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High Dividend Stocks

To say that these times are “uncertain” is like saying the ocean is wet.

Thanks to the Fed, interest rates are resting at all-time lows and are poised to stay that way for the foreseeable future. We may see a slight uptick as we near the end of 2017, but other than that continuing economic and fiscal policy uncertainties should keep rates low.

That means long-term investors should consider searching for new ways to invest. In a low-interest rate environment, certain investments may not perform as well.

Just take a look at treasury bonds.

Long considered the quintessential safe haven, Treasury bonds are not even keeping up with inflation.

Unless you want to watch your savings wash away with the tides of time, you should start looking for yields elsewhere.

That's where high-yielding dividend stocks come into play.

High-yielding dividend stocks are great for a variety of reasons.

If you are a patient long-term investor, these stocks can pay off handsomely in the long-run.

In 2016, these stocks outperformed the general market. And, given time, high-yield dividend stocks can offer a generous income and healthy retirement.


And if you are risk averse and looking to remove some risk from your portfolio, dividend stocks can be a great way to keep making profits without panic.

But there's a little more to it than simply looking for high-yielding dividend.

You want to keep in mind a few things here…

  • First off, even with a great dividend yield, you do not want to overpay for a stock.
  • Second, the company in question should have a minimal risk of a dividend cut.
  • Third, in order to really start growing your investment, you should search out companies with a high probability that their dividends will increase.
  • And finally, as with any kind of portfolio, you'll need to be diversified; dividends won't save you if you have all your assets in one sector and that sector crashes and burns.

With that in mind, let's check out some Dividend Aristocrats: companies that have raised their dividends every year for at least 25 years...

Also keep in mind: Traditionally a high-dividend stock yields 4% annually. That said, in our era of low interest rates, the stocks mentioned below are still generating great dividends on a yearly basis. That has earned them places in some of the biggest investing portfolios in the world, including Berkshire Hathaway.

Now onto the list...

1) Coca-Cola (NYSE: KO) 

The iconic soft drink maker owns or licenses more than 500 beverage brands. The company has raised distributions for 50 years in a row. The stock trades at 19.30 times earnings and yields 2.80%. 

The Coca-Cola Company is Warren Buffett's favorite dividend stock, comprising the biggest position of his Berkshire Hathaway portfolio.

2) Johnson and Johnson (NYSE: JNJ

Johnson and Johnson is the world's single biggest health care company. They engage in the research and development, manufacture, and sale of a range of products in the health care field. The company has raised distributions for 50 years in a row. The stock trades at 23.66 times earnings and yields 3.50%. 

Prem Watsa, “the Warren Buffett of Canada,” pegged it as the top pick of Fairfax Financial Holdings this year. 

3) Campbell's Soup (NYSE: CPB)

I doubt Campbell's Soup needs much introduction... The maker of the iconic American soup brand are also makers of juices in the U.S., biscuits in Australia, and even farm products in Europe, Canada, Latin America, and China.

A 3.3% yield and a P/E of around 15 makes Campbell's ripe for any dividend-based portfolio. 

4) ConocoPhillips (NYSE: COP) 

This oil and gas producer boosts a generous 4.5% dividend yield with a P/E of 7.

ConocoPhillips explores, produces and transports crude oil, natural gas, natural gas liquids, and liquefied natural gas — big business right now, to say the least. They hold assets in North America, Europe, Asia, and Australia.

5) Altria (NYSE: MO) 

The rebranded company formerly known as Philip Morris has increased dividends for 44 years straight. It also boasts a 5.6% dividend yield.

And we're not only talking about cigarettes here; Altria also produces and sells Chateau Ste. Michelle and Columbia Crest wine as well. 

For beginners, it may be overwhelming to have to diversify a portfolio of a dozen or more high-yielding dividend stocks.

That is where Exchange Traded Funds (ETFs) can be very handy...

If you want a grab bag of high-dividend stocks, the SPDR S&D Dividend ETF (SDY) is a one-stop shop for some of the world's best dividend players. Using ETFs is a relatively new yet very popular way to diversify your holdings without having to follow dozens, if not hundreds, of companies.

The SPDR S&D Dividend ETF holds around 80 companies that have increased dividend yields every year for the at least 25 years.

Its yield is 3% annually.

So whether you are a bull or a bear, there's a place in your portfolio for high-yield dividend stocks. 

Many of the companies I mentioned above have one thing in common: maturity.

When a company decides to issue a high-dividend yield that means they have chosen to return income to investors. Other companies chose to distribute more income to investors because of tax purposes.

With that considered, before we reach the end of our high-yield dividend resource page, it’s worth noting some red flags you may encounter when researching stocks outside of this list.

Red Flags in High-Yield Dividend Stocks

Unlike many investment tools, high-yield dividend stocks are easy to find information on.

In fact, all you have to do is search “top high-yield dividend stocks” and you will be bombarded with lists of promising companies. Many of the companies mentioned above could be on those lists.

That said, there are a few red flags investors should be braced for.

For instance, I mentioned above that most companies provide high-yield dividends when they have matured or adjusted their business model to do so.

But some companies offer high-yield dividend stocks to create a mirage. Perhaps they aren’t doing well, and they want to trick investors into investing in a sinking ship.

In this case, the high-dividend yields being offered are not sustainable.

You can make sure that you don’t fall into this trap by checking the company's dividend history. Do they have a history of paying stable dividends? Or did they just start offering them out of the blue?

You should be wary of companies that dangle high-dividend yields like juicy carrots. The underlying company is sound.

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