Dividend-focused investing, while on the surface designed for producing income, is also one of the best ways to build wealth in the stock market.
The trick is identifying top-paying dividend stocks and then consistently reinvesting the dividends. Dividend reinvestment allows the power of compound interest to work in your favor.
Even in 2017’s volatile market, I’ve located seven top-paying dividend stocks that can make a great addition to your portfolio. They are also a smart way to start to build a diversified income portfolio if you are just starting out.
What I haven’t included are the crazies — you know, the ultra-high dividend payers with yields that are unsustainable, often due to a plunging stock price.
While buzz-worthy and temporarily profitable, these investments are hardly suitable for a reliable portfolio.
These seven top-paying dividend stocks have proven, justifiable yields.
Even better, I fully expect them to provide better than average price performance over the next 12 months.
1. Enterprise Products Partners L.P. (NYSE:EPD)
EPD is a master limited partnership-structured company in the natural gas sector. The Houston-based pipeline operator pays nearly 6% and is America’s largest company in its niche.
My favorite thing about Enterprise Products is that it boasts a conservative (for MLPs) policy of only passing along 80% of its cash flow to shareholders as dividends. The reason this makes great sense is it leaves enough money for reinvestment and acts as a cushion. Having this financial moat allows Enterprise to weather the tough times and build itself up in the good ones.
2. Omega Healthcare Investors Inc (NYSE:OHI)
A yield close to 8% places this nursing and assisted living facility owner near the top of my list. With around 400 properties across 35 states and an aggressive acquisition strategy, OHI is expected to keep growth in high gear.
The company has increased dividends annually over the last decade, and earnings are higher by 47% in 2016 year over year. I expect Omega’s skilled management team can help it expand further by serving America’s rapidly growing elderly population, ensuring sustained price and dividend growth for the years ahead.
3. AT&T Inc. (NYSE:T)
The telecommunication behemoth has paid steady dividends since 1984, increasing the payout for over three decades. It boasts the highest yield in the S&P 500 with a 5% annual dividend.
The company has been diversifying into content production and pay TV services via acquisitions and profits are forecasted to climb an additional 5% in 2017.
4. Ford Motor Company (NYSE:F)
An often overlooked dividend stock, the auto giant yields nearly 5% and has an excellent forward price-earnings ratio of 7. Auto sales hit record levels in 2016, and are expected to stay strong in 2017, albeit below 2016 records. Innovation and economies of scale should continue to keep this legacy company on the front lines.
5. Verizon Communications Inc. (NYSE: VZ)
Verizon is a member of the Dow Jones Industrial Average and has paid consistent dividends for the last 17 years. VZ yields around 4.3%.
6. AbbVie (NYSE:ABBV)
Leading pharmaceutical company AbbVie yields a solid 3.6% and has returned around 20% in the last year. Not bad when you consider the pharmaceutical business has been struggling as a whole over the last 52 weeks. Although the patent on company’s top-selling product, Humira, expired in December, new products are keeping investors excited.
7. Alliance Bernstein (NYSE:AB)
This master limited partnership-structured asset manager yields an outstanding 8%-plus. It has $490 billion under management and is best known for its mutual funds.
Assets under management are increasing, and operating income advanced 29% year-over-year to $209.0 million while operating margin expanded 490 basis points to 25.3%.
Most interestingly, over 30% of its assets are owned by foreign investors. This global diversification of clients paints a reliable picture for the stock as global wealth continues to increase.
Risks To Consider: Risk is inherent in the stock market. No matter how well a company has performed or how solid the dividend, no one knows for certain what the future holds. Always use stop-loss orders and position size sensibly when investing in the stock market.
Action To Take: Consider adding one or more of the above top-paying dividend stocks to your income portfolio. If you are seeking to start an income producing stock portfolio, the above stocks provide a well-diversified start.
Editor’s Note: From proven blue-chips to breakthrough players, these 10 top stocks are rock solid “must-have” material for any portfolio. To find out how you can accelerate your retirement schedule by up to a decade, check out the report here…
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