Best high-dividend stocks in July 2024
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BLUEPRINT
Updated 9:00 a.m. UTC July 25, 2024
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The best high-dividend stocks are a possible solution for investors looking for a consistent source of income, as they typically offer quarterly dividends.
“A high yield could be a red flag indicating that the company is going into debt to maintain its dividend payments, or it could be a result of a falling stock price,” said James Allen, founder and certified financial planner at Billpin.com.
For the best high-dividend stocks in 2024, we identified those with solid fundamentals, Wall Street “buy” consensus, at least $2 billion in market capitalization, positive cash flow per share and a consistent dividend with a high yield.
Best high-dividend stocks
- Altria (MO).
- British American Tobacco (BTI).
- AGNC Investment (AGNC).
- Frontline (FRO).
- Alliance Resource Partners (ARLP).
Altria (MO)
British American Tobacco (BTI)
AGNC Investment (AGNC)
Frontline (FRO)
Alliance Resource Partners (ARLP)
Compare the best high-dividend companies
Methodology
The best high-dividend stocks included above meet the following criteria:
- Consensus analyst recommendation of “buy” or better. A high number of analyst “buy” ratings indicates an expectation that the stock will outperform the overall market.
- Market capitalization of at least $2 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a market cap of greater than $2 billion.
- An Altimeter overall grade of at least a B. We applied a screen to select the best stocks for this list, considering only stocks rated a B or better by Altimeter. The overall grade considers profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks ranked in the top quarter of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have strong valuations with the ability to improve returns.
- Pays a consistent dividend with a high yield. The stocks on this list consistently pay dividends with a yield of around 9% or higher. While some have cut dividends in the past, all currently meet that criterion. However, their yields could drop with future cuts.
- Positive free cash flow per share. Companies need cash to pay dividends to their investors. While not all companies on this list outperform their competition in this area, they all have a positive free cash flow per share.
Why other stocks didn’t make the cut
The stocks that didn’t make the cut may have some positive indicators, but they aren’t the best fit for this list due to one or more issues. For instance, while they may have a high yield, their payouts are wildly inconsistent in some cases. Dividend investors tend to prefer consistent payments with a steady increase, and huge payout swings may be a deterrent.
Another problem is big drops in share prices. While dividend investors tend to look for regular dividend payments, there will come a point where they must sell their shares. In this case, declining share prices can cut into profits realized from dividends.
Lastly, a common theme among stocks that missed the cut is a “sell” recommendation. These stocks are expected to have a below-average return, making them difficult to recommend despite their high dividend yields.
Final verdict
Dividends can provide regular income for investors who need money sooner rather than later.
Instead of relying solely on share price appreciation, dividend stocks pay investors regularly, usually once per quarter. But, investors should be careful not to chase high dividends alone. A high dividend can sometimes be a sign of a struggling company going into debt to increase its dividend or one with a declining share price. Therefore, investors should look for high-quality companies with a healthy balance sheet and a competitive advantage in their respective industries.
Strategies for building a portfolio of high-paying dividend stocks
As mentioned, building a portfolio of high-paying dividend stocks is about more than just looking for high yields. Consider the following strategies to build a strong portfolio:
- Diversification. Dividend stocks sometimes cluster in certain industries, such as energy and real estate. However, it’s best to spread your investment across several industries, such as energy, finance, real estate, technology and health care.
- Dividend aristocrats. These stocks have a history of consistently increasing their dividends. The best stocks in this category have increased their dividends for 25 years or longer in some cases. This makes them a dependable source of income, even if their yields aren’t the highest in their industries.
- Know the business. Businesses are more than just numbers on a page. Before you invest, it’s best to understand the company’s business model, the competition and the competency of its management.
- Understand dividend yield. You can calculate the dividend by dividing the company’s annual dividend payment by the current share price. As mentioned earlier, a falling share price could therefore increase the dividend yield, even if the dollar amount of the dividend is not increasing.
- Monitor your portfolio. It’s a good idea to regularly monitor your portfolio to ensure it still aligns with your financial goals. With dividend stocks, cuts and other issues could make a certain stock fall out of line with your objectives.
Remember that while dividends can provide a consistent income stream, they aren’t the only thing that matters. Most of the returns investors realize come from increases in share price, with dividends merely an added bonus. This is another reason to consider the whole picture before investing in dividend stocks.
Frequently asked questions (FAQs)
Certain criteria and conditions make dividend stocks a better fit for some investors than others. Generally, investors with a specific need for regular income, including retirees and those with a short investment horizon, will benefit more from dividend stocks.
In addition, those with a lower risk tolerance might like dividend stocks because dividends can offset falling share prices due to market conditions. Investors should consider their unique circumstances before investing in dividend stocks.
Yes, high-paying dividend stocks can help generate passive income. But investors should be careful not to focus too much on high yields, which can indicate a yield trap. Yield traps are stocks that have a high yield due to a falling share price but weak fundamentals and are at risk of declining earnings in the future. Consider the larger picture and not just the yield before you invest in dividend stocks.
Any sector can offer high-paying dividend stocks, but the companies that regularly pay dividends tend to be older and more established. This is because they may spend less on research and development, leaving more money to share profits with investors. You often see dividend stocks in the following sectors: energy, communications, finance, real estate and health care.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
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