The best dividend stocks give you a great hedge against inflation, as they provide both appreciation and capital gains to offset rising costs. From 1991 to 2015, dividend stocks delivered more than twice the return of nondividend paying stocks.
Here's the trouble: Not all dividend stocks are created equal. For instance, a good dividend cannot make up for an underperforming stock. Similarly, a high dividend yield could be a trap that covers up erratic payouts, poor performance, or minimal growth prospects.
To help you find reliable dividend candidates, we have identified 10 of the best dividend stocks available in the U.S. stock market today. These companies have boosted annual dividend payouts for at least 10 years with attractive yields and delivered long-term price stability.
What is a dividend Stock?
Before we begin, it's worth explaining what a dividend actually is.
Dividends are a portion of a company's earnings that are paid out to shareholders. Some of the most popular shares in the US and UK pay them. Others don't.
Most of the time, shareholders will receive their dividends in cash but they can also be given more company stock instead of money.
Larger, more established companies are more likely to pay out dividends. The reason for this is they can afford to do it. A startup or small business will need to use a large chunk of its earnings to build products, hire new staff or expand operations. That means paying dividends would likely be a poor use of cash and possibly even damage the company's future prospects. Conversely, a big company like Barclays is less likely to need or want to do those things so they can afford to take a part of their earnings and pay them out to shareholders.
How do stock dividends work?
A dividend is paid per share of stock — if you own 30 shares in a company and that company pays $2 in annual cash dividends, you will receive $60 per year.
Types of dividends
Usually, dividends are paid out on a company's common stock. There are several types of dividends a company can choose to pay out to its shareholders.
Cash dividends. The most common type of dividend. Companies generally pay these in cash directly into the shareholder's brokerage account.
Stock dividends. Instead of paying cash, companies can also pay investors with additional shares of stock.
Dividend reinvestment programs (DRIPs). Investors in DRIPs are able to reinvest any dividends received back into the company's stock, often at a discount.
Special dividends. These dividends payout on all shares of a company's common stock, but don't recur like regular dividends. A company often issues a special dividend to distribute profits that have accumulated over several years and for which it has no immediate need.
- Consistency: Identifying a good dividend stock starts with looking at its payment history. Whether in prosperity or downturn, the ability to grow a dividend is a sign of strength. The Dividend Aristocrats, for example, have grown their own dividends for at least 25 consecutive years. While not always the case, companies who have proven they can maintain their dividends in the past are more likely to maintain them moving forward. Track records are invaluable in the world of income investing.
- Financial Stability: A high-yield dividend stock must be supported by solid financials. For a dividend stock to even be considered by investors, it should have a good balance sheet; that way, it can make sure investors get their payments every time. Poor financials are a sign of a struggling company and could result in a dividend suspension or cut.
- Profit Margins: Businesses are responsible for paying dividends, and they will only be able to do so if their profit margins allow as much. Therefore, it's important to make sure the company is making enough to continue paying said dividends. Anything less will put even high-yield dividend stocks in jeopardy.
- The Moat A moat is a competitive advantage, and invaluable to the long-term prospects of a dividend stock. Investors can rest assured their dividends will remain protected and continue paying over time with a secure moat.
- Potential: Dividend stocks shine as long-term investments. For a high-yield dividend stock to be worth considering, it must exercise the potential to stick around for years, decades even. Therefore, investors will want to evaluate a company's potential moving forward. That way, they can ensure their dividend for years.
Preferred dividends. Payouts issued to owners of preferred stock. Preferred stock is a type of stock that functions less like a stock and more like a bond. Dividends are usually paid quarterly, but unlike dividends on common stock, dividends on preferred stock are generally fixed.
10 Best Dividend Stocks In 2022
1. Walker & Dunlop, Inc.
2. Digital Realty Trust
Digital Realty Trust is an REIT that specializes in physical real estate assets that house data centers. In all, Digital Realty's assets cover 284 facilities in 48 different cities across 23 countries. On the surface, Digital Realty invests in technologically advanced data center facilities. Beneath the surface, however, DLR is a “picks and shovels” play on the entire data industry. That said, the company is simultaneously on the “best dividend stocks 2022” list and the apparent beneficiary of long-term secular tailwinds in one of the fastest growing industries on the planet.
Digital Realty currently has a dividend yield of 3.83%, which makes it one of the highest paying dividend stocks that can also be viewed as a growth stock. At the very least, the need for data centers is increasing exponentially with the advent of technology. As wireless technology transfers and stores more and more data, the need for Digital Realty's services increases. Or, as research conducted by Allied Market Research suggests, DLR could be the leader in a data center industry that's expected to grow at an annual rate of 10.5% each year through 2030; that would take the current market cap from $187.4 billion in 2020 to $517.2 billion by 2030.
In the event DLR can grow its market share, which it appears perfectly capable of doing, its current share price makes it look like one of the best stocks to buy right now for growth. Additionally, DLR is a REIT, which means it has to pay the majority of its profits to shareholders in the form of dividends. As a result, Digital Realty looks like a strong candidate to grow its current dividend yield in the wake of a strong secular tailwind. If everything goes according to plan, DLR won't only be one of the best dividend stocks in 2022; it may even be one of the highest paying dividend stocks to own over the next decade. In the event investors don't interrupt DLR's potential to compound, there's no reason to think it won't be one of the top dividend paying stocks for the next decade. That's not to say compound dividend growth is guaranteed, but rather that DLR is in one of the best positions to do so.
3. Abbott Laboratories
Widely recognized as one of the world's largest pharmaceutical companies, Abbot Laboratories discovers, develops, manufactures, and sells a variety of healthcare products globally. With a firm grasp on the forefront of the industry, Abbot Laboratories has seen its share price double in as little as five years, firmly entrenching it as one of today's best dividend stocks 2022. However, shares are now trading about 30% below their 52-week high. On the surface, the drop appears to be related to a departure from COVID-19 stocks and towards value stocks in today's inflationary environment. If, for nothing else, nothing seems wrong with the company; people seem to be giving up on it too soon.
At the very least, Abbot Laboratories is much more than a COVID-19 play. The company expects to increase its research and development investment to $2.7 billion in 2022, which should help them cater to the world's aging population and take advantage of several lucrative tailwinds. Perhaps even more importantly, Abbott looks well positioned to thrive in today's inflationary economy. Healthcare stocks, as a whole, tend to do better at times of a recession (or when a recession is looming). As a result, Abbott's status in the healthcare industry should help it not only maintain its dividend, but also become one of the best dividend stocks in 2022.
Financially sound and well-positioned in a multi-billion dollar industry, Abbotts' 1.72% dividend yield isn't only safe, but it's also in a position to grow. At its current valuation, the company's expected tailwinds should enable it to grow its dividend in the high single digits, at least for the foreseeable future.
4. Brookfield Renewable Partners
Brookfield Renewable Partners is an extension of Brookfield Asset Management and a company that looks positioned to benefit from a “greener” future. As the company's name suggests, Brookfield Renewable Partners owns and operates renewable energy infrastructure. With most already moving on from fossil fuels, Brookfield Renewable is expected to pick up a lot of the slack. In doing so, Brookfield has one of the safest, most diversified portfolios of clean energy assets. As the world shifts away from carbon fuels, there's no reason to think Brookfield Renewable Partners won't take its place as the green industry leader. To be clear, Brookfield Renewable Partners isn't necessarily at the top of any “high dividend stocks 2022” lists, but it shouldn't surprise anyone to see the company become one of the best dividend stocks of the next decade.
With multiple contracts signed for decades down the road, its dividend is very safe and expected to grow. At 3.47%, BEP's dividend yield is enough to place it in the “best high-yield dividend” discussion, but the real potential is in the company's growth. Few renewable energy companies look better positioned to power a greener world than BEP, and the company's dividend should only strengthen as it contributes more to the world's power grid. Brookfield has a proven track record; one investors can feel confident in investing in for decades.
In a recent report, Brookfield Renewable Partners announced it expects to grow funds from operation per unit by as much as 10% 2026. Growth will be facilitated by a combination of development and acquisition. As an extension of Brookfield Asset Management, Brookfield Renewable Partners has a large purse to tap into in order to grow and meet the world's demand for greener energy. The company is run by proven leaders who have nothing but make investors happy for decades, and if they are able to meet projections, BEP could easily be one of the best high dividend stocks of the next 10 years.
5. EPR Properties
The highest dividend stocks are usually more of a red flag or dividend trap than a sound investment. That said, there are always exceptions to the rule. Every now and then, some of the highest paying dividend stocks are worth adding to a portfolio, and EPR Properties (NYSE: EPR) appears to fit the description. Of the market's high yield stocks, EPR Properties' 7.0% dividend yield not only looks sustainable, but may even have room to grow.
As a real estate investment trust which invests in experimental real estate, EPR Properties' portfolio consists primarily of entertainment venues like theme parks, music theaters, movie theaters, restaurants and museums. Due—in large part—to its portfolio, EPR Properties was hit hard during the pandemic, but the company's triple net lease business model and strong management team were able to use the downtime over the last two years to build a strong cash position. Subsequently, it's the cash on hand that makes EPR one of the best stocks to buy now for income investors.
EPR Properties' current dividend yield is already enough for even the strict income investors, but the real reason this company made the “Best Dividend Stocks 2022” list is because of its future potential. According to Greg Silvers, the CEO of EPR Properties, the company is currently looking to take advantage of a number of opportunities created in the wake of COVID-19.
“We are ramping up our investment spending as our pipeline of experiential real estate opportunities continues to grow,” said Silvers in a recent press release. As of this writing, Silvers has already put his money where his mouth is, using $142 million of the cash reserves the company has saved over the last two years to buy a resort in Quebec and a water park in Ontario.
EPR Properties tightened up its balance sheet in order to survive the pandemic and remained largely stagnant over the last 24 months. As a result, the company now has a lot of cash on hand to toast investing in what it sees as a $100 billion market opportunity. In the event EPR Properties is able to put its cash to good use, which management has proven it can do, this REIT looks like a great addition to any portfolio.
Despite its strong balance sheet and constant inclusion in “best dividend stocks 2022” discussions, EPR Properties is currently trading at a discount relative to its peers. In fact, EPR trades at 10.5 times its expected 2022 funds from operation (FFO), which should give investors peace of mind that they'll continue to receive their monthly dividend payments.
All things considered, EPR properties is one of the highest paying dividend stocks whose balance sheet looks perfectly capable of maintaining its payouts. If that wasn't enough, however, EPR is undervalued with what looks like plenty of room to grow. With upwards of $300 million in cash to put to work and a $1 billion credit line that hasn't even been touched, EPR properties is shaping up to be one of the top options on the “best dividend stocks 2022” list.
6. STORE Capital Corporation
Often compared to Realty Income Corporation (one of the most well-established REITs on the market), STORE Capital Corporation is a net-lease real estate investment trust. Both prioritize dividends for investors by focusing on the acquisition of net-lease investment properties. While Realty Income has accumulated more than 6,500 properties over the course of its 52-year operating history, STORE has a well-diversified portfolio that consists of investments in more than 2,500 property locations across the United States.
The comparisons are justified, but STORE trades at a better value and has more room to grow. Perhaps even more importantly, STORE is well-positioned to take advantage of the reopening economy. Real estate investment trusts have been suppressed for far too long, and STORE could break out at any moment with the announcement of more acquisitions. Perhaps even more importantly, REITs like STORE look like a good play in an inflationary economy. As the Federal Reserve increases rates throughout 2022, STORE could simultaneously act as a hedge while returning cash to investors.
Currently, somewhere in the neighborhood of 5.51%, STORE's dividend yield is already high enough to belong in many portfolios. However, the company's growth potential could turn an already good dividend into one of the best dividend stocks 2022. Shares of the REIT are trading at just 12 times this year's expected funds from operation, which means the dividend is relatively safe. Now that STORE Capital has put the worst part of the pandemic in the rearview mirror, the future looks bright for one of the best dividend growth stocks in 2022.
7. Devon Energy Corporation
Devon Energy, as its name suggests, primarily engages in the exploration, development, and production of oil, natural gas, and natural gas liquids in the United States. With more than 5,134 wells, Devon has become an integral component of the oil and gas supply chain. Despite the headwinds the entire oil and gas industry has faced in recent years, Devon Energy looks like one of the best dividend stocks in today's market.
Devon Energy is a pioneer in both the oil industry and within the framework of dividend payouts. The latter, however, is particularly important to note, as Devon was recently credited with introducing income investors to the oil and gas industry's first fixed plus variable dividend. In doing so, Devon Energy simultaneously promised investors access to a base dividend and a variable dividend which could reach as high as 50% of the company's free cash flow (after accounting for the previously mentioned base dividend and capital expenses).
Devon Energy's fixed plus variable dividend framework is made even more attractive in today's global economy, when gas prices are rising from geopolitical turmoil. With the United States and many of its Western allies sanctioning Russian oil, the cost per barrel has skyrocketed in recent weeks and increased Devon's free cash flow. In its most recent quarter, Devon Energy's unique divided structure resulted in a 9.96% dividend yield, well above The Street's average.
However, it is worth noting that the international crisis has shown no signs of cooling off. While the whole world is hoping for an immediate truce, there's a chance the conflict will continue for at least the foreseeable future; if that's the case, it is safe to assume oil prices will keep rising. As a producer of both oil and natural gas, Devon Energy will benefit from subsequent increases. On the other hand, investors will see their dividend yield increase in conjunction with Devon's free cash flow.
While forecasts are in no way guaranteed, many industry experts are predicting a 10- to 15-year window of growth for today's leading oil and gas plays. Demand will undoubtedly wane in more mature markets, but there's reason to believe the need for oil and gas will remain significant in emerging markets for years, if not decades. Therein lies the real reason Devon looks like one of today's best dividend stocks: its current share price looks like a bargain when you account for years of growth complemented by a fixed plus variable dividend.
The advent of electric vehicles and green technology has turned many investors off of the oil and gas industry for the better part of a decade. If for nothing else, the global economy is demanding cleaner energy sources. Still, only a small percentage of the world is ready to make the transition to clean energy. In the meantime, the entire planet needs to rely on traditional sources of energy.
It is forward looking thinking, however, that has discounted the entire oil and gas sector. More investors are putting their long-term capital in clean energy companies, effectively selling the oil and gas sector short.
The impending move away from oil and gas appears to be discounting companies like Devon energy. Devon energy not only boasts one of the lowest PEG ratios in the Oil, Gas & Consumable Fuels industry, but it also looks to be trading at a discount relative to its peers. Additionally, Devon Energy's price/earnings ratio comes in just below the industry average. The unique combination of a low PEG and PE ratios suggests Devon Energy has an attractive risk/reward profile complimented by an undervalued share price.
The oil and gas industry has seen better days, but the fact remains: the world needs access to energy now more than ever, and green alternatives simply aren't ready to supply the whole planet. Instead, companies like Devon Energy will need to bridge the gap for what could turn out to be decades. As a result, the unique undervaluation of the entire oil industry, years of potential tailwinds, and an attractive dividend framework make Devon Energy one of the best dividend stocks to buy right now.
8. Kinder Morgan, Inc.
Kinder Morgan is widely recognized as a pivotal component in the North American energy sector. As an energy infrastructure company, however, Kinder Morgan isn't responsible for the creation or extortion of natural gas, but rather its transportation. In doing so, KMI owns and controls oil and gas pipelines and terminals. In total, Kinder Morgan has at least an invested interest in approximately 85,000 miles of pipelines and 152 terminals.
Despite its prominent position in the oil and gas industry, however, Kinder Morgan's share price has been relatively suppressed by the pandemic. For the better part of two years, energy has been trailing the broader industries because of obstacles created by COVID-19. While the S&P 500 is up more than ninety percent since the market crashed in the wake of COVID-19, KMI's move has been more or less negligent.
Energy appears to be breaking out despite its underperformance over the past two years, and KMI is no exception. At the end of last year, even before Kinder Morgan reported its full-year 2021 earnings, the U.S. leader in natural gas pipeline infrastructure forecasted its full-year 2022 results. In the forecast, investors were reminded why they have invested in KMI in the first place: a strong balance sheet, higher net income, and higher earnings before interest, taxes, depreciation, and amortization (EBITDA). More importantly, KMI was so confident in the tailwinds the energy industry would experience in 2022 that it raised its dividend yield of 6.17%.
Kinder Morgan continues to be dependable in a market fraught with volatility. Even at a time when the world is trying to pivot away from oil and gas, KMI looks to be a safe transition play. If for nothing else, KMI is well positioned to cater to the lower-carbon energy sources in the future. As a result, few companies look more ready than KMI to generate consistent, dependable cash flow for their shareholders than KMI. With the ability to cater to both today's and tomorrow's energy sources, KMI looks ready to take its place as one of the highest paying dividend stocks in 2022 and beyond.
9. CareTrust REIT, Inc.
As its name suggests, CareTrust is a real estate investment trust that owns, acquires, develops, and leases many healthcare-related real estate assets. In particular, however, CareTrust specializes in skilled nursing facilities and senior housing on a national scale. In total, CareTrust's diversified portfolio includes 191 net-leased healthcare properties and three operated seniors housing properties in 24 states.
Despite resting comfortably at the forefront of the healthcare REIT industry, CareTrust faced a lot of headwinds in the wake of COVID-19. Not unlike most REITs, CareTrust had to worry about collecting rents at a time when delinquent tenants were protected by the government and “forgiven” for not paying monthly obligations. While the S&P 500 is up about 51.0% since the market crashed in March of 2020, CTRE is actually slightly down.
There is no doubt that CTRE's share price hasn't kept pace with broader indices. As a result, the healthcare REIT looks undervalued. With a PEG ratio below the Equity Real Estate Investment Trusts industry median PEG, CareTrust appears to be an industry leader trading at a discount relative to its peers.
To be clear, it's not the company's valuation that has landed it on the list of today's best dividend stocks 2022, but rather its future potential. If for nothing else, the U.S. population is aging at a rapid pace and the advent of technology in the healthcare industry is promoting longer life spans. According to The Motley Fool, today “less than 17% of the United States is 65 or older, and that's going to rise to 22% by 2050.” Long-term trends suggest we are in the early stages of an increasing demand for senior healthcare and nursing facilities.
CareTrust is uniquely positioned to benefit from long-term trends, making it one of the best dividend stocks to buy in 2022. Investors who get in sooner rather than later may benefit from growth and a 5.82% dividend yield with room to run for decades.
10. AbbVie Inc.
AbbVie is a worldwide pharmaceutical company that discovers, develops, manufactures, and sells prescription drugs for a wide variety of therapies. Its position as a global leader in the pharmaceutical industry has firmly entrenched it on most investors' “best dividend stocks” lists.
To be perfectly clear, AbbVie hasn't only found itself on the “best dividend stocks 2022” list; it's been at the top of income investors' lists for the better part of 50 years. Having already delivered 49 consecutive years of dividend increases, AbbVie is one of the most well-established income stocks investors should be excited about in 2022. Not only does the pharmaceutical company's track record speak for itself, but its prospects appear even brighter.
As recently as last year, AbbVie's revenue increased 59% year-over-year; that's impressive for such a well-established company. More importantly, AbbVie has a strong lineup of drug releases in the future, which should support years of dividend growth. With the acquisition of Botox-maker Allergan complete, AbbVie's business model is bigger, more diverse, and in a better position to improve its already attractive 3.70% dividend yield. Above all else, AbbVie is about as safe of an income stock as they come, which places it amongst today's best high dividend stocks.
The future of AbbVie looks brighter than ever, and the company's stock price is exhibiting the best of both worlds: growth and income. As a result, today's price targets look like they will enable AbbVie to continue growing its dividend for years (if not decades) to come.
How To Find High-Yield Dividend Stocks
Finding high-yield dividend stocks is as simple as searching brokerages for companies currently offering the highest yield. The information is displayed front and center, along with the stock price and everything else investors need to know. That said, there's a huge difference between stocks that offer a large dividend and quality dividend stocks.
In other words, investors shouldn't make their investment decisions based solely on a company's dividend size. Oftentimes, in fact, large dividends that seem too good to be true are red flags. According to Jason Hall at the Motley Fool, “High yields can be the result of a stock that's fallen because the dividend is at risk of being cut. That's a dividend yield trap.”
While the best dividend stocks are a great addition to any portfolio, it's not enough to covet the yield itself. Focusing solely on the yield and ignoring everything else is the surest way to make a poor investment. Instead, investors must evaluate everything they can about the stock and the company. Truly great yields will come from companies who have demonstrated an increased propensity for the following:
The Benefits Of High-Yield Dividend Stocks
The advantages of investing in dividend stocks are relatively straightforward. The benefits of high-yield dividend stocks are in their name: dividends. That said, dividends might offer more of an advantage than many new investors realize. Let's take a closer look at the benefits of high-yield dividend stocks:
- Compounding Income: Dividends are an obvious benefit associated with high-yield stocks. However, the true benefit is brought to light once those returns are reinvested through a DRIP (dividend reinvestment program). Brokerages allow investors to reinvest their dividends in the stocks they originate from, compounding income for years and years.
- Appreciation: While high-yield dividend stocks are inherently incapable of realizing the same growth rates as some of today's best growth stocks (their dividends prevent them from scaling further), they may still exhibit growth. In fact, the best dividend stocks may be considered growth stocks too. As a result, lucky investors will be able to simultaneously receive income in the form of dividends and watch their portfolios increase in value.
- Sound Fundamentals: For a company to pay a dividend in the first place, it must first be financially sound enough to even make the payments. As a result, most companies don't start making dividend payments until they are healthy enough to support them. That's not to say all dividend stocks are “healthy,” but rather that it's a good indicator of a successful stock.
- Risk Aversion: Dividend stocks can be held in several industries, which increases diversity and reduces risk. Not unlike traditional stocks, dividend stocks can vary dramatically, which can really help investors avoid market volatility.
The Risks Of High-Yield Dividend Stocks
Even the best dividend stocks, not unlike any other investment, are subject to risks under extenuating circumstances. While they have proven they belong in a diversified portfolio, there are certain pitfalls investors need to be aware of, not the least of which include:
- Dividend Traps: High-dividend yields may look attractive to the untrained eye, but companies with dividends that appear too good to be true can be a dangerous investment. While not always the case, businesses in distress may use incredibly high dividends to attract stock traders. It is entirely likely the dividend is still high after a stock price pullback, and the dividend hasn't been cut, so be aware.
- Poor Financials: Simply because a stock pays a high dividend, doesn't mean they can continue to pay it. If the company doesn't have enough cash flow or enough money to keep the business up and running, there's a good chance that dividends won't last much longer.
- Interest Rates: Dividend stocks are adversely impacted by rising interest rates. When rates rise, dividends become less attractive than other, safer government securities.