The best dividend stocks to buy now are simple to identify. Investors want to find companies with big dividend yields, strong profits that will fuel future growth in payouts and share performance that at worst keeps pace with the broader stock market.
Of course, while it’s simple to find the best dividend stocks to buy now, that doesn’t make it easy. There are always shiny short-term trades that catch our attention, and sometimes it’s hard to justify buying anything amid market uncertainty.
Income investors need to remain disciplined in their strategy, however, and not fall for the latest fads. The best dividend stocks to buy now aren’t swing trades or picks that could explode on one earnings report or buyout rumor. After all, dividend yields are calculated based on one year of distributions, so if you’re not buying these picks for the long term then you might as well not even look at that metric!
The good news is that if you can stick to your guns and keep a cool head, the best dividend stocks to buy now can pay off not just in 2016 and 2017, but for many years down the road thanks to consistent performance and reliable dividend payments.
So if you’re the kind of investor who finds a sleepy master limited partnership with a 4% yield and a 5% annual return more attractive than a gut-wrenching momentum play, this list is for you.
Here are the seven best dividend stocks to buy now.
Best Dividend Stocks to Buy Now: Ventas, Inc. (VTR)
Sector: Health care REITs
Market Capitalization: $25 billion
Dividend Yield: 4%
YTD Performance: +30% vs. +2% for the S&P 500
The gist is simple: This pick is a healthcare-focused real estate investment trust, paying 73 cents a quarter for a 4% dividend yield. It’s emphasis on medical office space, senior housing facilities and hospitals provides a rock-solid revenue stream since these are all recession-proof operations that don’t depend on consumer tastes or tech trends — meaning the dividend is safe.
Furthermore, the demographic shift in America driven by aging baby boomers who need more care as they age ensures a nice tailwind for years to come. Throw in Ventas’ strong outperformance this year and what’s not to like?
Best Dividend Stocks to Buy Now: Digital Realty Trust, Inc. (DLR)
Sector: Tech REITs
Market Cap: $16 billion
Dividend Yield: 3.2%
YTD Performance: +47% vs. +2% for the S&P 500
Digital Realty Trust, Inc. (NYSE:DLR) is the perfect hybrid between a growing technology stock and one of the best dividend stocks to buy now. That’s because this unique company is a real estate investment trust that rents server space instead of office space to its customers.
This kind of flexible IT solution is in big demand these days as many companies are reluctant to shoulder expensive up-front costs on in-house data centers, and that growth trend is clearly evidenced by the brisk 18% in revenue growth projected for Digital Realty this year.
The regular revenue also provides reliable cash flow to support a 3.2% dividend — and as one of the 10 best-performing stocks in the S&P 500 Index year-to-date, investors seem to like what they see in DLR.
Best Dividend Stocks to Buy Now: McDonald’s Corporation (MCD)
Market Cap: $106 billion
Dividend Yield: 3%
YTD Performance: +2.2% vs. +2% for the S&P 500
McDonald’s Corporation (NYSE:MCD) has slowed down in recent weeks, but it’s one of the few global brands that has defied gravity in the last year, with shares up about 25% in the past year thanks to a successful turnaround with Steve Easterbrook at the helm as of early 2015.
The numbers speak for themselves: In October, McDonald’s grew sales versus an expected decline (before all-day breakfast, mind you); in January, MCD smashed expectations and as of April the turnaround plan continued to show promise in the face of currency exchange rates sapping 3% from the top line.
This all adds up to strong share momentum, but remember … MCD is one of the best dividend stocks to buy now with a 3% yield and a strong history of increases with distributions growing over 250% since 2005.
Best Dividend Stocks to Buy Now: Philip Morris International Inc. (PM)
Sector: Consumer staples
Market Cap: $158 billion
Dividend Yield: 4%
YTD Performance: +16% vs. +2% for the S&P 500
Philip Morris International Inc. (NYSE:PM) is one of those names that always seems to come up in the list of the best dividend stocks, even though it also always seems to come up in conversations about companies that don’t have much of a future.
After all, cigarettes are bad for you. But interestingly enough, even though the rate of smoking continues to decline there is actually pretty strong demand still for actual cigarettes.
Furthermore, while Philip Morris continues to fight against sales headwinds, it continues to post strong profits thanks to an operating margin of almost 40%.
So while you may not see much dividend growth thanks to top line pressures, you can have a lot of confidence that the juicy 4.1% dividend will remain for quite some time.
Best Dividend Stocks to Buy Now: Public Storage (PSA)
Sector: Self-storage REITs
Market Cap: $44 billion
Dividend Yield: 2.8%
YTD Performance: +4.8% vs. +2% for the S&P 500
Real estate investment trusts are exactly what the doctor ordered for risk-averse investors worried about international upheaval and broad headwinds for growth names.
That’s where Public Storage (NYSE:PSA) comes in. Public Storage also is a countercyclical play, because people displaced from their homes tend to make greater use of storage units in troubled times.
Reliable rent from tenants across its businesses drove a robust operating cash flow of about $1.7 billion last year. That helps support a roughly 2.8% yield for the stock at current prices, which is a great hedge against market volatility and stagnant returns from the other equities in your portfolio. That makes PSA one of the best dividend stocks to buy now.
Best Dividend Stocks to Buy Now: Spectra Energy Partners, LP (SEP)
Sector: Oil & gas MLPs
Market Cap: $14 billion
Dividend Yield: 5.6%
YTD Performance: -2% vs. +2% for the S&P 500
Spectra Energy Partners, LP (NYSE:SEP) is one of the largest owners of natural gas pipelines and has the benefit of servicing the Northeast and Gulf Coast — two regions that are rich with frackers who continue to produce LNG at brisk volumes.
Not only is that great for growth potential, but its pipeline operations allow Spectra to remain relatively insulated from the volatility in energy prices, since it is simply a “toll taker” and doesn’t have to worry too much about the cost of production or the final selling price of natural gas to end users.
Given the high-risk and low-interest-rate environment on Wall Street, those characteristics have made SE stock quite attractive this year and one of the best dividend stocks to buy now.
Best Dividend Stocks to Buy Now: American Water Works Company Inc (AWK)
Sector: Water utilities
Market Cap: $15 billion
Dividend Yield: 1.8%
YTD Performance: +41% vs. +2% for the S&P 500
We’ll end with American Water Works Company Inc (NYSE:AWK) — a dividend stock that yields a fraction of some of the higher payers on this list … but still significantly above the paltry 1.5% offered by T-Notes right now.
More importantly, that dividend has huge growth potential. American Water Works Co. is a water and wastewater utility that services municipalities in the U.S. and Canada. Like many utility stocks, it’s a legalized monopoly, and since the much-publicized Flint water crisis, water stocks like AWK have very much been in favor as solutions to crumbling public infrastructure.
Earnings should come in 7% higher this fiscal year, and up another 7% in 2017 according to projections as revenue rises 6% this year and about 5% next year. The fact that American Water Works just boosted its dividend 12% this year shows the dividend growth potential here, and long-term investors may want to get in on the ground floor.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.