Dividend stocks are shares of companies that regularly distribute a portion of their net profits to shareholders. The technology sector offers a dividend yield averaging about 0.82%. However, there are often more attractive investment options available on the market.
Investing in growth-oriented technology companies that pay dividends provides a dual benefit. An investor receives passive income regularly, while their capital appreciates due to rising stock prices.
High dividend yield stocks are not always the best investment choice. It is necessary to select securities for dividend investing with the help of a whole set of indicators. Below, we’ll explain how to find the best stocks in 2024 and how to invest to create an additional income stream.
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What are the best dividend stocks?
The best dividend stocks are those that provide regular dividend payments, not necessarily those with the highest possible yield. Stability of payments and the annual dividend growth rate are more crucial factors.
Dividend investors looking for the best dividend stocks to their portfolios in the Dividend Aristocrats Index. This term refers to companies that have increased its dividend year after year for 25 years or more.
How to invest in dividend stocks
To build a portfolio of individual dividend stocks, follow these steps:
- Open a brokerage account. You might also consider an account with tax benefits, such as an IRA.
- Select stocks that align with an income investing strategy.
- Determine the proportion of each stock within the portfolio.
- Purchase the necessary amount of stocks that pay dividends.
- Regularly monitor dividend payments using dividend track services.
An easy way to add many dividend stocks to your portfolio is by investing in mutual funds and exchange-traded funds.
In the question of dividend stocks or dividend funds, the latter is preferable. Such investment instruments provide diversification even with a small capital. Unlike individual stocks, funds have a better chance to keep the dividend stream stable.
Why Best Dividend Growth Stocks in the High-Tech Industry are Important
The technology sector is one of the fastest growing sectors. The capitalization of technology companies is growing faster than representatives of other industries.
Dividend growth stocks do not only bring passive income. They can significantly increase an investor’s capital.
There are fewer dividend stock offers in the technology sector than in other sectors. It has a dividend yield below the average for the S&P 500. In times of high interest rates, the comparison of dividend stocks vs bonds is often in favor of the latter.
How do you find the best dividend stocks to buy?
To find the best dividend stocks to buy, you can use screeners. These are online services that allow you to select securities based on various criteria. You can identify dividend stocks based on the following parameters:
- dividend yield;
- number of consecutive years of dividend increases or annual dividend growth rate;
- dividend payout ratio, etc.
Choosing stocks for your portfolio solely on the basis of high dividend yield is a mistake. This indicator increases also when quotations fall.
Also a dividend should grow in absolute value. CAGR is important for a long-term investor. This indicator reflects the increase in passive income of shareholders over the last few years.
Another key factor is the dividend payout ratio. Many dividend investors believe that it should not exceed 80%. If this ratio is higher, there is a risk of lower payments to shareholders. This could happen due to a lack of free cash flow.
Before you invest in dividend stocks, you should study the dividend policies. This will allow you to find out what the size of the company’s payout depends on.
Best dividend stocks to buy and hold in 2024
Below are the top dividend stocks to consider for your portfolio. The stocks on this list are selected based on such criteria as high dividend, good growth rates, and optimal payout ratio.
1. Realty Income Corp. (O)
This is one of the best dividend stocks in the US market. Realty Income is a real estate investment trust. Net assets are single-tenant commercial properties. The territory of presence is the United States, Europe, and the United Kingdom. There are a total of 15,450 properties owned.
You can check out the full analysis of Realty Income Corp. right here.
Realty Income is a member of the Dividend Aristocrats Index. The company has increased its dividend for 30 consecutive years. Shareholders receive dividends every month.
Key metrics according to beatmarket.com (as of November 22, 2024 ):
- Forward Annual Dividend – $3.16.
- Forward Annual Dividend Yield – 5.43%.
- Dividend growth over 5 years – 20%.
- Payout ratio – 99.05 %.
2. Oracle Corporation (ORCL)
Oracle Corporation is engaged in the development of database and cloud computing software. The company primarily offers enterprise products. For example, software for enterprise resource management, supply chain planning, and others.
You can check out the full analysis of Oracle Corporation right here.
Annual dividends have been continuously increasing for 10 years. Profit distribution to shareholders occurs quarterly.
Key metrics according to beatmarket.com (as of November 22, 2024 ):
- Forward Annual Dividend – $1.6.
- Forward Annual Dividend Yield – 0.84%.
- Dividend growth over 5 years – 100%.
- Payout ratio – 27.23 %.
3. Verizon Communications Inc (VZ)
Verizon Communications is one of the top three largest telecommunications companies in the world. It is also the largest wireless carrier in the United States. This line of business generates more than ⅔ of revenue. Additionally, VZ provides fixed-line telecommunications, satellite broadband, and information services.
You can check out the full analysis of Verizon Communications Inc right here.
The company has been increasing its dividend without interruption since 2004.Shareholders are paid quarterly.
Key metrics according to beatmarket.com (as of November 22, 2024 ):
- Forward Annual Dividend – $2.71.
- Forward Annual Dividend Yield – 6.38%.
- Dividend growth over 5 years – 11%.
- Payout ratio – 58.49 %.
4. Cisco Systems Inc (CSCO)
Cisco Systems operates in the field of networking equipment. Clients are leading telecommunication companies and other large organizations. Another line of business is information security.
You can check out the full analysis of Cisco Systems Inc right here.
Cisco Systems subsidiaries are leaders in areas such as Internet of Things, domain security, energy management, etc.
The issuer boasts 13 consecutive years of dividend increases. Dividend payments are made quarterly.
Key metrics according to beatmarket.com (as of November 22, 2024 ):
- Forward Annual Dividend – $1.6
- Forward Annual Dividend Yield – 2.73%.
- Dividend growth over 5 years – 21%.
- Payout ratio – 34.27 %.
5. KLA-Tencor Corporation (KLAC)
KLA Corporation offers equipment and software for testing chips at various stages of manufacturing. Its key customers are TSMC and Samsung Electronics. The products are also in demand by other manufacturers of semiconductor wafers, printed circuit boards, large-panel displays and others.
You can check out the full analysis of KLA-Tencor Corporation right here.
More than 50% of KLA Corporation’s sales market is in the PRC and Taiwan. Therefore, in October 2024, calls to ban American companies from cooperating with Huawei led to a 17% drop in quotations.
The company has raised its dividend every year since 2010. It pays dividends every quarter.
Key metrics according to beatmarket.com (as of November 22, 2024 ):
- Forward Annual Dividend – $6.8
- Forward Annual Dividend Yield – 1.06%.
- Dividend growth over 5 years – 88%.
- Payout ratio – 23.87 %.
6. Skyworks Solutions Inc (SWKS)
Rounding out the list of the best dividend stocks is Skyworks Solutions. It is a manufacturer of semiconductors, primarily needed to receive radio signals. The company’s products are used in communication systems, automotive industry, medicine, electronic devices, and others.
You can check out the full analysis of Skyworks Solutions Inc right here.
Skyworks Solutions products are in demand worldwide, with manufacturing facilities located primarily in the United States. The independence of the manufacturing process from China and Taiwan is one of the company’s strengths.
Regular dividend increases for the entire 8 years. Over the past 5 years, however, they have grown faster than the industry average. The company pays quarterly dividends.
Key metrics according to beatmarket.com (as of November 22, 2024 ):
- Forward Annual Dividend – $2.8
- Forward Annual Dividend Yield – 3.35%.
- Dividend growth over 5 years – 86%.
- Payout ratio – 32.8 %.
FAQ
Which tech stocks pay the highest dividends?
The leader among technology dividend-paying stocks is Xerox Holdings Corporation (XRX). Its dividend yield is 11.86% as of Nov. 22, 2024. But XRX don’t have good history of payments. Among reliable tech companies the leader is Verizon Communications. Its yield 6.32%
Which fund has the highest income from dividends?
Among the best mutual funds for dividend stocks is VHYAX. The 12-month dividend yield is 2.58%. The fund tracks the FTSE High-Dividend Yield Index. Expense ratio is just 0.08%.
What are the safest dividend stocks?
First and foremost, stocks that provide reliable dividend income include dividend kings. This is the name given to issuers that have hiked its dividend for more than 50 consecutive years. An example of such a dividend payer is Coca-Cola. But usually such a stock has a below-average dividend yield.
How to make $1000 a month in dividends?
The amount of capital required depends on the average annual dividend yield of the portfolio. At 3%, you will need to invest $400,000 in dividend stocks and funds. This will allow you to receive $1,000 in monthly dividend.
What is a dividend fund?
These exchange-traded or mutual funds focus on stocks with strong dividend yields. Also, the net assets of dividend funds may include securities with rapidly growing dividends.
