High-yield dividend stocks are an attractive tool for generating passive income. They are primarily used by investors who want to live off their capital today, such as retirees.
High dividend stocks can offer current yields of 15% or more. However, mostly higher dividend yield stocks than the average of the S&P 500 index are considered risky assets. They are not suitable for a conservative investment strategy.
The reason for this is the inability to guarantee the dividend safety over several years. Nevertheless, among high dividend stocks, there are several securities with a long history of payouts. Individuals planning to receive high income in the future should pay attention to the prospects for maintaining and growing investors rewards.
When selecting high dividend stocks, risk assessment is crucial. It is necessary to analyze the likelihood of maintaining and further increasing payout amounts, as well as to consider factors that influence quotes
Our review includes 25 companies. Their dividend yield at the beginning of March 2025 is 4% or more. In the article, we will answer the question: “What is the highest paying dividend stock?” We will also explain how to create a diversified portfolio of the best high dividend stocks.
Table of Contents
What Are Dividend Stocks?
Dividend stocks are securities whose holders receive regular income from a company’s earnings distribution. Dividend payments typically occur quarterly, although some issuers pay dividends monthly. Other possible payment schedules include semi-annually or annually.
Dividend yields are usually calculated as the total annual dividend divided by the current price of the security. Therefore, a high yield does not always indicate the company’s success; it can be a result of falling quotes.
Dividend stocks are considered more reliable assets than growth companies. They help maintain portfolio stability during times of crisis. Their prices are supported by the interest of many investors in regular payouts, and dividend reinvestment is another way to increase capital, especially beneficial in a bear market.
It is more challenging to define what are good dividend stocks. For retirees, good dividend stocks are those that currently offer higher dividend yields than the market average. For younger investors, they are securities from companies that consistently increase their payouts. In any case, important factors include the stability of investors’ rewards and quotes.
Investing for Income: Dividend Stocks vs. Dividend Funds
There are two investment options with the goal of generating dividend income: direct investments in high dividend stocks and purchasing index funds.
The main argument in favor of the first option is the potential for higher total returns. Experienced investors have the opportunity to create a portfolio of market leaders. Additionally, they can save on fund fees and gain cost advantages.
However, there are drawbacks to direct investing in high dividend stocks:
- the need for strong knowledge to conduct in-depth analysis of companies;
- time commitment required for portfolio management;
- the necessity of having substantial capital for diversification of investments.
Investments in ETFs and mutual funds are more suitable for beginners and individuals who are not willing to spend time studying the market. The first disadvantage of funds is the reduction in overall income due to fees. The management firm retains these fees regardless of financial performance, and the fee amount varies for each fund.
Typically, we are talking about tenths of a percent. However, over a horizon of decades, this leads to significant changes in returns. Let’s consider an example with the following conditions:
- initial capital: $10,000;
- investment period: 30 years;
- frequency of dividend reinvestment: once a year.
With an average annual return of 5.5%, the total profit would be around $40,000. When accounting for fees and a return that is 0.1% lower, the result would be approximately $1,400 worse.
Index funds replicate a specific index, for example S&P 500. Therefore, their net assets may include companies with unsatisfactory financial results. An investor who buys individual stocks can exclude such securities from their portfolio, but a fund manager cannot.
However, the drawbacks mentioned are offset by the advantages of dividend funds:
- Rapid diversification: With a single investment, an individual gains a balanced portfolio of high dividend stocks.
- High degree of diversification even with a small capital: An ETF share can cost less than $100, allowing the holder to indirectly own a stake in dozens or even hundreds of companies.
- Risk reduction: The performance of an index fund depends on the results of many companies. Therefore, the failure of 1 or 2 of them will not have a significant impact.
- No need to spend time tracking multiple companies.
- Savings on broker commissions through passive investing via ETFs: An individual buys one security instead of several dozen.
- The ability to automatically reinvest dividends (only if it concerns a bond fund focused on high dividend stocks, not an ETF).
An important factor in building capital through investments in dividend stocks is the reinvestment of dividends. Below is a comparison of the returns of the S&P 500 with an index that takes into account dividend reinvestment.
The image clearly shows the difference in the final result. When it comes to a time horizon of decades, reinvestment allows profits to increase significantly.
However, it is important to remember that receiving dividends almost always entails tax obligations. Exceptions include:
- investment accounts with tax benefits;
- the right to use a 0% tax rate (applicable to qualified dividends for income not exceeding $47,025 for a single investor and $63,000 for head of household).
If capital grows due to asset value, “paper earnings” do not lead to additional expenses. Taxes are only paid upon the sale of securities.
How to Evaluate High Dividend Stocks
It is not enough to determine what are the highest paying dividend stocks. Before purchasing, it is essential to conduct a safety analysis of the asset. The following indicators should be examined:
- payout ratio;
- stability of dividend yield;
- financial health.
The payout ratio reflects the portion of the company’s earnings that is distributed to investors. If this ratio exceeds 80%, it is a red flag, indicating a high likelihood of dividend cuts in the future. At best, the corporation may not increase its payouts, which could negatively impact share prices.
The following indicators help assess the reasons for higher dividend yields compared to other companies in the industry. This could be a sharp decline in quotes due to investors fleeing from these dividend stocks. Another possible factor is the declaration of special dividends, which may result in lower subsequent payouts.
To evaluate a company’s financial wellness, one should look at its debt levels. It is important to take a peer comparison of these levels with similar companies. If the indicators are significantly worse, it may be a reason to avoid purchasing those high dividend stocks.
Selection Criteria for Safe High Dividend Stocks
The first criterion to consider when selecting high dividend stocks is the capitulate. According to experts, it should be no less than 4%. Otherwise, the dividends cannot be considered high.
However, the minimum yield is not the only criterion. When forming a long-term portfolio, it is essential to take into account not only the current dividend yield but also the stability of the payouts. Therefore, when evaluating high dividend stocks, the duration of the dividend streak is considered. This is the number of years during which the business has increased or at least maintained its payouts.
When assessing the dividend safety score, attention is also paid to the credit rating. This is the quickest way to determine the financial stability of the issuer. Investing in dividend stocks with a low investment grade can lead to a loss of money.
Liquidity of securities is also important. In the event of serious problems for the business, an investor may not be able to sell illiquid dividend stocks or may be forced to sell them at a significant discount.
Current List of High Dividend Stocks by Yield
The dividend yield is typically calculated based on the forward dividend for the next 12 months. A trailing dividend (the amount paid over the last 12 months) may also be used.
To calculate the current yield, current stock prices are utilized. An investor can compute their personal yield for their portfolio, taking into account the purchase price.
Below, one can find out which stock has the highest dividend. The listed companies are sorted by annual dividend yield. Additionally, other market data were considered when selecting securities, primarily the consistency of payouts, the rates of dividend growth, and the prospects for their sustainability in the future.
- Ares Capital – 8.85%.
- Altria – 7.58%.
- Main Street Capital – 7.34%.
- LyondellBasell – 7.29%.
- Dow – 6.85%.
- Verizon – 6.79%.
- Enterprise Products Partners – 6.78%.
- Highwoods Properties – 6.65%.
- W. P. Carey – 6.49%.
- Enbridge – 6.34%.
- Realty Income – 6.00%.
- NNN REIT – 5.75%.
- Alexandria Real Estate – 5.32%.
- Pembina Pipeline – 5.27%.
- United Parcel Service – 5.19%.
- Canadian Natural – 5.03%.
- Dominion Energy – 4.98%.
- AT&T – 4.86%.
- Ennis – 4.84%.
- Prudential Financial – 4.41%.
- Magna – 4.39%.
- Rexford Industrial Realty – 4.39%.
- Philip Morris International – 4.35%.
- Kinder Morgan – 4.28%.
- Best Buy – 4.04%.
Tax Considerations for Dividend Stocks
Improving tax efficiency is an important issue for investors in dividend stocks. The fiscal burden depends on several factors.
First of all, it is necessary to know that there are two types of investment accounts:
- taxable accounts;
- accounts that provide tax credits.
The second type includes, for example, retirement accounts. Classic 401(k) and IRA accounts assume that a person pays taxes only after withdrawing money upon retirement. Roth 401(k) and Roth IRA accounts exempt investment income from taxes.
In a regular taxable account, the tax rate depends on two factors:
- whether the dividends are classified as qualified or non-qualified;
- investor’s income.
The most effective method for optimizing taxes when investing in dividend paying stocks is to open a retirement account. However, this comes with restrictions on the maximum contribution amount. It also deprives the investor of the ability to freely manage their funds. Therefore, the most popular strategy for optimizing dividends is long-term investing. Qualified dividends are taxed at a rate ranging from 0% to 20%.
For dividends to be classified as qualified, the investor must hold the share for more than 60 days during a specified period. This period begins 121 days before the ex-dividend date. Additionally, the status of the firm is taken into account.
When it comes to investing in securities from other countries, it is necessary to study their tax legislation. For example, in Canada, there is a so-called withholding tax.
The Canada Revenue Agency generally withholds 30% of the amount paid to foreign investors. However, there is a tax treaty between the U.S. and Canada that allows for a reduction of the rate to 15%. The investor can also claim a credit for the amount withheld and reduce their taxable income in the U.S.
Top 25 High Dividend Stock Profiles
Below is a list of top dividend stocks that offer above-average yields. There are no dividend stocks here whose upcoming payouts will bring 10%-12%. However, the listed companies offer relatively reliable dividends. They have a promising business model and stable free cash flow. Many of them have already established themselves as reliable dividend payers. This list can be considered an answer to the question: “What are the best dividend stocks?”
For each share the forward yield is indicated, as well as the period during which the business has not reduced its dividend amount. When selecting securities, the company’s balance sheet was taken into account. The list does not include issuers that have excessive debt and other signs of financial instability.
| Ticker | Name | Industry | Dividend Yield | Safety Score |
| ARCC | Ares Capital | Asset Management and Custody Banks | 8.85% | Very safe |
| MO | Altria | Tobacco | 7.58% | Safe |
| MAIN | Main Street Capital | Asset Management and Custody Banks | 7.34% | Very safe |
| LYB | LyondellBasell | Commodity Chemicals | 7.29% | Safe |
| DOW | Dow | Commodity Chemicals | 6.85% | Carefully |
| VZ | Verizon | Telecom Services | 6.79% | Very safe |
| EPD | Enterprise Products Partners | Midstream Services | 6.78% | Very safe |
| HIW | Highwoods Properties | Office REITs | 6.65% | Very safe |
| WPC | W. P. Carey | Diversified REITs | 6.49% | Safe |
| ENB | Enbridge | Midstream Services | 6.34% | Safe |
| O | Realty Income | Retail REITs | 6.00% | Safe |
| NNN | NNN REIT | Retail REITs | 5.75% | Very safe |
| ARE | Alexandria Real Estate | Health Care REITs | 5.32% | Safe |
| PBA | Pembina Pipeline | Midstream Services | 5.27% | Safe |
| UPS | United Parcel Service | Air Freight and Logistics | 5.19% | Very safe |
| CNQ | Canadian Natural | Oil and Gas Production | 5.03% | Safe |
| D | Dominion Energy | Multi-Utilities | 4.98% | Unsafe |
| T | AT&T | Telecom Services | 4.86% | Unsafe |
| EBF | Ennis | Commercial Printing | 4.84% | Safe |
| PRU | Prudential Financial | Life and Health Insurance | 4.41% | Carefully |
| MGA | Magna | Automotive Parts | 4.39% | Safe |
| REXR | Rexford Industrial Realty | Industrial REITs | 4.39% | Safe |
| PM | Philip Morris International | Tobacco | 4.35% | Safe |
| KMI | Kinder Morgan | Midstream Services | 4.28% | Unsafe |
| BBY | Best Buy | Electronics Retail | 4.04% | Very safe |
#1: Enbridge (ENB)
- Sector – Energy – Oil and Gas Storage and Transportation.
- Yield – 6,34%.
- Dividend Safety Score – 87 (Safe).
- Dividend Streak – 72 years.
The energy infrastructure of Enbridge includes a pipeline network for crude oil transportation and natural gas distribution. The business transports 30% of crude oil in North America. It covers 20% of the U.S. natural gas needs. ENB receives stable regulated income. It has a BBB+ credit rating. This is a Canadian corporation. When calculating the yield, it is necessary to consider the withholding tax.
#2: Realty Income (O)
- Sector – Real Estate – Retail REITs.
- Yield – 6%.
- Dividend Safety Score – 85 (Safe).
- Dividend Streak – 56 years.
Realty Income is a REIT that specializes in retail properties. The firm uses a triple-net leases system. Tenants pay all expenses (utilities, taxes). The occupancy rates exceed 96%. Realty Income has built a tenant diversification system. No single tenant accounts for more than 5% of the firm’s total income. An important feature is the monthly dividends.
#3: United Parcel Service (UPS)
- Sector – Industrials – Air Freight and Logistics.
- Yield – 5,19%.
- Dividend Safety Score – 97 (Very safe).
- Dividend Streak – 56 years.
UPS operates package delivery services in 200 countries. The main advantage of the firm is its logistics network. The distribution infrastructure includes a fleet of ground vehicles and 550 aircraft. The business processes demonstrate high operational efficiency. The business is a beneficiary of e-commerce growth.
#4: Ennis (EBF)
- Sector – Industrials – Commercial Printing.
- Yield – 4,84%
- Dividend Safety Score – 82 (Safe).
- Dividend Streak – 51 years.
Ennis produces printed custom products. These include business forms, labels, envelopes, and more. In recent decades, there has been industry consolidation in commercial printing. However, EBF has actively expanded by acquiring competitors. Today, it maintains dividend growth prospects. The corporation has a stable cash flow and a debt-free balance sheet.
#5: Verizon (VZ)
- Sector – Communications – Wireless and Internet Services.
- Yield – 6,79%.
- Dividend Safety Score – 90 (Very safe).
- Dividend Streak – 41 years.
Verizon Communications’ key source of profit is its wireless services. The business has an extensive subscriber base and offers premium rates. The downside is the highly competitive environment in the telecommunications industry, as well as the costs associated with developing network infrastructure and implementing 5G technology. The corporation has a credit rating of BBB+. At the same time, VZ maintains a stable cash flow.
#6: NNN REIT (NNN)
- Sector – Real Estate – Retail REITs.
- Yield – 5,75%.
- Dividend Safety Score – 91 (Very safe).
- Dividend Streak – 37 years.
The NNN REIT portfolio includes over 3,000 properties. These are not only retail properties. The firm collaborates with representatives from 30 industries. NNN operates on the principle of triple-net leases. The property management system provides for broad tenant diversification. The focus is on experiential retail, fitness centers, and other sectors that are not adversely affected by the growth of e-commerce.
#7: Pembina Pipeline (PBA)
- Sector – Energy – Oil and Gas Storage and Transportation.
- Yield – 5,27%.
- Dividend Safety Score – 89 (Safe).
- Dividend Streak – 28 years.
PBA provides midstream services and earns fee-based revenue from the transportation of oil and gas in Western Canada. Pembina Pipeline’s energy infrastructure includes several processing plants. PBA’s long-term contracts provide minimum volume protection. Therefore, its revenue is predictable. This is a Canadian business. Its dividends are subject to withholding tax.
#8: Enterprise Products Partners (EPD)
- Sector – Energy – Oil and Gas Storage and Transportation.
- Yield – 6,78%.
- Dividend Safety Score – 90 (Very safe).
- Dividend Streak – 26 years.
EPD owns a pipeline network. Its energy infrastructure is connected to almost all shale oil fields in the United States. The business enters into long-term fixed-fee contracts. This ensures distribution growth and stable income.
The firm is a master limited partnership (MLP). This has tax implications, such as restrictions on benefits in retirement accounts and the requirement to use a K-1 form.
#9: Highwoods Properties (HIW)
- Sector – Real Estate – Office REITs.
- Yield – 6,65%.
- Dividend Safety Score – 93 (Very safe).
- Dividend Streak – 20 years.
HIW owns office properties. The firm is focused on the growing Sun Belt markets, including Atlanta, Nashville, and others. Highwoods Properties has strong tenant diversification. Over the next few years, lease expiration is expected for less than 10% of tenants. This allows for the expectation of maintaining occupancy rates and dividends.
#10: Best Buy (BBY)
- Sector – Consumer Discretionary – Computer and Electronics Retail.
- Yield – 4,04%.
- Dividend Safety Score – 94 (Very safe).
- Dividend Streak – 20 years.
Best Buy is a leader in electronics retail. BBY offers customers tech support when selecting complex equipment and fast delivery. The corporation’s strengths include e-commerce integration with brick-and-mortar stores and a price matching policy. Thanks to the latter, BBY customers receive the best deals.
#11: Philip Morris International (PM)
- Sector – Consumer Staples – Tobacco.
- Yield – 4,35%.
- Dividend Safety Score – 83 (Safe).
- Dividend Streak – 16 years.
Philip Morris International is represented in global markets with a large brand portfolio. The business’ cigarettes are sold in 150 countries, with a primary focus on emerging markets. PM is a leader in the development of smoke-free products, including vapes, heated tobacco, and others.
#12: Main Street Capital (MAIN)
- Sector – Financials – Business Development Companies.
- Yield – 7,34%.
- Dividend Safety Score – 92 (Very safe).
- Dividend Streak – 17 years.
MAIN is a business development firm. Its main activity is to provide capital to small companies, primarily through first-lien secured loans. The firm’s advantage is a well-diversified loan portfolio that includes about 150 companies. MAIN pays monthly dividends.
#13: Prudential Financial (PRU)
- Sector – Financials – Life and Health Insurance.
- Yield – 4,41%.
- Dividend Safety Score – 75 (Carefully).
- Dividend Streak – 16 years.
Prudential Financial is the largest life insurance firm in the U.S. and Europe. The management employs a conservative approach to finances. As a result, it manages to exceed capital requirements. To reduce sensitivity to interest rates, the business has decreased the share of annuities in its portfolio of contracts. The second source of income for PRU is other financial services, primarily investment management.
#14: Alexandria Real Estate (ARE)
- Sector – Real Estate – Health Care REITs.
- Yield – 5,32%.
- Dividend Safety Score – 81 (Safe).
- Dividend Streak – 14 years.
ARE focuses on life sciences properties. The business owns assets located in innovation hubs. Its clients are in the biotechnology and pharmaceutical business.
A strong point of Alexandria Real Estate is low competition. Healthcare real estate and laboratories are difficult to design. Additionally, space in key research facilities is limited. These factors ensure a constant demand for ARE.
#15: Ares Capital (ARCC)
- Sector – Financials – Business Development Companies.
- Yield – 8,85%.
- Dividend Safety Score – 93 (Very safe).
- Dividend Streak – 14 years.
ARCC was established in 2004 to participate in corporate lending. Today, it is the largest business development company in the U.S. One of its advantages is portfolio diversification. The borrower base of Ares Capital exceeds 400 companies, predominantly from non-cyclical sectors of the economy. More than half of ARCC’s investments are first-lien loans.
Ares Capital is the answer to the question of what stock has the highest dividend and has good performance metrics. According to BeatMarket, its Financial Score is 93 out of 100.
#16: Dow (DOW)
- Sector – Materials – Commodity Chemicals.
- Yield – 6,85%.
- Dividend Safety Score – 78 (Carefully).
- Dividend Streak – 14 years.
DOW is a representative of the chemical industry. The corporation has global operations. Its products are supplied to 150 countries around the world.
The main source of income is plastics production and chemical building blocks. DOW also offers performance materials used in the manufacture of paints, furniture, and more. Commodity chemicals is a cyclical industry. During downturns, the firm manages to maintain high dividends due to its diversified product portfolio and vertical integration.
#17: Magna (MGA)
- Sector – Consumer Discretionary – Automotive Parts and Equipment.
- Yield – 4,39%.
- Dividend Safety Score – 82 (Safe).
- Dividend Streak – 14 years.
Magna is a Canadian corporation engaged in global manufacturing of auto parts. An important area of the business is the development of components for electric vehicles. Magna’s clients include leading automotive manufacturers, such as Ford Motor. The main drawback is the industry cyclicality in vehicle production. During downturns, MGA’s quotes decline.
#18: LyondellBasell (LYB)
- Sector – Materials – Commodity Chemicals.
- Yield – 7,29%.
- Dividend Safety Score – 80 (Safe).
- Dividend Streak – 12 years.
LYB is the highest yielding stock in the chemical industry sector on our list. LyondellBasell is involved in the processing of fossil fuels into plastic resins. The firm also produces other petrochemicals.
LyondellBasell’s clients include manufacturers of clothing, packaging, and more. LYB is a representative of commodity chemicals with a cyclical industry production cycle. However, the business maintains its dividend levels during economic downturns. This is achieved through reduced capital expenditures and a number of other factors.
#19: Rexford Industrial (REXR)
- Sector – Real Estate – Industrial REITs.
- Yield – 4,39%.
- Dividend Safety Score – 88 (Safe).
- Dividend Streak – 11 years.
Rexford Industrial owns industrial properties located in Southern California. These include warehouses, logistics hubs, and more. Due to proximity to major U.S. seaports, the properties have a high occupancy rate. The company’s advantage is the high barriers to entry for new competitors, which are associated with the scarcity and high cost of land in the region.
#20: Canadian Natural Resources (CNQ)
- Sector – Energy – Oil and Gas Exploration and Production.
- Yield – 5,03%.
- Dividend Safety Score – 83 (Safe).
- Dividend Streak – 24 years.
CNQ is a corporation engaged in oil production. The majority of its output consists of high-carbon varieties extracted from oil sands. Commodity prices and energy resources are volatile. However, the breakeven point for Canadian Natural Resources is below $40 per barrel. The business is registered in Canada, so its dividends are subject to withholding tax.
#21: Dominion Energy (D)
- Sector – Utilities – Electric Utilities.
- Yield – 4,98%.
- Dividend Safety Score – 68 (Unsafe).
- Dividend Streak – 4 years.
Dominion Energy is an electric utilities company. Its operations fall under regulated operations. Dominion Energy benefits from rising rates.
A strong point is its focus on the Virginia market, which is the largest data center in the world. In the long term, the demand for electricity here will grow. Dominion Energy will have more opportunities for infrastructure investment in clean energy sources.
#22: AT&T (T)
- Sector – Communications – Wireless and Internet Services.
- Yield – 4,86%.
- Dividend Safety Score – 62 (Unsafe).
- Dividend Streak – 2 years.
AT&T’s core business focus is on wireless services and internet services. After selling its media assets, the company has concentrated on telecommunications. The payout ratio is 49.12%. AT&T generates a stable cash flow from the services it offers. Its revenue is not dependent on the phase of the economic cycle.
#23: Kinder Morgan (KMI)
- Sector – Energy – Oil and Gas Storage and Transportation.
- Yield – 4,28%.
- Dividend Safety Score – 66 (Unsafe).
- Dividend Streak – 9 years.
Kinder Morgan owns a pipeline network for natural gas transportation. Additionally, its midstream infrastructure allows for the transportation of oil and refined products. The company’s pipelines and energy storage are integrated with key U.S. production areas. In recent decades, KMI has implemented a self-funding model and significantly reduced its debt.
#24: W.P. Carey (WPC)
- Sector – Real Estate – Diversified REITs.
- Yield – 6,49%.
- Dividend Safety Score – 85 (Safe).
- Dividend Streak – 1 year.
WPC represents diversified REITs. It owns approximately 1,300 properties. More than 60% of them are industrial properties and warehouse facilities. Another 20% consists of retail properties. WPC has good tenant diversification. Its clients include around 300 companies from 20 industries. The most significant client accounts for less than 4% of total revenue.
#25: Altria (MO)
- Sector – Consumer Staples – Tobacco.
- Yield – 7,58%.
- Dividend Safety Score – 89 (Safe).
- Dividend Streak – 54 years.
Altria is one of the largest tobacco companies. In the U.S., it owns the Marlboro brand and other world-renowned cigarettes brands. Additionally, MO produces smoke-free products. These include alternative nicotine products such as moist smokeless tobacco, oral pouches, and others.
Altria is the answer to the question of what is the best dividend stock. As of March 2025, it is the highest-yielding among the dividend kings. These are companies that not only regularly pay shareholders but also increase dividends annually. Year after year, holders of these shares receive higher dividend yields in their portfolio.
Common Risks in High-Yield Dividend Investing
Yield traps refer to dividend stocks that show high yields as a result of declining quotes. Often, the reasons for falling stock prices are significant debts of the company.
Such businesses demonstrate interest rates sensitivity. The more a company spends on interest payments, the less it can allocate to dividends. Therefore, there is a risk that investors’ payouts may decrease or cease entirely.
Another risk associated with investing in high dividend stocks is sector concentration. There are no representatives from the IT sector among high-yield shares. Predominantly, these are REITs, consumer services, and others.
Additionally, investing in high dividend stocks carries general market risks that apply to all securities. This includes the likelihood of price declines, company bankruptcies, and more.
To reduce portfolio risk, attention is paid to payout sustainability and the financial performance of the company. It is also important to maintain diversification across sectors.
Portfolio Construction with High Dividend Stocks
For effective risk management, it is essential to build a portfolio while adhering to key rules:
- Diversification by issuers.
- Sector allocation.
- Correct position sizing.
Experts recommend holding dividend stocks of at least 20 companies. The fewer issuers in the portfolio, the more its returns will deviate from the market. Various sources suggest that having 55-100 shares is necessary to reduce specific risk by 90%. Even 25 shares can lower it by 80%.
Dividend stocks from the same sector are sensitive to the same factors. Their prices will have a high correlation. The most popular rule of diversification is not to invest more than 25% of capital in one sector. At the same time, one should not attempt to cover all sectors in the stock market. It is important to remain in those sectors where the investor’s expertise allows them to select the best high dividend stocks.
The simplest way to determine position sizing is to choose equal weight for all dividend stocks. For example, if the investment portfolio includes shares of 20 companies, approximately 5% of the allocated capital is invested in each.
A more complex approach is to consider sector allocation. For instance, if the portfolio is evenly divided into 5 sectors, with 20% of capital allocated to each, and the investors have selected 5 companies in one of the sectors, the optimal position size for each of them would be 4%.
To maintain portfolio balance, it is recommended to combine dividend stocks with other asset classes. Primarily, this includes low risk bonds. This solution is preferable for investors who value payout stability. A person interested in capital growth may add growth companies to the portfolio.
Final Thoughts and Recommendations
The answer to the question of what stock pays the highest dividend is Ready Capital Corp. As of March 1, 2025, RC has a capitulate of 14.65%. The main reason for this high figure is the decline in quotes. This company cannot be considered a reliable payer. It is not suitable for an investment strategy aimed at stable income generation in the future.
When selecting dividend stocks, the quality of the company and its ability to increase investors rewards are of key importance. If investors do not take these factors into account, they risk losing more from a decline in quotes than they gain from dividends. It is especially important to consider the company’s prospects during retirement planning.
In addition to the initial share selection strategy, ongoing portfolio tracking is also important. It is necessary to rebalance assets at least once a year to maintain their original proportions. It is also useful to reanalyze the selected companies. This will ensure that they still align with the investment strategy.
Various research tools available online can accelerate and simplify the tracking of the investment portfolio. Among them are the portfolio manager from BeatMarket and the BeatGuru Advisor system. They will help identify the most promising dividend stocks to create a balanced long-term portfolio.
