Best Dividend Stocks To Pick Right Now

Given the volatility of the current stock market, wouldn’t it be great if you had a steady stream of income that you could count and not depend on the ups and downs of the market? Investing in the best dividend stocks can help.

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Top dividend stocks can yield a steady income, but they can also beat the market at times. Of course, investors should pay attention to a company’s fundamentals and other factors before buying a dividend stock.

Look for companies that offer above-market yields and solid earnings. A good stock price track record is important, too: If a stock’s price is in decline, its dividend yield rises.

IBD’s The Income Investor column can help find dividend winners. Found in Investors.com and IBD Weekly, the column features companies that meet those criteria. That puts these stocks in more of the growth-and-income camp vs. simply, income.

Why is it important to pay attention to earnings, yield and other factors? If a company hits a tough patch or its profits falter, that could hurt its ability to keep making those dividend payouts.

Best Dividend Stocks: Steady Earnings

That’s why a steady earnings track record is key, as is dividend growth rate. That growth rate can be found in three screens that appear with the Income Investor, online and IBD Weekly: Dividend, Utility and REIT Leaders. To access the dividend screens at Investors.com, go to the homepage and click on the Stock Lists tab, then IBD Data Tables.

The broadest screen is Dividend Leaders, featuring names such BCE (BCE), which climbed to a record high Thursday after a long consolidation. BCE is a company that provides telecommunications services across Canada through its subsidiary, Bell Media.

Dividend Leaders

BCE stock has extremely low stock volatility. It’s less volatile than any S&P 500 stock. BCE’s dividend yield of 5.4% is solid and the payment has been growing every year since 2003.

The Dividend Leaders list today is chock full of names from the oil and pipelines group, such as Devon Energy (DVN) and Enbridge (EBN), which have hit new highs due to the rise in oil prices. There are several real estate and financials stocks as well.

Other stocks offering big dividends include Enterprise Products Partners (EPD) with a 6.49% annualized yield, and Philip Morris International (PM) (5.3% yield).

But don’t look at just the high dividend payers. You want Steady Eddie names known for a steady earnings track record and dependable dividends, such as energy giant Chevron (CVX) and pharmaceutical company AbbVie (ABBV).

Both stocks are in the S&P 500 Dividend Aristocrats ETF (NOBL), which tracks an index of companies that have increased their dividends for at least the past 25 consecutive years.

Best Dividend Stocks: Utilities And REITs

Utility stocks are known for their defensive nature. They tend to hold up well when growth stocks are weakening. Their reliable revenue streams also enable most utilities to pay a steady dividend.

Like utilities, real estate investment trusts (REITs) offer a relative safe haven in a volatile market. REITs are structured in a way that allows them to avoid paying corporate taxes if they pass the bulk of their earnings through to shareholders. Since that’s done in the form of cash dividends, many income investors favor REITs.

Though not immune to a slowing economy, these companies enjoy a fairly stable revenue stream via rent payments and lease proceeds from buildings or other real estate assets they own. REITs, financials and oil stocks also tend to perform well during high inflationary periods.

That said, keep in mind that utilities and REITs can also fall sharply if the stock market enters a steep slide. For instance, the Dow utility average dropped 45% during the 2008-09 bear market. In such severe corrections, it’s important to cut stock losses and forget about dividends.

Keep Risks In Mind

Take Occidental Petroleum (OXY) as an example. The stock yielded 7.7% going into 2020. Shares of the energy company dropped 50% though, during the year. Additionally, the company slashed its dividend. That left investors with a net loss of more than 50%, even with the remaining paltry 0.2% dividend.

Keep in mind, too, companies paying high dividends can cut them when the business wanes. Ford (F) cut its storied dividend in the first quarter of 2020 to nothing, down from the 15 cents a share it paid previously. Ford’s dividend yield was 6.5% in early 2020. It’s just 2.2% now.

Follow Michael Molinski on Twitter @IMmolinski

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