Dividend stocks can be a great way to generate income and increase your wealth over the long term. These stocks are issued by companies that make regular cash payments to their shareholders. However, not all dividend stocks are created equal, and it can be challenging to know where to start your search.
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One strategy is to look for Dividend Aristocrats. These are companies in the S&P 500 index that have paid and raised their base dividend for at least 25 consecutive years. Here are 2 Dividend Aristocrats to consider:
Lowe’s (NYSE:LOW): Despite being a home improvement giant, Lowe’s has raised its dividend every year since going public in 1961 and has raised the payout by 556% over the past decade alone.
Johnson & Johnson (NYSE:JNJ): This company owns a diverse portfolio of healthcare brands and has increased its dividend for 60 years in a row.
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Looking beyond the Dividend Aristocrats list can uncover many excellent companies that have not yet been paying dividends for a long enough time to be included in the list. While they may not have the same lengthy track record of dividend increases, these companies can still make great long-term dividend investments.
Consider these two dividend-paying stocks, each possessing strong brands, loyal customer bases, and favorable demographic trends:
American Express (NYSE:AXP): Financial services such as consumer and business lending are another great place to find top dividend stocks, and American Express is one of the best. Although it is not a Dividend Aristocrat, American Express has a decades-long track record of either raising or maintaining its dividend through all kinds of economic environments. This is a testament to its high-quality lending standards and its focus on serving higher-income consumers who are less likely to default on their debts during economic downturns. American Express is a great stock to consider buying during market downturns and holding for the recovery.
Clearway Energy (NYSE:CWEN.A): Renewable energy is often thought of as a place for growth investors, but it can also be an excellent source of dividends. Clearway Energy owns and operates utility-scale wind and solar assets, selling the power on long-term contracts to utility companies. The company’s dividend yield has been above 4.5% for much of the past few years, and the payout has increased by a remarkable 84% since 2019. For investors looking for a safer and lower-volatility way to profit from renewable energy, Clearway Energy is an excellent choice.
What to consider with Dividend Stocks
When evaluating dividend stocks, consider the company’s payout ratio, history of dividend raises, steady revenue and earnings growth, durable competitive advantages, and dividend yield. While a high yield may be preferable, it’s only valuable if the other criteria are met first.
Remember that dividend stocks are long-term investments, and even the most rock-solid companies can experience short-term volatility. Focus on finding companies with excellent businesses, stable income streams, and strong dividend track records, and let the long term take care of itself.
It’s also important to keep in mind that the market can be unpredictable and that past performance is not a guarantee of future success. Therefore, it’s crucial to diversify your portfolio and not put all your eggs in one basket.
Another aspect to consider is the sector in which the company operates. Some sectors may be more resilient to economic downturns, while others may be more volatile. It’s essential to have a good understanding of the industry and the company’s competitive position within it.
Furthermore, it’s important to monitor the company’s financial health, such as its debt levels, cash flow, and profitability. A healthy balance sheet and strong cash flow can provide a buffer during tough times and ensure the company can continue to pay dividends.
Lastly, it’s critical to have a long-term perspective when investing in dividend stocks. While it can be tempting to focus on short-term gains, dividend stocks are designed to provide a steady stream of income over time. By reinvesting dividends, you can compound your returns and increase your wealth over the long term.
In conclusion, dividend stocks can be an excellent way to generate income and increase your wealth over time. By looking for companies with a strong track record of paying and increasing their dividends, a durable competitive advantage, and solid financials, you can build a diversified portfolio that can weather economic storms and provide a steady stream of income for years to come.
How to invest in dividend stocks?
If you’re interested in investing in dividend stocks, one platform that you may want to consider using is eToro. eToro is a social trading and multi-asset brokerage platform that allows users to invest in stocks, ETFs, cryptocurrencies, and more.
eToro offers a user-friendly platform that is easy to navigate, making it accessible for both beginner and experienced investors. With eToro, you can easily search for dividend stocks, view their performance, and make informed investment decisions.
Furthermore, eToro offers a unique feature called CopyTrading, which allows users to automatically copy the trades of other successful traders. This can be a great way to learn from experienced investors and potentially generate returns on your investment.
Overall, if you’re interested in investing in dividend stocks, eToro can be a great platform to use. With its user-friendly interface and unique features, eToro can help you build a diversified portfolio of dividend stocks and potentially generate a steady stream of income over time.
