and when there is a potential recession. Dividend stocks or dividend funds can help you earn regular passive income from some of the strongest companies in the economy.
Here are the 10 best dividend stocks to consider for your portfolio and how to invest in them.
How to invest in dividend stocks and funds
When you’re looking for ways to receive regular dividend payments, you generally have two options: dividend-paying stocks and funds that hold dividend-paying stocks. Here’s how they all work.
Investing in a dividend share is no different from investing in other shares. In order to place a trade, you will need a broker account, which can be easily created through an online broker. Once your account is created and funded, you can choose which dividend stocks you want to invest in. Your broker may even be able to help you identify dividend stocks with big payouts through its research offering.
If you’re not quite sure which high dividend stocks to choose, a dividend fund may be a better option for you. Mutual funds and exchange-traded funds (ETFs) focused on dividends contain a basket of stocks that pay dividends. Some of these funds focus on stocks with high dividend yields, while others look for companies that have consistently paid their dividends and grown over time.
By choosing a fund, you don’t have to worry about closely monitoring the individual stocks in the portfolio, because the fund’s diversification should protect you from overexposure to any single stock.
Stocks with a high dividend
All dividend and return information applies as of February 2, 2024.
1. Altria (MO)
Altria is the name behind Marlboro cigarettes, one of the most recognized and popular tobacco brands in the world, and the company also owns a significant stake in Anheuser-Busch InBev. Altria’s management has indicated for years that it intends to pay out the vast majority of its profits as dividends.
- Dividend yield: 9.4 percent
- Annual dividend: $3.92
2. Devon Energy (DVN)
Devon Energy is an oil and natural gas producer and has a portfolio of oil and gas properties in the US. The Oklahoma City-based company is focused on delivering competitive shareholder returns within its peer group. With the variable dividend, the payout here could fluctuate depending on the company’s earnings.
- Dividend yield: 6.9 percent
- Annual dividend: $2.87
3.Dow Inc. (DOW)
Dow is involved in the production of various chemicals used in various industries. The segments include packaging and specialty plastics, industrial intermediates and infrastructure, as well as performance materials and coatings. Dow is headquartered in Midland, Michigan.
- Dividend yield: 5.2 percent
- Annual dividend: $2.80
4. International Business Machines (IBM)
IBM is one of the largest technology companies in the US and generates more than two-thirds of its revenue from software and consulting services. The Armonk, New York-based company has paid dividends for more than 100 years in a row.
- Dividend yield: 3.6 percent
- Annual dividend: $6.64
5. Verizon Communications (VZ)
Verizon is a leader in communications and technology services. Together with AT&T and T-Mobile, they provide the majority of mobile phone services in the US. Verizon generated more than $135 billion in revenue in 2023.
- Dividend yield: 6.3 percent
- Annual dividend: $2.66
6. AT&T (T)
AT&T is another telecommunications leader that generates solid cash flow for shareholders. Recently, the company divested some assets and cut its dividend by almost half as it focuses on 5G investments and paying down its heavy debt load.
- Dividend yield: 6.2 percent
- Annual dividend: $1.11
7. Prudential Financial (PRU)
Prudential Financial is a global financial services provider with several products including life insurance, annuities, retirement services, mutual funds and investment management. The company had nearly $1.4 trillion in assets under management at the end of 2023.
- Dividend yield: 4.9 percent
- Annual dividend: $5.00
8. Philip Morris International (PM)
Philip Morris sells cigarettes and smokeless products in more than 180 countries outside the US. While the company still generates significant profits from sales of tobacco-related products, it is moving toward a greater focus on smoke-free products that, while not risk-free, pose less of a health risk than cigarettes.
- Dividend yield: 5.6 percent
- Annual dividend: $5.20
9. Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance operates pharmacies in the US, Europe and Asia. The U.S. pharmacy company administered approximately 35 million COVID-19 vaccinations in fiscal 2023. The company has a dividend history dating back to 1989.
- Dividend yield: 4.3 percent
- Annual dividend: $1.00
10. 3M Company (MMM)
3M produces a variety of products used by both businesses and consumers. The St. Paul, Minnesota-based company makes everything from building materials, electronic components and orthodontics to perhaps its best-known product: adhesive tape. 3M has been paying dividends to shareholders continuously for more than 100 years.
- Dividend yield: 6.3 percent
- Annual dividend: $6.00
In short
Dividend stocks or funds can be a great way to earn extra income. Keep in mind that if you own these securities in a taxable investment account, you will have to pay taxes on the income you receive, even if you reinvest those dividends. If you want to avoid taxes, you should own the shares in a tax-advantaged account, such as an IRA or 401(k).
Make sure you research any dividend stocks carefully before investing. Some companies with high payouts may be forced to reduce payments if their business suffers.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
