5 Top Dividend Stocks to Buy Now
By: Ned Piplovic,
In addition to sporting high dividend yields, equities that qualify as top dividend stocks to buy now must also offer extended records of rising dividend distributions as well as asset appreciation that complements the dividend income in order to produce long-term total returns.
As the ratio of total annual dividend distributions per share and the equity’s current share price, the dividend yield is the simplest and most common metric that investors use to identify the top dividend stocks for their specific investment portfolio strategy.
Not only is the dividend yield readily available, it is also easy to calculate in the extremely rare instance that the metric is not offered. However, the dividend yield’s simplicity is also its biggest drawback. While a rising distribution amount drives the yield higher, a falling share price has the same effect. Therefore, a rising yield on its own could be either a positive indication or a negative one when a share price drop causes the increase.
Without resorting to complex and multi-variable analysis models, evaluating the equity’s total return over the trailing year is the simplest method for identifying the equities with rising yields that are worthy of consideration. As long as the one-year total return exceeds the dividend yield, investors should include that equity in the detailed analysis that they use to identify the best dividend stocks for their investment consideration.
Using a 4% dividend yield minimum as a criterion to find the best dividend stocks, the Dividend Screener available at DividendInvestor.com identified nearly 1,500 individual securities that met that eligibility requirement. Additional constraints reduced the list of potential investment options for the best dividend stocks to just the five entries below.
In addition to having a 4%-plus dividend yield, all five of the best dividend stocks to buy now have boosted their annual dividend distribution for at least five consecutive years and have both a minimum market capitalization of $3 billion and a sub-50% dividend payout ratio. Investors consider a payout ratio in the 30% to 50% range to be sustainable, as the equity uses less than half of its earnings to cover the distributions. Therefore, equities with a payout ratio in the sustainable range are more likely to continue boosting their dividend distributions for the foreseeable future. Lastly, the one-year total returns of all of the equities below exceed their current yield, which indicates that the share prices were able to deliver at least marginal growth and did not offset any dividend income gains.
Sorted in ascending order by dividend yield and based on the above criteria, the five top dividend stocks to buy now are:
5 Top Dividend Stocks to Buy Now: #5
Principal Financial Group, Inc. (NASDAQ:PFG)
Market Capitalization: $15 billion
Dividend Yield: 4.02%
Dividend Payout Ratio: 46%
First Dividend: 2002
Consecutive Annual Hikes: 11 years
Based in Des Moines, Iowa, and founded in 1879, Principal Financial Group, Inc. provides retirement, asset management and insurance products and services to businesses, individuals and institutional clients worldwide.
The company has boosted its dividend distribution amount almost five-fold over the last 11 consecutive years. This level of advancement is equivalent to an average annual dividend growth rate of 15.5%. For its 11th consecutive annual dividend, PFG enhanced its quarterly payout by 2% to $0.55. This corresponds to a $2.20 annualized dividend distribution and yields 4%.
A share price decline in 2015 limited the three-year total return to just 6.4%. However, a share price recovery in 2019 has provided shareholders with a 17.3% total return over the trailing 12 months.
5 Top Dividend Stocks to Buy Now: #4
Huntington Bancshares, Inc. (NASDAQ:HBAN)
Market Capitalization: $15.3 billion
Dividend Yield: 4.06%
Dividend Payout Ratio: 44%
First Dividend: 1912
Consecutive Annual Hikes: 9 years
Founded in 1866 and headquartered in Columbus, Ohio, Huntington Bancshares Incorporated operates as a holding company for the Huntington National Bank in eight Midwestern states. The current $0.15 quarterly dividend payout is 7.1% above the $0.14 distribution of one year earlier and corresponds to a $0.60 annual distribution. The 4.06% yield outperformed the company’s own 2.73% five-year yield average by nearly 50%.
Since nearly eliminating dividend distributions in the aftermath of the 2008 crisis, the bank hiked its dividend payout amount 15-fold, which is equivalent to a 35% average annual growth rate. Even over the last five years, the average annual growth rate has still been nearly 24%.
With minimal share price gains over the last year, dividends delivered almost the entire total return of 4.5%. However, the combination of escalating dividend payouts and capital gains has delivered total returns of 30% over the past three years and 62% over the last five years.
5 Top Dividend Stocks to Buy Now: #3
Legg Mason, Inc. (NYSE:LM)
Market Capitalization: $3.4 billion
Dividend Yield: 4.11%
Dividend Payout Ratio: 39%
First Dividend: 1983
Consecutive Annual Hikes: 6 years
Legg Mason, Inc. is a publicly owned asset management holding company. The company’s current $0.40 quarterly dividend is 17.6% higher than the $0.34 dividend from the same period last year. After a dividend cut of almost 90% in the aftermath of the 2008 financial crisis, the company has enhanced its total annual dividend payout amount more than 11-fold. This level of advancement is equivalent to an average growth rate of 27.6% per year.
LM’s current $0.40 quarterly payout converts to a $1.60 annualized payout and a 4.11% forward dividend yield, which is 36% higher than the company’s own 3.02% yield average over the last five years.
The share price lost approximately half of its value during 2018 and hit its five-year low, which was below $24, in mid-December 2018. However, since bottoming out in late 2018, the share price has gained 60% and delivered asset appreciation of 38% for the trailing one-year period. The dividend income has pushed the 12-month total return to 44%
5 Top Dividend Stocks to Buy Now: #2
LyondellBasell Industries NV (NYSE:LYB)
Market Capitalization: $31 billion
Dividend Yield: 4.41%
Dividend Payout Ratio: 43%
First Dividend: 2011
Consecutive Annual Hikes: 6 years
Incorporated in the Netherlands, and with operational headquarters based in London and Houston, Texas, LyondellBasell Industries N.V. is one of the largest plastics, chemical and refining companies in the world.
The current $1.05 quarterly payout is 5% higher than the company’s $1.00 distribution from the same period last year. This new quarterly payout corresponds to a $4.20 annual payout and a 4.41% forward dividend yield. Since beginning its current streak of consecutive annual dividend hikes in 2013, the company has more than doubled its total annual payout amount, which is equivalent to an average growth rate of 12.7% per year.
While the stock traded relatively flat over the past year, the company has enhanced its share price more than 30% since its five-year low in late August 2019. Over the trailing 12-month, the company’s total return of 4.7% was only slightly higher than the dividend yield. However, the shareholders have been able to enjoy a total return of nearly 25% over the last three years.
5 Top Dividend Stocks to Buy Now: #1
Brookfield Property Partners LP (NASDAQ:BPY)
Market Capitalization: $5 billion
Dividend Yield: 6.83%
Dividend Payout Ratio: 123%
First Dividend: 2013
Consecutive Annual Hikes: 6 years
Based in Hamilton, Bermuda, and formed as a spinoff from Brookfield Asset Management in 2013, Brookfield Property Partners is a $70 billion real estate investment trust (REIT) that owns and manages a diversified portfolio of multifamily and commercial real estate properties. With an annual distribution hike every year, the trust has increased its annual payout by one-third since its formation six years ago. That level of growth corresponds to an average growth rate of 4.7% per year. The average annual growth rate over the past three years is even higher, at 5.7%.
The REIT’s unit price experienced a 25% pullback in the last quarter of 2018 but recovered to deliver a gain of nearly 7% over the past year. Because of a 20% share price decline over the past five years, the three-year and five-year total returns are below 10% and lower than the one-year total return of almost 15% over the trailing 12-month period. The current share price has nearly 10% room on the upside before it reaches the analysts’ current average target price.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.