Good Dividend Paying Stocks For Making Money From Dividends
Today, I would like to discuss good dividend stocks.
First of all, I want to offer up 7 of my favorite stocks that pay good dividends. Also, what to look for in good dividend stocks.
Those are the 2 goals for this article. But you might be searching for something a little different?
Then check out our entire list of dividend investing articles. With a quick scan, you will be sure to find something that meets your needs.
But for the rest of us, let’s work on understanding and finding some good dividend stocks to buy!
7 Good Dividend Stocks
Here is today’s list of good stocks that pay dividends. Later in the article, we will take a closer look at their dividend metrics.
- Abbott Laboratories
- Automatic Data Processing
- Procter & Gamble
- Wisconsin Energy Group
But first, I want to discuss what to look for when searching for stocks that pay good dividends.
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
6 Things To Look For In Good Dividend Stocks
First of all, you should always understand what you are investing your money in. So, doing a little research on dividend stocks before you buy them is a must.
Furthermore, I do my most of my own research. And supplement it with resources like Morningstar.
And the Simply Investing Report. Both are great tools for dividend stock investors.
With resources like Morningstar and Simply Investing, there is no excuse for not researching your investments. They make it easy.
Finally, here are 6 things to look at when identifying good dividend stocks to own. In other words, we need to ask ourselves, what are good dividend stocks, and how do they work?
1. Good Dividend Stocks Have Moderate Dividend Yields
First of all, the dividend yield is a company’s annual dividend rate divided by the stock price per share. Furthemore, I prefer dividend yields between 3% and 5%.
Why is that? Because a dividend yield of less than 3% may not provide enough dividend income.
On the other hand, when you find a high dividend stock. Let’s say with a dividend yield greater than 5%. This may indicate too much investment risk.
Certainly, I make many exceptions to this rule. And, you can too. For example, I own Apple stock. And Apple’s dividend yield is lower than 3%.
On the other hand, I also own AT&T stock. Its dividend yield is more than 5%.
Furthermore, I have no intention of selling either of these stocks. So, 3-5% dividend yield is just my rule of thumb.
It’s more important when making new investments. And, a little less important for stocks you have held for a long time.
Finally, dividend stock valuations are at very high levels. So, dividend yields, in general, are a little bit on the low side. In other words, it is becoming harder to find good dividend-paying stocks with yields of at least 3%.
2. Good Stocks That Pay Dividends Have A Long Dividend History
There are 2 considerations when looking at a company’s dividend history.
First of all, how long has the company been consistently paying dividends? Furthermore, we want good dividend growth stocks too. So, we need to know how many years in a row the company has increased its dividend.
In either case, a company with a long dividend history is usually better. They indicate the sustainability of a company’s business model. Also, a company’s commitment to paying recurring dividends no matter the circumstances.
3. Good Dividend Stocks Have Appropriate Dividend Payout Ratios
First of all, the dividend payout ratio reflects how much of a company’s profits are paid out to shareholders as dividends. Furthermore, I look at dividend payout ratios 2 ways.
First dividends per share divided by earnings per share. But the problem with using earnings are the accounting rules.
For any given time and in certain industries, earnings can be confusing. And sometimes lead to a poor assessment of different companies capacity to pay dividends regularly.
So, I also check the dividends paid against free cash flow. Since our dividends are paid from cash.
In either case, a lower dividend payout ratio is better. But what is a good dividend payout ratio?
The answer to that question is that it depends on the industry. While a regulated utility may be fine with a dividend payout ratio of 85%. Such a high ratio would not be appropriate for an economically cyclical industrial firm.
4. Good Dividend Stocks Have A Strong Financial Position
Certainly, the best stocks for making money from dividends are not loaded with debt. High debt can make it difficult to continue paying dividends during difficult economic times.
Furthermore, modest debt loads will translate to solid credit ratings. I like investment-grade credit ratings when looking for good dividend stocks to invest in. That’s what most good stocks that pay dividends are rated.
I check company credit scores before I invest. And I check my personal credit score on a routine basis for free using Credit Karma.
5. Good Dividend Stocks Have A High Degree of Dividend Safety
What do I mean when speaking of dividend safety? It is a judgment about how likely a company’s dividend is at risk. Risk of what? Of being reduced or suspended in the future.
Nothing can ruin your ability to make regular money from dividends. And turn a good dividend stock into a bad dividend stock faster than a dividend reduction. So how do we find safe dividends?
Safe dividends are a result of many of the characteristics of the best stocks for dividends that we have discussed so far. Specifically, companies with:
- Sustainable business models
- Long dividend histories
- Appropriate dividend payout ratios
- Strong financial positions
Companies with these traits will tend to have a higher degree of dividend safety.
6. Stocks That Pay Good Dividends Have A Dividend Policy
Each dividend payment must be authorized by a company’s board of directors. So, does the board just get together and say hey “let’s pay everybody a dividend today”?
First of all, the answer to that question is no. More typically, a board has established a dividend policy and distribution guidelines.
Furthermore, the guidelines set the rules for delivering regular cash dividends to shareholders. And the dividend policy must be determined in context with other cash needs of a business.
Finally, every company has a dividend policy. The dividend policy may not be formalized. Furthermore, it may never be communicated to the public.
On the other hand, I love it when a company publicly communicates future intentions for its dividend. However, most companies do not do so.
In that case, we are left to interpret dividend policy for ourselves. And that’s okay. The lack of formal communication is not necessarily a red flag.
Okay now. That concludes our review of 6 things to look for in good dividend stocks to buy now.
Now you may say to me, Tom, doing all of this research to find and identify good dividend stocks is a lot of work. And I will reply, yes it is. I can’t argue.
How To Find Good Dividend Stocks -Quickly
So, how do you find these good dividend stocks quickly? Is there an easier way?
And the answer to those questions is, yes! So, let me suggest a faster way to find good stocks that pay dividends monthly or quarterly.
Dividend Aristocrats Represent Good Dividend-Paying Stocks
Dividend Aristocrats are stocks in the S&P 500 stock market index. But not every stock in this index is a Dividend Aristocrat.
Aristocrats have paid annual dividends for many years. Most importantly each Dividend Aristocrat has increased their dividend rate for at least 25 years in a row.
So, Dividend Aristocrats are often good dividend stocks. By building a dividend portfolio from stocks on the Aristocrats list. Most if not all, of the 6 traits we discussed for good dividend stocks will be met.
Now, that doesn’t mean you can’t find good dividend stocks that do not qualify as Dividend Aristocrats. Certainly not. They are out there, for sure.
However, Dividend Aristocrats are some of the best dividend stocks to buy now. Partly because they represent some of the best dividend growth stocks you can find.
Next, let’s talk more about some of my favorite good dividend-paying stocks. Because I promised to dig deeper into the 7 good dividend stocks identified at the start of this article. And now it’s time to deliver on that promise.
Buy and hold dividend stocks like these for the long-term. Put them in an IRA for the tax advantages. You can open your IRA with M1 Finance.
More About 7 Of My Favorite Stocks That Pay Good Dividends
For today, I will just include a few facts and metrics for each company. Such as:
- Company name
- Stock symbol
- Dividend yield
- Dividend payout ratio
- History of dividend increases
Please know that dividend yields can change quickly. They have an inverse relationship with a stock’s price. And we know how quickly stock prices can change.
And for the dividend payout ratio? I will use cash flow over the past several years as the basis.
Rather than accounting earnings. Since dividends are paid from cash. And as I said, earnings can be difficult to interpret because of accounting rules.
Do 1 or more of these good dividend stocks interest you? Then each is linked to a more complete dividend stock analysis using the stock symbol. Be sure to check them out for more information.
Next, onto today’s list of 7 good dividend-paying stocks. They can be a solid part of your investment and money management program.
Do you need a great tool to manage your total financial picture? Personal Capital is effective. And it’s free to sign up and use.
- Stock symbol: ABT
- Dividend yield: 1.7%
- Dividend payout ratio: 60%
- Increased dividend annually since 1972
First of all, Abbott Labs has been in business for more than 125 years. Furthermore, the company is a global, diversified producer of health care products.
In 2013 Abbott spun off its pharmaceutical division into a standalone company called AbbVie. After adjusting for the dividends that transferred with the AbbVie shares, Abbott is a Dividend Aristocrat. And AbbVie is another stock that pays good dividends.
Automatic Data Processing
- Stock symbol: ADP
- Dividend yield: 2.1%
- Dividend payout ratio: 50%
- Increased dividend annually since 1976
Known as ADP for short, the company is also a Dividend Aristocrat. And another good dividend stock.
ADP offers a robust range of services and solutions for businesses. Similar to a smaller company that competes in this sector, called Paychex. These services include payroll processing and human resources outsourcing.
- Stock symbol: PEP
- Dividend yield: 2.8%
- Dividend payout ratio: 80%
- Increased dividend annually since 1973
Another one of our stocks that pay good dividends is PepsiCo. It is one of the world’s leading beverage and snack food companies. It was formed through the merger of Pepsi-Cola and Frito-Lay.
The company has a diverse global portfolio of brands. They reside in the savory snacks and beverages categories. And for many soft-drinks, PEP competes for market share with another good dividend growth stock, Coca-Cola.
Best of all? Pepsi stock is another Dividend Aristocrat. And a very good dividend stock. That operates in a stable industry.
Procter & Gamble
- Stock symbol: PG
- Dividend yield: 2.3%
- Dividend payout ratio: 60%
- Increased dividend annually since 1957
P&G is a branded consumer goods company. Owning brands that cut across a variety of home goods and personal care categories. Just think Tide laundry detergent. Or, Pampers diapers to name just a couple of P&G’s iconic brands.
It’s tough to argue that P&G is a good dividend stock. The company has paid dividends every year since it became publicly traded in 1891.
So, celebrate Valentines’ day with P&G. Why? Because the stock starts paying dividends each year in the middle of February. And continues on every 3 months thereafter.
- Stock symbol: TGT
- Dividend yield: 1.6%
- Dividend payout ratio: 35%
- Increased dividend annually since 1968
Over the past few years, Target has transformed itself into a multichannel retailer. And with consumers looking to consolidate their shopping trips. Or, order online. Target is in the right place at the right time.
But, best of all? You guessed it. Target is the 5th Dividend Aristocrat on our list of good dividend stocks for today. And a tough competitor for other retailers like Walmart, a good dividend stock in its own right.
- Stock symbol: VZ
- Dividend yield: 4.3%
- Dividend payout ratio: 70%
- Increased dividend annually since 2005
Verizon Communications is a holding company. Their portfolio of assets makes it one of the world’s leading providers of communications, information, and entertainment products. Right up there with another telecommunications giant that pays dividends, AT&T.
Finally, Verizon is a good dividend stock with a dividend yield in my preferred range of 3% to 5%. On the other hand, Verizon is the first stock on today’s list that is not a Dividend Aristocrat.
But I said before, there are plenty of good dividend stocks that do not qualify as Aristocrats. And Verizon is one that could be a good dividend stock to buy now. Especially if you want to participate as an investor in the growth of 5G networking.
Wisconsin Energy Group
- Stock symbol: WEC
- Dividend yield: 3%
- Dividend payout ratio: 67%
- Increased dividend annually since 2004
WEC, a Fortune 500 company, is one of the largest electric generation, distribution, and natural gas delivery holding companies in the United States. They provide energy services to more than 4.5 million customers in Wisconsin, Illinois, Michigan, and Minnesota.
First of all, just like Verizon, WEC has a pretty nice dividend yield. However, the company has yet to make it as a Dividend Aristocrat.
Finally, I used accounting earnings for the dividend payout ratio this time. Because of the nature of regulated utility companies, cash flow isn’t the best indicator of dividend payment capacity.
Okay! That concludes my review of 7 good dividend growth stocks. Of course, this list does not represent all the best dividend stocks to buy now. Just several that I invest in and cover here at Dividends Diversify.
So are you looking for good stocks that pay dividends? If so, now you have a group of good dividend growth stocks to consider. It is a high-quality selection of several Dividend Aristocrats.
Also, a couple of Dividend Achievers like Verizon and Wisconsin Energy Group. Achievers are stocks that have paid increasing dividends for at least 10 years in a row. And maybe someday they will become Dividend Aristocrats.
7 Good Dividend Stocks -Wrap Up
To wrap up, here is a list of 7 good dividend stocks to buy now or in the future. If you would like to have consistent dividends deposited into your brokerage account, check 1 or more of these companies out.
- Abbott Laboratories
- Automatic Data Processing
- Procter & Gamble
- Wisconsin Energy Group
These 7 dividend payers represent some of the best dividend stocks for passive income from dividends. Ready to invest? Then be sure to trade your stocks fast and for free. I prefer the Webull app to do so.
More Reading About Good Stocks That Pay Dividends & Dividend Investing
- How to make $1,000 every month from dividend stocks
- Why companies pay dividends to shareholders
- A popular dividend growth stock ETF
My Favorite Dividend Investing & Personal Finance Resources
Some great tools and resources to keep investment costs low. And make the most of your money…
- Trade stocks for free with the Webull app
- Get stock research from Morningstar
- Money and investment management using the M1 Finance app
- Or dividend stock recommendations from Simply Investing
- Manage your finances for free with Personal Capital
- And check your credit score for free too!
Disclosure & Disclaimer
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