When writing this article, I was looking for an ideal list of dividend-paying stocks that consistently raise their dividends each year. In addition, the dividend yields have to be higher than average. I used a cutoff of 4 to 6% dividend yield.

This is much higher than the S&P 500, with its dividend yield of 1.8%. So picking these stocks has a good chance of appreciation.

The stocks also have to be cheap. The price-to-earnings ratio hurdle to make my list is 11 times or lower. This is significantly lower than most stocks trading today. For example, the S&P 500 P/E ratio is 23.8 times earnings. On a forward basis, it is slightly below 20x. So my cutoff is almost 50% to 60% of the market average.

Lastly, the company has to be able to afford the dividends. Earnings per share must be higher than the dividend per share.

Even with as strict as all that may sound, I still found five stocks that met these criteria in spades. You might consider investing in them.

Dividend Stocks to Buy: AT&T (T)

Dividend Yield: 5.3%

Price-to-Earnings Ratio: 10.8x

Average Dividend Growth Over 5 Years: 2%

AT&T (NYSE:T) has consistently raised its dividends to shareholders each year. You can see this in the chart I prepared, at right. Dividends per share are growing consistently by 2% or higher each year over the past three to five years.

In addition, AT&T is very cheap compared to its earnings per share. The P/E ratio is below 11x.

AT&T purchased Time Warner a little over a year ago and is still in the process of integrating the company. Analysts expect earnings to grow by 2.2% in 2020. Moreover, this is also the same amount by which dividends are expected to grow next year.

T stock is expected to begin buying back shares on a larger scale.  I recently wrote an article about this which you can read here. Moreover, earnings cover T stock dividend very well. The $2.05 dividend rate represents just 57% of its expected $3.55 earnings per share.

AbbVie (ABBV)

Dividend Yield: 5.3%

Price-to-Earnings Ratio: 9.9x

Average Dividend Growth Over 5 years: 21%

AbbVie is a $128 billion market value drug manufacturing company. It has consistently raised its dividend over the past five years. You can see this in the chart I have prepared. On average dividends have increased by 21% per year.

In addition, ABBV stock is very cheap. For example, International Business Machines (NYSE:IBM) stock trades for less than 10 times earnings. In 2020, expected earnings of $9.91 per share put ABBV stock at a P/E of 8.75 times.

Abbie made a cash and stock bid for Allergan (NYSE:AGN) in late June 2019. AGN is a $61 billion market cap U.K./U.S. drug company. The deal is expected to close in early 2020. AbbVie claims the deal will significantly increase shareholder value.

As it stands, the dividend per share for ABBV stock is well covered by its earnings. The annual $4.72 dividend per share represents just 53% of expected earnings of $8.93 per share.

In sum, ABBV stock looks like a good cheap, high-yield and consistent dividend-paying stock worth buying.

Dividend Stocks to Buy: Harley-Davidson (HOG)

Dividend Yield: 3.9%

Price-to-Earnings Ratio: 11.6x

Average Dividend Growth Over 5 Years: 11.99%

Harley-Davidson (NYSE:HOG) stock has a very nice dividend yield of 3.9%.  The company has had a rough few years from EU and China tariffs. Nevertheless, HOG has paid consistently higher dividends, as can be seen in the chart. Its average dividend growth has been 12% over the past five years.

HOG stock presently trades on 11.6 times earnings. The company is experiencing lower earnings from the tariffs and lower bike sales as a result. Nevertheless, it has reduced its costs. Revenue next year is expected to be slightly higher than this year.

Earnings for 2020 are expected to be $3.55 per share by analysts covered by Seeking Alpha. That puts HOG stock at less than 11x earnings.

The dividend per share of $1.50 is well covered by expected earnings. Once the tariffs are lifted, HOG stock has a good chance of increasing earnings and dividends dramatically.

Meanwhile, the dividend yield of almost 4% is a good inducement for investors to wait for things to turn around for Harley-Davidson.

International Business Machines (IBM)

Dividend Yield: 4.8%

Price-to-Earnings: 10.6x

Average Dividend Growth 5 Years: 10.91%

IBM has consistently raised its dividend per share over the past 5 years. Its average dividend growth has been stellar at 10.9%. You can see this in the chart at the right.

In addition, IBM is very cheap. It trades at just 10.6 times earnings. In 2020 EPS is expected to be $13.31 per share, according to Seeking Alpha. This puts IBM stock on just 10x forward earnings.

Moreover, IBM’s $6.48 dividend per share is just over 50% of the EPS of $12.80 or so expected this year. As a result, you can see the earnings well cover the dividend.

I have written several articles on IBM and its push into the hybrid cloud space now that it fully owns Red Hat. IBM paid $34 billion for that acquisition, which closed in early July 2019. IBN believes the hybrid cloud market represents a $1.2 trillion opportunity over the next decade. Most companies will need to move their operations onto the cloud over that period.

This bodes well for IBM over the long run. With its 4.8% dividend yield, IBM stock will pay investors to investors to wait for earnings to take advantage of the expected spike from hybrid cloud growth.

Kohl’s Corp (KSS)

Dividend Yield: 5.5%

Price-to-Earnings: 10.3x

Average Dividend Growth 5 Years: 11.4%

Kohl’s (NYSE:KSS), the department store chain, can catch your eye with a very nice dividend yield of 5.5%. Moreover, KSS has increased its dividend annually on average 11.4% over the past five years.

EPS is expected to be $4.77 this year. Therefore KSS’s earnings well cover the dividends. Dividends take up just 56% of earnings. In addition, next year EPS is expected to be roughly flat with this year, according to Seeking Alpha.

KSS stock trades for about 10 times earnings. KSS stock is very cheap at these prices. For example, several reasons for this relate to tariff headwinds and customers’ increasing preference to shop online. Its recent deal to take in Amazon returns will help drive traffic to its physical stores.

I believe that Kohl’s will be a winner in the omnichannel sales space.  At this price, which is very cheap, the dividend pays investors very well to wait for the company to grow earnings.

As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs the Total Yield Value Guide which you can review here. The Guide focuses on high total yield value stocks. This includes both high dividend and buyback yield stocks. In addition, subscribers a two-week free trial.