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Jeff Castillo
Jeff Castillo

Best Stocks To Buy That Pay Dividends


Best Stocks To Buy That Pay Dividends

When it comes to dividend investing, some folks chase yield above everything else. But that can come with big risks, as some stocks that pay a significant yield at present are in risky sectors like mortgage-related financing or the cyclical business of energy exploration.

And while you might think that in an inflationary environment like this one it can still be hard for a packaged foods company, management just boosted its full-year earnings and revenue expectations after a stronger-than-expected third-quarter earnings report in November. That's because when you have premium brands, you can command premium prices to ensure a strong financial performance. The company is riding 17 years of consecutive dividend increases, and has paid dividends in some form since 1925.

When it comes to consumer stocks, it's hard to top the powerhouse that's Coke (). The Atlanta-based company has a global scale with more than 120 years of operating history, and one of the most recognizable brands on the planet. It also counts Warren Buffett's Berkshire Hathaway (, ) as its largest shareholder, holding more than 9% of the company and providing a strong institutional presence to keep shares stable in the long run.

Although it seems counterintuitive, the stock with the highest dividend is not always the best dividend stock. When a dividend yield is artificially high, it could indicate that the company is desperate to lure investors because it is in financial distress or some other kind of trouble.

Identify stocks that meet your criteria using seven unique stock screeners. See what's happening in the market right now with MarketBeat's real-time news feed. Export data to Excel for your own analysis.

The risks of stock holdings can be offset in part by investing in a number of different stocks. Investing in other kinds of assets that are not stocks, such as bonds, is another way to offset some of the risks of owning stocks.

Stock funds are another way to buy stocks. These are a type of mutual fund that invests primarily in stocks. Depending on its investment objective and policies, a stock fund may concentrate on a particular type of stock, such as blue chips, large-cap value stocks, or mid-cap growth stocks. Stock funds are offered by investment companies and can be purchased directly from them or through a broker or adviser.

Long-term investors are often all too quick to dismiss opportunities in the technology sector for one simple reason: the way they see it, tech stocks are far too volatile for dividend investing. Although the dot-com bubble scared many away from the tech space (and rightfully so!), recent trends in this sector suggest that the industry has grown up from its start-up only roots and now includes many, big stable companies with a long history of solid earnings and dividends.

Though it is less common, a number of tech stocks pay out dividends that investors may want to take a closer look at. As always, be sure to look under the hood of these companies to ensure you understand how they operate and what the stock will hinge on prior to investing.

Let's say you buy a $30-a-share stock that pays $3 a year in dividends. You might be initially thrilled with your impressive 10% annual dividend yield ($3 dividend divided by $30 stock price). The stock's yield is 500% larger than the S&P 500's roughly 1.3% yield.

Keep in mind, too, companies paying high dividends can cut them when the business wanes. Occidental did that in 2020. Ford (F) cut its storied dividend in the first quarter of 2020 to nothing, down from the 15 cents a share it paid previously. Ford's dividend yield was 6.5% in early 2020. It's just 2.6% now.

1. Dividends. When companies are profitable, they can choose to distribute some of those earnings to shareholders by paying a dividend. You can either take the dividends in cash or reinvest them to purchase more shares in the company. Investors seeking predictable income may turn to st


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