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How to Invest in Dividend Stocks and Top High Dividend Stocks in 2023

High dividend stocks in 2023

A dividend is a type of stock, also known as a payment to its shareholders. Dividends are portions of a  company’s profits that are later distributed to its investors. It provided investors with a steady income and is good for people looking for a stable and highly profitable income. The question comes what are the high dividend stocks in which we should invest?

Tips to Invest in Dividend Stocks 

1. Educate yourself

Start by searching for stable dividend-paying companies with a good track record of dividend payments. Investors can find the dividend information on the Securities and Exchange Commission's website. Always look for stable and consistent-paying companies. Screening tools also help investors find information on dividend-paying stocks. One should be active in gathering financial news and information.  

2. Stock Selection  

Following are the steps to consider while selecting dividend stocks: 

Know your Investment Goals

Be certain of the type of income you want, which can be a regular income or a long-term income. Pick stocks that outperform the market. 

Dividend Yield

Always check for annual dividend payments as a percentage of the stock's current price. A higher dividend yield is directly proportional to better income. Don’t go for extremely high yields, as they could signal financial loss. 

Dividends Rise and Shine

While selecting the ideal company, first check the growth of dividends; they should increase over time. Know the policies of the company and its financial stability. 

Payout Statistics

Know the percentage of the amount the company is paying from its annual income. If the payout ratio is lower, that indicates the company has the potential to grow even in challenging phases. 

Financial life: Know the cash flow, revenue generated, profit, debt, or loan of the particular company to keep a check on the company’s financial health and stability. If the financial health of the company is good, then you can expect a sustainable dividend. 

Market Rank

Make sure of the company’s market rank and how it’s positioned by market trends. 

Tax 

Take note of the tax implementation of dividends in the country to optimize the returns. 

Market risks

Evaluate the economic condition, overall market risks, and any financial factors the company may face that could affect dividend payments. 

Research

Make sure to do complete research on dividend stocks to make the best and most informed investment. 

3. Set Financial Goals

It involves a systematic and thoughtful approach. Steps to consider while setting financial goals are: 

Address your financial situation

Evaluate the financial situation by understanding the income, profit or loss, expenses, debts, and net worth. Doing this will give you an idea of how much you can invest in dividend stocks. 

Investment purpose: define and know why you want to invest in dividend stocks. Whether you are looking for stable income, consistent growth, or both, Understanding this will give you a clear picture of your long-term goals. 

Set goals

Be specific about your goals, which should be measurable, balanced, and attainable. Set a target to earn a certain amount in a certain amount of time. 

Maintain a time limit

Set a certain time limit, like how long you plan on investing. It should be a long-term approach to benefit and have stability. 

Amount to invest

Determine an amount you can invest in dividend stocks based on your financial assessment. Ensure the risk tolerance fits the overall investment plan. Select high dividend stocks. Start by setting specific criteria to filter potential high dividend stocks. It may include key factors like dividend threshold, dividend history, and payout ratio. 

Dividend growth potential

While high dividends might seem appealing, ensure their potential for future growth. 

Search the company’s history. Check the company’s track record of paying dividends. Companies with a consistent history of paying dividends are more likely to continue doing so in the future. 

Reinvestment

Reinvesting can increase the amount over time. Although this step is optional, it is an important factor to consider if you aim for high dividend payments.

Patience: Investing in dividend stocks is a long-term commitment. Ensure that you are patient and stick to your goals and investment plans to achieve what you have planned so far. 

4. Select the best dividend stocks: 

Dividend stock performance may vary from time to time, and the best dividend stocks can change over time based on market conditions and the company’s performance. Though it becomes difficult to be certain about the investment. 

5. Look for high dividend stocks 

You should try to look for stocks issued by companies that offer a high dividend yield. Investing in high dividend stocks is good for those looking for a stable income in low interest-rate environments. Calculate the dividend yield by dividing the annual dividend payment per share by the stock’s current market value. Companies offering high dividends are more established and financially stable, providing stability to an investor’s portfolio. 

The best dividend stock companies

Following is the list of the best dividend stock companies of 2023:

Company Symbol Current market price Dividend yield
Lowe’s LOW US$ 235.09 1.87%
Realty income US$ 61.47 4.99%
Chevron CVX US$ 158.87 3.74%
Target TGT US$ 135.00 3.21%
Starbucks SBUX US$ 101.25 2.09%
Brookfield infrastructure BIPC US$ 46.19 4.34%
Microsoft MSFT US$ 338.37 0.80%
American Express AXP US$ 165.43 1.45%
Clearway Energy CWEN US$ 26.28 6.21%

Lowe’s (LOW)

It’s a well-known home improvement retailer. Historically paid dividends to its shareholders. Has raised its payout by more than 500% in the past few decades. 

Realty Income (O)

It’s a real estate investment trust often referred to as "The Monthly Dividend  Company." Known for its reliable and consistent dividend payments. 

Chevron (CVX) 

It’s an integrated oil and gas company. It has had a strong share price over the past few years. generates a good amount of cash flow and grows the payout. It is one of the best-run retailers. 

Target (TGT)

It is a general merchandise retailer. It has been profitable for shareholders, with high gross margins and profitable margins. 

Starbucks (SBUX)

Known for roasting and sourcing several blends of coffee, it has increased earnings per share by 710% over a decade. Its dividend increases every year. 

Brookfield Infrastructure (BIPC):

BIPC has a worldwide reputation for giving back a good amount of returns to its shareholders. As a part of the giant management group, it operates its infrastructure assets worldwide. It has a record of delivering over 900% returns a decade ago.

Microsoft (MSFT)

Microsoft is one of the most famous world-renowned technology companies. All of us know that Microsoft has constantly increased its dividend over the years and is currently with its aggressive dominant tactics. Due to this, it has a history of having a very low payout ratio and almost no debt in comparison to other tech giants. 

American Express (AXP)

Whether you are looking for credit card products or travel services American Express is your one-stop solution. It has a record of increasing its dividend throughout every economic year. It is a company that strictly focuses on the benefits of customers.

Clearway Energy (CWEN) 

These companies work on a large scale. The company became highly profitable after the Covid 19 phase. Its stable cash flow makes it a good company to invest in. 

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Analyzing Dividend stocks companies

While looking for the best long-term dividend stocks, you should keep in mind the following points:

  • Look for stable and established companies. Look for companies with proven past records of success and stability. They can be "the originals" in the market with great revenue and profits. 
  • Analyze the company's financial statements to make sure of good economic growth, healthy cash flow, low debts, and good dividend payments over time. 
  • Look for companies with strong management and leadership qualities who have a clear vision for the future and the ability to grow. 
  • Check its future growth potential by considering the company’s growth prospects and potential. A company with solid growth rates has the possibility of growing in the future.
  • Be mindful of market conditions and the economy. A recession and a down market impact dividend stocks. 

Adding to the above-mentioned list are a few more examples of good dividend-paying companies like McDonald’s, Coca-Cola, Johnson & Johnson, Procter & Gamble, Apple, Polyplex, Walmart,  and Vedanta. 

Advantages of Investing in Dividend Stock

  • Dividend-paying companies tend to be more stable and less volatile in stock prices, offering protection. 
  • Companies paying dividends show financial strength and confidence in their businesses, thus attracting more investors. 
  • With constant and steady income in the form of dividends, it attracts investors seeking steady cash flow. 
  • A company’s dividend payout depends on its financial health. If the company is not facing financial issues, it reduces the chances of bouncing dividend payments. 
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Disadvantages of Investing in Dividend Stock

  • Dividend stocks may not experience the same growth as high-growth companies, as they tend to distribute a part of their profits to their shareholders, indicating limited growth potential.
  • If a company’s financial growth weakens, it may reduce or eliminate dividends, thus impacting investors expected income. 
  • Investing in dividend stocks means missing out on profits from other growth-oriented stocks. An increase in interest rates indicates the possibility of investors losing interest in fixed-income investments. 

Note: Always seek the advice of a financial advisor before making investment decisions. Remember that investing in stocks involves risks and the possibility of loss. Past performance indicates a lot and gives an idea of the future.