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Dividends can be a great way to give your investment portfolio a boost of income, which is something many people are looking for during periods of high inflation and amid talk of a possible 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: stocks that pay dividends and funds that hold stocks that pay dividends. Here’s how each one works.
Investing in a dividend stock is no different than investing in any other stock. You’ll need a brokerage account, which can easily be set up through an online broker, in order to place a trade. Once your account is set up and funded, you can choose which dividend stocks to invest in. Your broker may even be able to help you identify dividend stocks with large 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 hold 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 and grown their dividends over time.
By choosing a fund, you won’t have to worry about closely tracking the individual stocks in the portfolio because the fund’s diversification should shelter you from having too much exposure to a single stock.
All dividend and yield information is as of Aug. 30, 2023.
1. Pioneer Natural Resources (PXD)
Pioneer Natural Resources is an oil and gas exploration company that conducts business in the Midland Basin in West Texas. The company pays a base plus variable dividend that varies based on the company’s performance. It currently has one of the highest dividend yields in the S&P 500.
Dividend yield: 7.1 percent
Annual dividend: $16.47
2. Devon Energy (DVN)
Devon Energy is a producer of oil and natural gas and holds a portfolio of oil and gas properties in the U.S. The Oklahoma City-based company is focused on earning a competitive shareholder return within its peer group.
Dividend yield: 6.8 percent
Annual dividend: $3.45
3. Dow Inc. (DOW)
Dow is involved in the production of different chemicals that are used in a variety of industries. Its 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: 5.1 percent
Annual dividend: $2.80
4. International Business Machines (IBM)
IBM is one of the largest tech companies in the U.S. and earns more than two-thirds of its revenue from software and consulting services. The Armonk, New York-based company has paid a dividend for over 100 consecutive years.
Dividend yield: 4.5 percent
Annual dividend: $6.64
5. Verizon Communications (VZ)
Verizon is a leader in communication and technology services. Along with AT&T and T-Mobile, they provide the majority of mobile-phone services in the U.S. Verizon generated more than $135 billion in revenue in 2022.
Dividend yield: 7.5 percent
Annual dividend: $2.61
6. AT&T (T)
AT&T is another telecommunications leader that generates solid cash flow for shareholders. Recently, the company has divested some assets and cut its dividend by nearly half as it focuses on 5G investments and paying down its heavy debt load.
Dividend yield: 7.8 percent
Annual dividend: $1.11
7. Prudential Financial (PRU)
Prudential Financial is a global financial services company with various products including life insurance, annuities, retirement services, mutual funds and investment management. The company had nearly $1.4 trillion of assets under management at the end of 2022.
Dividend yield: 5.3 percent
Annual dividend: $5.00
8. Philip Morris International (PM)
Philip Morris sells cigarettes and smoke-free products in more than 180 countries outside the U.S. Though the company still generates significant profits from sales of tobacco-related products, it’s moving towards a greater focus on smoke-free products that, while not risk-free, present less of a health risk than cigarettes.
Dividend yield: 5.1 percent
Annual dividend: $4.50
9. Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance operates retail pharmacies across the U.S., Europe and Asia. Its U.S. pharmacy business administered about 35 million COVID-19 vaccinations in its 2022 fiscal year. The company has a dividend history that dates back to 1989.
Dividend yield: 7.5 percent
Annual dividend: $1.92
10. 3M Company (MMM)
3M manufactures a variety of products that are used by businesses and consumers alike. The St. Paul, Minnesota-based company makes everything from building materials, electronics components and orthodontics to perhaps its best-known product: Scotch tape. 3M has paid a dividend to shareholders without interruption for more than 100 years.
Dividend yield: 5.7 percent
Annual dividend: $6.00
Dividend stocks or funds can be a great way to earn additional income. Keep in mind that if you own these securities in a taxable brokerage account, you’ll need to pay taxes on the income you receive, even if you reinvest those dividends. If you want to avoid taxes, you’ll need to own the shares in a tax-advantaged account such as an IRA or 401(k).
Be sure to research any dividend stocks carefully before investing. Some companies with high payouts today may be forced to cut the payments if their business suffers.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.