Investors buy stocks to profit from their growth, but they can increase their investments by picking dividend stocks. Companies that offer dividends make payments to their stockholders to share profits. Dividends earn a return for an investor per share of a stock, and companies usually pay them quarterly. You should assess how safe dividend-paying stocks may be. That entails examining a stock’s yield — the percentage of a company’s share price paid in dividends — and its history of paying dividends.
Quick Look at the Best Safe Dividend Stocks:
- Verizon Communications
- Walgreens Boots Alliance
- Morgan Stanley
- Enterprise Products Partners
- Diamondback Energy
- Realty Income Group
The Best Safe Dividend Stocks
The safest dividend-paying shares are paid quarterly, have a high yield and a history of payment growth. Companies offering such stocks usually have a high market value and a good track record of earning profits consistently. Your dividend yield should only be one part of your process when looking at a dividend stock. You can use other dividend investing techniques to get the best results, including watching out for dividend growth, targeting dividend increases and much more.
Analyzing all the stocks to determine the ones offering the safest dividend payments is arduous. So Benzinga has made your search easier by identifying stocks currently offering good returns.
Lowe’s Companies Inc. (NYSE: LOW) has cemented its place as the second-largest home improvement retailer in the world. Its retail chain stores cover the U.S., Canada and Mexico, offering products and services for maintenance, repair, home decorations and remodeling.
Not only has Lowe’s share price significantly climbed in the last decade, but the company has paid a dividend every quarter since going public in 1961. In May 2021, Lowe’s announced a 33% increase in a quarterly cash dividend.
Lowe’s investors are most impressed by the company’s history of increasing dividend payments for the last few decades. The company’s May 2022 stock price analysis resulted in Citigroup maintaining its buy rating. Telsey Advisory Group has maintained its outperform rating.
Although inflation and rising interest rates may be a challenge to maintaining its customer base, Lowe forecasts aging home stock and high real estate prices to increase sales.
2. Verizon Communications
Verizon Communications Inc. (NYSE: VZ) is a telecommunication business offering technology, communications and entertainment products and services. Verizon is the largest U.S. wireless carrier and also provides fixed-line telecom operations to more than 25 million homes and businesses.
The telecommunication industry is highly competitive, but Verizon has increased dividend payments for 15 consecutive years. The company pays dividends quarterly and maintains a high yield. It has managed to exceed analysts’ forecasts of earnings per share (EPS) numerous times.
Verizon offers wireless connections to more than 120 million people and has gained more than a million net postpaid wireless users in Q4 2021.
3. Walgreens Boots Alliance
Walgreens Boots Alliance Inc. (NASDAQ: WBA) has established itself as a retail pharmacy giant. It has more than 9,000 stores in the U.S., with a presence in 50 states. International countries where Walgreens operates include the U.K., Thailand, Mexico and Chile.
The company has obtained the leading U.S. market share of the prescription drug market. Its share price increased after the sale of the majority of its Alliance Healthcare wholesale business. Walgreens’ growth and expansion plans include lowering costs, increasing digital sales and providing full-service healthcare clinics.
Walgreens has paid quarterly dividends for 89 years. Moreover, the company has raised dividend payments for 46 consecutive years. Combined with its generous dividend yield, Walgreens is set to attract more investors.
4. Morgan Stanley
Morgan Stanley (NYSE: MS) has grown into a global investment bank and an investing powerhouse since 1924. The company gained a reputation for technology sector deals, but it has shifted its focus toward wealth and investment management, showing that with acquisitions of E*Trade and Eaton Vance.
About half of Morgan Stanley’s revenue is from institutional securities, and it generates 30% of total revenue outside the Americas. The company usually pays four dividends annually and usually has a higher yield than the U.S. market average.
Morgan Stanley has more than $5 trillion of client asset value. Analyst firm Oppenheimer gave Morgan Stanley an outperform rating in its May 2022 analysis.
5. Enterprise Products Partners
Enterprise Products Partners L.P. (NYSE: EPD) transports and processes natural gas, refined products, crude oil and petrochemicals. It’s one of the largest midstream companies in the U.S. The company is dominant in the natural gas liquid (NGL) market and provides services across the hydrocarbon value chain.
Enterprise investors have been impressed with the company’s high dividend yield, sometimes surpassing 7%. The company usually pays dividends four times per year and has increased its dividend payment for 23 consecutive years.
Analyst firm Credit Suisse gave the company an outperform rating in its May 2022 analysis, with the share price having significant upside potential in the subsequent 12 months.
6. Diamondback Energy
Diamondback Energy, Inc. is an independent oil and natural gas company that focuses on the acquisition, development, exploration and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas.
7. Realty Income Corp
Realty Income (The Monthly Dividend Company) is an S&P 500 company and member of the S&P 500 Dividend Aristocrats index. The fund invests in assets that can produce monthly dividends that will increase over time.
What to Look for in Dividend-Paying Stocks
Just because a stock pays dividends, it doesn’t mean it’s a safer option than a non-paying stock. You need to analyze a few factors to determine if a dividend stock is safe. That’ll help you determine an investment’s long-term potential, including how it might fit into a dividend reinvestment plan.
Factors such as a company’s market value and the length of its history play a big role. But investors look for companies that expect long-term earnings growth, usually at least 5%. For investors to receive dividends, a company has to have consistent cash flow. It cannot reward investors if it’s unprofitable.
Another factor that investors examine when purchasing stocks is a low debt-to-equity ratio. It’s also important that you compare a company’s dividend yield to its competitors. You can also use the dividend payout ratio to determine dividend sustainability. Preferably, a company should pay dividends to shareholders quarterly.
A company that raised dividend payments for several consecutive years has demonstrated an ability to increase investor income. At the same time, this is not a guarantee of infinite improvement. You must carefully monitor each investment to ensure that it pays out in the manner you prefer (or planned on.) If the asset is not paying out properly, you can reinvest that money elsewhere given your current investing strategy.
How are Dividends Paid?
The traditional method of shareholders receiving a dividend payment was via mail. A company would mail a check to a stockholder days after the ex-dividend date — the day the stock trades without the previously declared dividend. Remember, your cash payout is not instant, but you can expect that the dividend fund will be dispersed relatively quickly.
Most companies pay stockholders with cash. An alternative method of payment is company stock. Investors can opt for a dividend reinvestment program (DRIP). It enables investors to reinvest dividends into a company’s stock at a discount, meaning your dividend payout can lend itself to future growth in your portfolio.
Another form of payment is preferred dividends. Preferred stock investors receive bond-like payments, which are usually fixed. A company distributes a special dividend for profits accumulated over several years that it doesn’t need. At times, dividend cuts may occur. At other times, you may use these extra funds to enact a dividend investing strategy that can grow your portfolio much more than expected.
Companies pay dividends per share of stock. As an example, an investor with 100 shares, paying $1.50 quarterly, would receive $150.
Should All Stocks Pay Dividends?
Not all stocks pay dividends. The advantage of owning a dividend-paying stock is additional income. Stockholders of non-paying dividends earn profits by selling the stock at a higher price than the buy price.
Dividend-paying stockholders earn from dividends and after selling stocks at a price higher than they bought at. It’s common for rapidly expanding companies not to offer dividend payments. They use the profits to reinvest into operations to expand the business. That could increase the share price.
Companies that pay dividends have less money to reinvest into the company, limiting their expansion and share price increase. You simply need to decide how you wish to make a profit on each investment—and they are all a bit different.
Compare Online Brokers for Stocks
Choosing a reliable online stock broker that offers safe dividend stocks can be risky. Research is time-consuming, so Benzinga made the process easier by compiling a list of the best stock brokers. You can better access the stock market, tap into index funds, ETFs, dividend-paying assets and more when you use the best broker for your situation.
Frequently Asked Questions
What is the safest dividend-paying stock?
Benzinga’s analysis revealed that Lowe’s Companies has proven to be a safe dividend-paying stock. It’s the second-largest home improvement retailer in the world and has paid dividends every quarter since going public in 1961. The company has consistently increased dividend payments for several years, and it announced a 33% increase in 2021. The market’s confidence in Lowe’s stock is evident in the rising stock price over the last 10 years. Although competition in the home improvement industry is stiff, Lowe forecasts increased sales because of aging home stock and high real estate prices.
How do you know if a dividend-paying company is safe?
Every investor has a unique definition of a safe dividend-paying stock. But the consensus is a company that offers consistent dividend payments, provides a high yield, has a low debt-to-equity ratio and expects long-term earnings growth. You can also compare a company’s dividend yields to its competitors. If it offers a higher yield than competitors consistently, it’s shown to provide dividend sustainability — use the dividend payout ratio. Also, you can examine if a company has increased dividend payments throughout the years.
What are the best safe dividend stocks?
Check out Benzinga’s list above of the best safe dividend stocks.
What is a dividend growth stock?
A dividend growth stock is a stock that’s clearly still growing but is already paying dividends to shareholders.