10 Superior Dividend Stocks
These stocks are good choices whether you're looking for dividend growth, down-market defense, or inflation protection.
While they may not be the highest-yielding stocks around, dividend-growth stocks--those that have a history of increasing their payouts over time--have plenty going for them.
For starters, the management teams at these companies are focused on delivering a growing cash stream to their shareholders--and income is a key component of total return. That's a shareholder-friendly mindset.
Moreover, companies that consistently ratchet up their dividends are usually profitable and financially healthy--two especially valuable qualities during a market downturn.
And lastly, dividend growers can provide some inflation protection, which is a plus for retirees. "Income-focused investors receive a little 'raise' when a company increases its dividend," reminds Morningstar director of personal finance Christine Benz.
Given their multipurpose role, dividend-growth stocks are suitable for almost any type of investor.
To uncover a few dividend-growth stocks to investigate further, we're turning to the top constituents in the Morningstar US Dividend Growth Index.
The index focuses on companies with a history of dividend growth and an ability to sustain it. The index includes U.S.-based securities that pay qualified dividends and that have increased their dividend payments over the past five years. To gauge the sustainability of dividend growth into the future, eligible constituents must display positive consensus earnings forecasts from the analyst community, and must also pay out no more than 75% of their earnings in the form of dividends. Constituents are weighted in proportion to the total pool of dividends available to investors. (Read more about the index specifics here.)
Given the index's construction rules, its largest constituents are relatively stable mega-cap companies. Most of these names are fairly valued as of this writing, but they're fine watchlist candidates.
Disclosure: Morningstar, Inc. licenses indexes to financial institutions as the tracking indexes for investable products, such as exchange-traded funds, sponsored by the financial institution. The license fee for such use is paid by the sponsoring financial institution based mainly on the total assets of the investable product. Neither Morningstar, Inc. nor its investment management division markets, sells, or makes any representations regarding the advisability of investing in any investable product that tracks a Morningstar index.
Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.