Best dividend stocks for traders
Learn about what dividend stocks are, how to apply a dividend yield formula, how the prominent dividend stocks rank by key metrics, and more.
What are dividend stocks?
Dividend stocks are shares of publicly traded companies that regularly distribute a portion of their earnings to shareholders in the form of dividends. These payments can supplement any potential capital gains from rising share prices.
Dividends are typically paid on a quarterly, monthly, semi-annual, or annual basis, depending on the region and the company’s policy. The practice of issuing dividends dates back centuries and serves as an incentive for shareholders to hold onto their shares for the long term.
You might have heard of the term ‘dividend aristocrats.’ These are companies in the US 500 index that have increased their dividend payouts annually for at least 25 consecutive years and meet specific inclusion criteria. Well-known examples include Coca-Cola (KO) and McDonald's (MCD).
How to find the ‘best’ dividends in the stock market
Finding the ‘best’ dividend stocks involves more than just seeking out the highest yields. Traders often consider a combination of factors to assess the sustainability and growth potential of dividend payments, such as:
- Dividend yield is the annualised dividend payout divided by the stock price, expressed as a percentage. A higher yield is attractive, but remain cautious: excessively high yields might indicate a struggling company or a stock price that has sharply fallen. Look for yields that balance income with growth potential.
- Payout ratio measures the proportion of earnings paid out as dividends. While a payout ratio between 30% and 60% is often considered healthy, the ideal range depends on the industry. For instance, REITs (real estate investment trusts) may sustain higher ratios due to their business models, and may be affected by central bank interest rates.
- Dividend growth is the rate that the amount paid in dividends rises over time. Regular increases indicate a company’s financial health and long-term profitability. For example, ‘Dividend Aristocrats’ are US 500 companies which have increased their dividend payouts for at least 25 consecutive years.
- Industry and stability: certain sectors, like utilities, consumer staples and real estate, tend to have more stable dividends due to predictable cash flows. Credit ratings from agencies like Fitch Ratings or Moody’s can provide insight into a company's financial stability. Traders could also review dividend histories on sites like Morningstar.
- Ex-dividend date: shareholders are eligible to receive the next dividend payment if they own the shares before the ex-dividend date. Those aiming for quick returns should monitor this date closely.
The value and financial stability of dividend stocks may change over time. Always conduct your own research and technical analysis alongside recent, reliable, qualified and vetted sources – such as independent analyses, SEC filings or company earnings reports.
Learn more about dividends and how they work – read our trader’s guide to dividends.
Top 10 overall dividend stocks
Here are 10 of the top overall dividend stocks on the US stock market, as of December 2024 – determined by yield, payout ratio, dividend growth, ex-dividend dates, industry and stability:
| # | Stock | Industry | Trailing dividend yield* | Payout ratio |
|---|---|---|---|---|
| 1 | Exxon Mobil (XOM) | Energy | 3.4% | 47.32% |
| 2 | Johnson & Johnson (JNJ) | Healthcare | 3.28% | 79.93% |
| 3 | Verizon Communications (VZ) | Telecommunications | 6.31% | 115.69% |
| 4 | Procter and Gamble (PG) | Telecommunications | 2.32% | 67.14% |
| 5 | Medtronic (MDT) | Healthcare | 3.31% | 85.02% |
| 6 | Comcast (CMCSA) | Telecommunications | 3.12% | 32.88% |
| 7 | PepsiCo (PEP) | Non-alcoholic beverages | 3.34% | 77.29% |
| 8 | Altria (MO) | Tobacco | 7.09% | 66.89% |
| 9 | Dow (DOW) | Chemical production | 6.55% | 186.67% |
| 10 | Chevron (CVX) | Energy | 4.15% | 70.33% |
*Trailing dividend yield represents the total distributions (capital gains, dividends, and interest) paid per share over the past 12 months, expressed as a percentage of the previous month-end price.
1. ExxonMobil (XOM)
ExxonMobil is a dividend aristocrat in the energy sector (oil and gas), offering consistent performance, reflected in its 3.4% trailing dividend yield and a payout ratio of 47.32%. Known for its resilience during market volatility, ExxonMobil has consistently increased dividends for over 40 years, supported by robust upstream and downstream operations.
2. Johnson & Johnson (JNJ)
Johnson & Johnson, another dividend aristocrat, has increased its dividend payments for over 60 years. With a trailing dividend yield of 3.28% and a payout ratio near 80%, this healthcare giant is considered financially stable and reliable. Its innovations in medical devices and pharmaceutical breakthroughs complement its over-the-counter brands, such as Tylenol and Benadryl.
3. Verizon Communications (VZ)
Verizon is a telecommunications powerhouse, offering a high yield of about 6.31% with a payout ratio of 115%. As the world’s second-largest telecommunications company, Verizon benefits from its expansive infrastructure and consistent cash flows, driven by growing demand for broadband and 5G services.,
4. Procter & Gamble (PG)
Operating in the consumer staples sector, Procter & Gamble has a strong reputation for dividend growth, with a trailing dividend yield of 2.32% and a payout ratio of 67.14%. Known for its global brands like Tide, Pampers, and Gillette, P&G has a long history of dividend growth.
5. Medtronic (MDT)
A leader in life sciences, Medtronic has a strong dividend history, reflected in its trailing dividend yield of 3.31% and a payout ratio of 85.02%. The company is known for its medical devices in cardiology and diabetes management, contributing to dividend growth.
6. Comcast (CMCSA)
This media and telecommunications giant offers a trailing dividend yield of approximately 3.12%, and a payout ratio of 32.88%. With diversified operations spanning broadband, streaming, and film production (owning NBC and Universal Studios), Comcast provides consistent shareholder returns.
7. PepsiCo Inc. (PEP)
PepsiCo’s global dominance in the non–alcoholic beverage and snack industry underpins its trailing dividend yield of 3.34% and a 77.29% payout ratio. Its well-diversified product offerings – and strong brand equity make it a dependable choice for long-term dividend growth traders.
8. Altria (MO)
With a trailing dividend yield of 7.09%, Altria is a top pick in the tobacco sector, and its 66.89% payout ratio shows its focus on rewarding shareholders. Despite challenges like regulatory pressure, the company continues to innovate, such as with various smokeless tobacco and cannabis opportunities.
9. Dow (DOW)
This chemicals and materials company provides a payout ratio around 186.67% and a 6.55% trailing dividend yield. Dow’s robust position in essential industries, 125+ years of experience, and commitment to shareholder rewards make it an attractive dividend-paying stock for those seeking exposure to industrials.
10. Chevron Corp. (CVX)
Chevron, another energy giant, rounds out this list with a trailing dividend yield of 4.15% and a payout ratio near 55%. Its integrated operations across the energy value chain and prudent financial management ensure consistent dividend payments, even in challenging economic conditions.
Learn about trading shares on dividend stocks and more – check out our comprehensive trader’s guide to shares trading.
