The 10 Best Dividend Stocks to Buy
Even with interest rates slowly on the rise, historically speaking, they remain quite low: The 10-year yield sits at a measly 2.5 percent. For many income investors, retirees and baby boomers who rely on investments like these, bonds still simply don't offer the sort of cash flow they need. Thankfully, dividend stocks offer a nice mix of income and capital appreciation.
While stocks are more volatile than Treasurys, not all stocks are created equal, and choosing the cream of the crop can help manage risk. Here are 10 of the best dividend stocks to buy now, and what makes them better than the rest of the pack.
General Motors Co. (ticker: GM). One of America's great corporate titans of industry, GM, continues to benefit from the years-long auto industry resurgence. The Detroit automaker sold 4.2 percent more cars in February 2017 than it did the year before, despite analysts expecting sales to fall 1 percent across the industry. With a healthy, sustainable dividend of 4.4 percent and a dirt-cheap price-earnings ratio just under 6, GM is one of the best dividend stocks to buy now. Sure, GM isn't growing by leaps and bounds, but conservative income investors can buy and hold for the handsome dividend.
[See: 7 Dividend Stocks to Buy That Pay More Each Year.]
Boeing Co. (BA). Boeing, another American industrial powerhouse, has been on an absolute tear since Trump's election. In just four months, between Nov. 1 and March 1, BA stock rose 29 percent, buoyed by hopes that the new administration's commitment to defense spending would trickle down to one of the biggest military contractors. That seems like a good assumption; Trump's budget plan includes a nearly 10 percent, or $54 billion increase in military spending, and the president has already asked Boeing to price out F-18 Super Hornets for the Navy, a deal that Lockheed Martin Corp.'s ( LMT) F-35 was supposed to have locked down. BA stock carries a dividend yield of 3.2 percent.
AbbVie (ABBV). Pharmaceutical giant AbbVie represents an interesting opportunity for all investors, offering a rare mix of high-growth, attractive valuations and a stellar dividend profile. Driven by sales of its blockbuster autoimmune disease drug Humira, analysts expect earnings per share to grow more than 14 percent annually for the next five years. Still, AbbVie trades for 10 times forward earnings, almost half the valuation of the Standard & Poor's 500 index. And the 3.9 percent dividend? That's been increasing annually for the last 44 years if you include Abbott Laboratories ( ABT) dividends, which ABBV was spun off from in 2013.
Cisco Systems (CSCO). Even after an impressive rally, network equipment maker and Dow member Cisco remains one of the best dividend stocks for your buck. Cisco gained a grasp on an important and lucrative market -- the hardware that enables the internet to both run and be accessed smoothly -- in the '90s and hasn't looked back. While no one expects much revenue growth from Cisco, its enviable margins and consistency make it a cash cow. Its P/E ratio of 17.7 falls to just 10.3 when you subtract the $14.33 per share -- or $71.9 billion -- in cash on hand. Cisco offers investors a dividend of 3.4 percent.
Home Depot (HD). The world's leading home improvement retailer has produced market-beating returns for decades now, and after a blowout February earnings announcement, HD stock is still going strong. Home Depot continues to grow same-store sales faster than rival Lowe's ( LOW), which is impressive given its size. Encouraged by a successful push into the professional market and high-value transactions, HD also announced a massive 29 percent hike to its dividend in February. Home Depot may even get a boost from the executive branch: The Trump administration's determination to roll back Dodd-Frank to increase lending could benefit Home Depot's remodeling business big time. HD stock has a dividend of 2.4 percent.
U.S. Bancorp (USB). U.S. Bancorp is a nice option for investors who want some exposure to bank stocks but don't want to invest in risky financials doing who knows what with depositors' money. USB errs on the conservative side when it comes to risk-taking, and imminent interest rate hikes should boost its net interest margins along with the rest of the industry. At less than 15 times forward earnings, you aren't paying an arm and a leg to invest, and given the fact that USB only uses 33 percent of its earnings to pay its dividend, there's plenty of room to increase it going forward. USB has a 2 percent dividend.
[See: 8 Great ETFs That Hold ETFs.]
Southern Co. (SO). Some of the best dividend paying stocks are utilities, and for good reason. Utilities benefit from built-in, permanent demand for their goods and services, and typically operate in oligopolies. In exchange for this power they're highly regulated and price-controlled, but even then, they're absolute cash cows. Regional electric utility Southern Co. is no exception, and the 72-year-old company has increased its dividend payment -- now 4.4 percent -- annually for the past 15 years. With shares trading in a very tight range, SO stock is a great option for conservative investors. This stock won't make you rich, but it will provide a reliable income stream.
Verizon Communications (VZ). Like Southern, VZ stock won't make you a fortune. But it will provide a very reliable stream of income year-in and year-out, and that's what matters to most investors looking for the best dividend stocks to buy. Competitively speaking, Verizon has more subscribers than any other wireless carrier, and its leads the pack in 5G network development, both big advantages its rivals simply don't have. Its acquisition of AOL and proposed acquisition of Yahoo ( YHOO) will help diversify its revenue stream over the long-run. A recently approved 100 million-share buyback program should also provide some downside protection for the stock price. VZ has a dividend of 4.6 percent.
3M (MMM). Not only is MMM one of the best dividend stocks to buy now, it's been a dividend aristocrat for decades now. The diversified global conglomerate has been around since 1902, which is impressive, but what's more remarkable is that it's been paying dividends every year for the last 101 years. As you might expect, there are only a handful of dividend stocks paying out for 100 years or more. The company, which makes everything from Post-It notes to stethoscopes, has also annually increased its dividend for the last 58 years -- or since Eisenhower was president. It's now at 2.4 percent.
[See: 10 Long-Term Investing Strategies That Work.]
Seagate Technology PLC (STX). Shares of data storage company Seagate are not for faint of heart, with STX stock up about 40 percent in the last year alone. With a market value around $14 billion, Seagate is dramatically smaller than every other company on this list, which makes it a riskier proposition for investors. Still, it makes sense why STX has been on such a run: Instead of hitching its wagon entirely to the PC industry, the memory company increasingly sells storage to data centers and servers, which swallow up more data every year. With a 5.5 percent yield, Seagate is quite a unique dividend stock.
John Divine is an investing reporter for U.S. News & World Report, where he covers financial markets and the economy, with a focus on individual stock analysis. He has been an investor himself for over 10 years, and has been writing professionally about stocks and investing for the last five years. He previously wrote about the stock market for The Motley Fool and InvestorPlace, and his work has appeared on Yahoo! Finance, MSN Money, and AOL DailyFinance. He graduated from Appalachian State University in 2011 with a bachelor's degree in finance and banking. At Appalachian, he was a member of the Bowden Investment Group, a team of students that ran a real-money portfolio worth over $100,000. You can follow him on Twitter or give him the Tip of the Century at jdivine@usnews.com.
