LemonTrades
TL;DR
- For beginners, the best dividend stocks are big, steady companies that have raised their payouts for decades, like Procter & Gamble (70 years), Coca-Cola and Johnson & Johnson (64 each).
- Yields range from about 2% to 6%. A very high yield can be a warning that the dividend may be cut.
- A dividend fund like SCHD, VIG or VYM gives you dozens of these companies in one purchase.
- LemonTrades tells you what moved the stocks you own, and why, as it happens, and warns you before their earnings.
Dividend stocks pay you cash just for owning them. These seven have paid through recessions, wars and crashes.
Why these suit beginners
- Long records: 50 or more years of raises makes a company a “Dividend King.” Procter & Gamble, Coca-Cola, Johnson & Johnson, PepsiCo and McDonald’s all qualify or are close.
- Everyday businesses: soft drinks, soap, medicine and burgers sell in good times and bad.
- Lower swings: these stocks usually fall less than the market in a sell-off, though not always.
What you’re buying
- Procter & Gamble: Tide, Pampers, Gillette; 70 years of raises.
- Coca-Cola: drinks sold in nearly every country; Warren Buffett’s Berkshire is its biggest holder.
- Johnson & Johnson: medicines and medical devices.
- PepsiCo: drinks and snacks such as Lay’s and Doritos; its yield is higher partly because the stock has fallen.
- McDonald’s: it owns the land under many restaurants and collects rent from franchisees.
- Realty Income: a property trust that pays every month; its payouts are taxed as ordinary income.
- Verizon: a high yield, with slower growth and a lot of debt.
Or buy a fund
| Fund | Yield | What it holds |
|---|---|---|
| SCHD | About 3.0% | 100 high-quality dividend payers |
| VYM | About 2.3% | Over 500 higher-yield US stocks |
| VIG | About 1.5% | Companies with 10+ years of raises |
Beginner mistakes
- Chasing the highest yield. A 10% yield often means the market expects a cut.
- Ignoring the payout ratio. If a company pays out more than it earns, the dividend is at risk.
- Buying just before the ex-dividend date. The price drops by about the dividend, so there’s no free money.
- Forgetting taxes. In a regular account, dividends are taxed each year.
Use the SCHD dividend calculator to see how payouts grow, and read investment strategies. Tech giants pay little: see does Google pay dividends.
Sources
- StockAnalysis: Procter & Gamble dividend history
- StockAnalysis: Coca-Cola dividend history
- StockAnalysis: Johnson & Johnson dividend history
- StockAnalysis: Realty Income dividend history
- Investor.gov: Dividends
Education, not financial advice. All investing involves risk, including the loss of your money. See our disclaimer.
