When you buy a stock, you buy partial ownership in a company. Dividend stocks pay out one of the fruits of that ownership: Dividends — your share of the company’s profits — to investors on a regular basis.
Dividend stocks are frequently judged by their dividend yield, which is the amount of the company’s annual dividend divided by the stock’s share price. Investors often search for stocks with high dividend yields, though a stock’s dividend yield will fluctuate as the company’s share price and dividend payouts change.
Income from high-dividend stocks can be reinvested or used as cash flow. Cash dividends will vary by company, but they are often under $1 per share. Most companies pay dividends quarterly.
List of high-dividend stocks
Below is a list of 25 high-dividend stocks, ordered by dividend yield. The dividend shown below is the amount paid per period, not annually.
|Symbol||Company Name||Dividend Yield||Dividend|
|HPT||Hospitality Properties Trust||7.62%||$0.53|
|STX||Seagate Technology Plc||5.36%||$0.63|
|CMP||Compass Minerals International Inc.||5.29%||$0.72|
|PM||Philip Morris International Inc||5.23%||$1.14|
|OXY||Occidental Petroleum Corp||4.73%||$0.78|
|CM||Canadian Imperial Bank of Commerce||4.59%||$1.36|
|D||Dominion Energy Inc||4.56%||$0.9175|
|IBM||International Business Machines Corp||4.50%||$1.57|
|BNS||The Bank of Nova Scotia||4.34%||$0.85|
|IP||International Paper Co||4.27%||$0.50|
|PRU||Prudential Financial Inc||4.21%||$1|
|PFG||Principal Financial Group Inc.||4.02%||$0.54|
|RY||Royal Bank of Canada||4.01%||$0.98|
|SLF||Sun Life Financial Inc||3.92%||$0.50|
Stock data current as of Feb. 22, 2019.
Evaluating dividend-paying stocks
Bigger is not always better when it comes to dividend yields.
Dividend yields over 4% should be carefully scrutinized; those over 10% tread firmly into risky territory. (You might notice we didn’t include any above this threshold on our list above.) Among other things, a too-high dividend yield can indicate the payout is unsustainable, or that investors are selling the stock, driving down its share price and increasing the dividend yield as a result.
To evaluate a high-dividend stock, start by comparing the dividend yields among its peers. If a company’s dividend yield is much higher than that of similar companies, it could be a red flag. At the very least, it’s worth additional research into the company and the safety of the dividend.
Then look at the stock’s payout ratio, which tells you how much of the company’s income is going toward dividends. A payout ratio that is too high — generally above 80%, though it can vary by industry — means the company is putting a large percentage of its income into paying dividends.
Why would that be bad? For one thing, money going to investors in the form of dividends is money that’s not being reinvested in the company’s growth. But a high payout ratio could also mean the dividend is unsustainable, or that the company is experiencing financial trouble to maintain the dividend. In some cases dividend payout ratios can top 100%, meaning the company may be going into debt to pay out dividends.
An alternative: dividend ETFs
Rather than pick individual high-dividend stocks through research or a list like the one above, many investors choose to invest in dividend exchange-traded funds.
An ETF is a bundle of securities packaged together into one investment. In the case of a dividend ETF, that bundle is made up of dividend stocks. With a dividend ETF, you can buy a large selection of individual dividend stocks in one transaction.
» Learn more: How to invest in dividend stocks and ETFs
Generally speaking, investors benefit from investing in ETFs or other funds rather than individual stocks — funds offer easy diversification and a more reliable stream of income. In the case of a dividend ETF, that means if one stock cuts its dividend, that loss of income will be smoothed out by the other dividend stocks in the ETF.
You can buy dividend ETFs through an online broker. Here are some of our picks for the best brokers for ETFs:
Want to see more? View all of our top picks for ETF brokers.