Making a smart investment in stocks isn't just about how much value you'll get out of ultimately selling that part of your investment. The other primary element to consider is finding companies that pay dividends. These quarterly payouts are where you can start to reap the actual value of your investments.
Even so, you can't stop at just selecting a company that has a dividend—you need to make sure you're getting the right dividend to have something worthwhile in your hands. If you're serious about making the best of your stocks this year, we've compiled our guide to the ten best dividend stocks of 2019.
3M is an industrial conglomerate that produces almost everything you can think of, from electrical circuits for adhesives.
General Motors Co (GM)
With the resurgence of the auto industry in recent years, General Motors has been performing well.
General Motors Co (GM)
You may not know Crown Castle International by name, but there's a strong chance you benefit from their industry.
Realty Income Corporation (O)
Relatively younger in the growing dividend chain than some other picks on our list, Realty Income Corporation has been paying monthly dividends on a regular basis ever since 1995.
Abbott Laboratories (ABT)
Abbot Laboratories is a related venture to AbbVie. ABT is in the industry of branded versions of generic drugs, nutrition, medical devices, and diagnostic products.
Boeing Co. (BA)
Boeing Co. is an industrial aerospace company focused on developing military, commercial, and space aircraft.
As one of the oldest oil companies in the world, ExxonMobil is right on the cusp of 150 years in business.
Shaw Communications Inc. (SJR)
Not an American company, Canadian cable corporation Shaw Communications provides Wi-Fi, digital phone, and broadband services over its fiber network.
As mentioned with Abbot Laboratories, AbbVie is also on a roll when it comes to dividend increases, providing ups to the payouts for over 40 years.
Cisco Systems (CSCO)
Cisco Systems as a network equipment maker that develops hardware to help with better accessibility to the internet, which is a business that everyone can get behind.
Things to Consider When Considering Purchasing a Dividend Stock
One of the primary benefits to selecting a dividend stock is that these options are often much more reliable than companies that don't offer a dividend. That means you should take the effort to find stocks that show signs of increased profit, have been growing their dividend steadily over time, and have a strong financial history.
The more mature businesses are, the more free cash flow they'll have open to provide as dividends. This trend is in opposition to newer companies, who need to invest most of their free profit into expanding. These smaller companies are often doing everything in their power to open new locations, increase their production, and gather new equipment.
More established businesses don't have to worry about these things. While it's true they'll be investing into continued growth; they don't need to put all their profits into that endeavor. When a company offers a dividend, they're confident in their growth. As such, you should focus on these established businesses for the best payouts.
Be Cautious Of High Yields
When you divide the dividend earnings by the current stock price, you get the dividend yield. While having this number be high may seem like a way to get the best bang for your buck, don't be so quick to snatch that stock up.
These stocks have much higher risks than those with more appropriate yield levels. Do a little extra research to make sure that high yield rate is a genuine buying opportunity and not just a sign of a company in distress.
Dividend Payout Ratio
How much of the company's cash flow goes into dividend payments? That percentage is the payout ratio. If a company pulls in $500 thousand in profits and $250 thousand into dividend payouts, it has a payout ratio of 50 percent.
The higher the payout ratio, the more likely it is the company will pull back on its dividend payouts when tough times occur. After all, that free cash flow can switch to support if need be. If the ratio is too high, there's also a chance the company isn't investing as much money as it could into growth opportunities. This value means you need to find a safe payout ratio.
There's no set rule on what's the best ratio to aim for, and part of that will depend on your stock preferences. But any rate up to 35 percent tends to set a good range for company and dividend growth, though you can also see a safe investment all the way through 50 percent.
The Balance Sheet
You shouldn't purchase any stock without first checking the company's finances, and that rule applies just as for when looking into high dividend stocks. The balance sheet is the place to find this information. By looking at it, you're able to determine not just the growth of the company, but also if it has enough financial flexibility to survive when the economy starts to take a downturn.
Two essential elements to look for are the:
Sometimes profits may fluctuate. The best companies to work with are those who are always working to increase their dividends, rather than letting them go up and down based on other influences. The longer a company has been growing their dividends, the better track record they have for you to consider them.
Of course, to raise dividends, a company cannot be stagnant. Some companies can accomplish increasing dividends because they steadily increase the ratio of profits that they pay out to investors. And while this does work out for the investor, eventually the company won't be able to increase that ratio anymore if it doesn't have comparable levels of growth.
When the company increases its total earnings, it's easier for them to pay increasing dividends without straining other aspects of the company. Both the company's market share and industry growth forecasts are your best indicators of this trait, though market conditions can make it hard to achieve exact predictions. Look for companies that have a significant growth runway in their futures.
Even with all the work to determine if a dividend stock will have a high payout, it's still best to invest in several businesses. Even established companies have the risk of a share price decline, and others still may end up with dividend cuts. As with any wise investment, you'll have much better results with several high dividend stocks in your portfolio.
Top 10 Best Dividend Stocks for 2019
Now that you know what to keep an eye out for when you're looking to invest in high dividend stocks, here are our recommendations for the best dividend stocks you don't want to miss out on in 2019.
3M is an industrial conglomerate that produces almost everything you can think of, from electrical circuits for adhesives. There were some financial difficulties in 2018, but that doesn't do anything to damage its dividend ratio. 3M's 60-year streak of dividend increases is undoubtedly appealing, and there's no reason to believe that they'll stop anytime soon. With a century of dividend payments, you can count on 3M to deliver on your investment.
With the resurgence of the auto industry in recent years, General Motors has been performing well. Their vehicle sales have been increasing, despite some predicted drops for the whole industry.
GM may not be growing at an exponential rate, but it's indeed providing a steady increase that will pay off in the long run for any investor. Not to mention that in the past few years, there's been an appealing price-earnings ratio, making for a more than worthwhile purchase.
You may not know Crown Castle International by name, but there's a strong chance you benefit from their industry. This company is responsible for maintaining wireless towers that facilitate cell phone networks and other such communications.
Primary cell phone providers all provide service through CCI, including Sprint, AT&T, Verizon, and more. You know that we aren't going to give up our phones anytime soon, and data usage has only increased over the past years. This market condition means that CCI has a very reliable source of income when it comes to building the business, so their dividends will only benefit in the years to come.
Relatively younger in the growing dividend chain than some other picks on our list, Realty Income Corporation has been paying monthly dividends on a regular basis ever since 1995. This real estate investment trust primarily handles properties in the retail space.
While the share price fluctuated in 2017, Realty Income Corporation has been able to return to its previous levels of value, showing stability. Its revenues have been on the increase, too, and income has remained positive. With these substantial numbers behind it, there's more continued growth to come.
Abbot Laboratories is a related venture to AbbVie. ABT is in the industry of branded versions of generic drugs, nutrition, medical devices, and diagnostic products. It produces goods for many different levels of treatment, from diabetes management to infant formulas to i-Stat diagnostic devices.
This company has been on the market since 1888 and started providing dividend payments back in 1924. On top of that, ABT has been increasing its dividend for the past 46 years, making it a reliable source of regular income and increased payouts as time goes on. Its spin-off company, AbbVie, has a strong history of increasing dividends as well.
Boeing Co. is an industrial aerospace company focused on developing military, commercial, and space aircraft. With the current presidential administration, the increased political focus on defense has bolstered the value of BA with new planes for military and Navy use.
Considering the current government's percentage of the budget, this military contractor is likely to continue to see more deals as time goes on. It's also competing with a fellow military contractor, Lockheed Martin Corp., so those who get into BA stock won't have to worry about their dividends anytime soon. When combined with the increasing stock value, we have a winner.
As one of the oldest oil companies in the world, ExxonMobil is right on the cusp of 150 years in business. With upstream oil & gas production, specialty chemicals, and downstream refining under its best. ExxonMobil has a diversity and scale that give the company a solid base.
Its management team also makes smart decisions that allow for lower costs and higher returns on capital. Exxon pays quarterly dividends that haven't faltered since 1882, and its increased that dividend consecutively for over 30 years. These increases are incremental due to the state of the oil market, but Exxon has still shown commitment.
Not an American company, Canadian cable corporation Shaw Communications provides Wi-Fi, digital phone, and broadband services over its fiber network. It is another company that's seen some troubles with cash flow in recent years, but it has always been able to recover and steadily increase net income.
Despite these difficulties, Shar Communications has maintained a dividend growth for over ten years. With this stock, you get monthly payouts (which no one is likely to argue with), plus there's some room for stock price appreciation with the declines over the past year.
As mentioned with Abbot Laboratories, AbbVie is also on a roll when it comes to dividend increases, providing ups to the payouts for over 40 years. Like Abbot Laboratories, AbbVie focuses on the medical industry where it has rheumatoid arthritis treatment Humira and testosterone replacement therapy, AndroGel.
It has over 35 products that spread out amongst various stages of clinical trials. Besides just the regular increasing dividend payouts, AbbVie increased its payout not once, but twice in 2018. The second one was thanks to additional capital from the US tax reform, which is a super exciting opportunity for investors.
Cisco Systems as a network equipment maker that develops hardware to help with better accessibility to the internet, which is a business that everyone can get behind. Finding success in the 90's, Cisco has continued to hold its place in the market ever since.
Do experts foresee much revenue growth from this company? Not much, but it has impressive margins and consistency that make it an incredibly worthwhile investment. Besides the value of the dividend, it's also got a fantastic P/E ratio, which gives you one of the best levels of bang for your buck.
As the years go by, more and more companies are joining the ranks of those that provide regularly increased dividends for long stretches of time. You can't go wrong when looking at these companies since they show a dedication to bettering themselves and the payouts of their customers.
2019 is just starting, but the stocks on our list were impressive last year – and they continue to be impressive now. Dividend payments are no doubt one of the most significant ways to ensure cash flow from stocks. With these choices, you're looking at some of the best dividend stocks to invest in for 2019.