Even a cursory look at the stock market’s more dedicated dividend growers shows a lot of bullish sentiment among not just investors, but Wall Street’s research community.
Little wonder why.
When a company chooses to begin a dividend program, that’s a powerful statement by corporate management about their expectations for future profits. It says they’re so optimistic they can produce enough in earnings, consistently, that they’re pledging to give some of it back to shareholders. So just imagine what that says about companies that continue to dole out bigger dividends year after year.
While “the Street” is generally bullish on dividend growers, they unsurprisingly have their favorites. And those are the stocks we’ll be talking about today.
Read on as I examine 10 of the best dividend-growth stocks to buy in 2026, as measured by consensus ratings across Wall Street’s analyst community.
Editor’s Note: The tabular data presented in this article is up-to-date as of Jan. 15, 2026.
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Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
Table of Contents
3 Reasons to Value Dividend Growth
Let’s say you owned shares of the presently fictional Woodley Federated Holdings (WFH). If one day, WFH suddenly informed shareholders that it would be paying, say, a dollar per share per year from now on, we’d be pretty happy campers—after all, a dollar per year of returns we couldn’t really count on before.
But if Woodley Federated Holdings started paying us a dollar per share one year, then raised it every year after that, we’d be downright euphoric. Why? Well, I can think of three reasons:
1. A higher dividend over time means a higher “yield on cost” for us. Let’s say you bought a WFH share for $100. That $1-per-share annual dividend would equal a 1% yield on your purchase. If the stock price and dividend both doubled, to $200 per share and $2, respectively, new investors would still be buying at a 1% yield. But you? You’d be earning 2% on your original $100 purchase.
2. A higher dividend over time fends off inflation. In most years, you experience inflation, which is when the worth of our currency slightly declines. So $1 worth of groceries, gas, etc. this year will generally buy you slightly less groceries, gas, etc. next year. High inflation over the past few years really drives home this point—according to the U.S. Bureau of Labor Statistics, in January 2025 you would need $1.88 to buy what $1 could have bought in January 2020, right before the COVID pandemic hit a fever pitch. So if you receive $1 in dividends every year in perpetuity, your dividend income will lose its value over time. But if that initial $1 dividend is raised enough every year, your income could keep pace with (or even outrun) inflation.
3. A higher dividend can be a sign of quality. Just like initiating a dividend says “we have so much money that you can have some,” a track record of raising dividends typically signals a company’s ability to continue growing its bottom line.
Put simply: Regular dividend growth signals a higher caliber of operations (and thus potentially a higher caliber of stock), and it puts more money in our pockets. That’s a lot to love.
Keep an Eye on Dividend Payout Ratios
Whenever you’re considering any dividend stock, among the metrics you’ll want to factor in is the dividend payout ratio.
The dividend payout ratio—what percentage of profits is being used to pay the dividend—is a “quick and dirty” way that the average investor can get an idea of how sustainable a dividend is. It’s a simple calculation: dividends per share (DPS) / annual earnings per share (EPS) = dividend payout ratio.
I’ll use extreme examples to get the point across:
— Company A pays $1 per share in annual dividends and is expected to finish the year with $10 per share in earnings. $1 in DPS / $10 in EPS = 10% payout ratio.
— Company B pays $10 per share in annual dividends and is expected to finish the year with $10 per share in earnings. $10 in DPS / $10 in EPS = 100% payout ratio.
Which company do you think has a more sustainable dividend?
While an earnings-based payout ratio isn’t a perfect metric (dividends are technically paid from cash flow, not profits, and certain types of companies use more specialized measures of profitability), it’s generally fair to assume Company A has a safer payout than Company B. If Company A’s earnings suddenly fall by half in a given year, it can still pay its dividend with plenty of room to spare. If Company B’s earnings suddenly fall by half, however, it will be paying out nearly twice what it’s bringing in.
You can use this same logic to make an educated assumption about a company’s ability to grow its dividends going forward. If Company A and Company B—two companies in the same sector with a similar business model—have payout ratios of, say, 10% and 80%, you could reason that Company A has more runway to grow its dividend.
To be clear, though: There’s no “exactitude” as it pertains to dividend payout ratios. But if you need a general guide? Depending on who you’re asking, anywhere between 30% and 60% is perfectly healthy with room to grow, below 30% implies miles of runway, between 60% and 80% might be sustainable but probably not much room to grow, and between 80% and 100% could be worrisome from dividend-growth and dividend-safety perspectives.
Related: The 10 Best Vanguard Index Funds to Buy in 2026
Dividend-Growth Stocks That Wall Street Loves
Here’s how I came up with today’s list of highly rated dividend-growth stocks.
I started with a “selection universe” of the 500 companies within the S&P 500 Index. Next, I included only companies with 10 or more years of uninterrupted annual dividend growth. (These companies are frequently referred to as “Dividend Achievers.”)
From there, I excluded any company with a consensus analyst rating (provided by S&P Global Market Intelligence) of Hold or below. S&P boils down consensus ratings down to a numerical system where …
— 1 to 1.5: Strong Buy
— 1.5 to 2.5: Buy
— 2.5 to 3.5: Hold
— 3.5 to 4.5: Sell
— 4.5 to 5: Strong Sell
In fact, every dividend-growth stock on this list has a rating of 2 or less, indicating that at worst they enjoy a very firm consensus Buy rating, if not an outright Strong Buy rating.
From there, I selected some of the highest-rated dividend stocks that qualified, but with a firm eye on creating a somewhat diversified list. Specifically, no sector is represented by more than two stocks.
You might have noticed that yield wasn’t even a consideration. Dividend growers often don’t have a high current yield—and if you’re taking the long view, they don’t necessarily need to. If a company yielding 1% today has a commitment to robust dividend growth, that same stock could yield 3%, 4%, or even more as the years roll by.
The stocks are listed below, in descending order of their consensus rating (from the “worst” rating to the best).
Related: The 10 Best Dividend Funds You Can Buy Now
Best Dividend-Growth Stock #10: Coca-Cola
— Sector: Consumer staples
— Market cap: $205.8 billion
— Dividend yield: 2.9%
— Consensus analyst rating: 1.61 (Buy)
What better place to start than one of the oldest dividend growers, which comes out of one of Wall Street’s best dividend-paying sectors?
The consumer staples sector, which deals in basic-necessity goods, is teeming with dividend growers. It’s pretty easy to understand why. When times get tough, households might spend less on vacations and designer jeans, but they’re not going to stop going to the grocery store. (This is why staples make for some of the best dividend stocks for beginners, too.)
Take Atlanta-based beverage titan Coca-Cola (KO), which has more than 130 years of operating history and currently serves up more than 200 brands to more than 200 countries and territories.
Sugary soft drinks might not be a growth business in an age of healthier living, but Coca-Cola products still enjoy strong baseline demand. But more importantly: This mega-cap powerhouse is more than just Coke. Coca-Cola boasts a wide variety of other beverage brands, including Vitaminwater and Dasani water, Fuze teas, Powerade sports drinks, Minute Maid juices, Costa Coffee, Fairlife ultra-filtered milk, and many more drinks that are likely to meet your definition of a household staple.
But Coke isn’t just a consumer staples stock—it’s one of the best, boasting a huge bull contingent of 20 Buys versus three Holds and not a single Sell call right now.
“Coke remains our top pick, with strong and durable pricing power, existing historical volume growth, sustained market share gains, as well as increasing contribution from the high-growth Fairlife brand,” says Morgan Stanley analyst Dara Mohsenian. BNP Paribas Exane senior research analyst Kevin Grundy (Outperform) also cites the “under-appreciated Fairlife contribution” in his bull thesis, as well as a “best-in-class portfolio, market share, return of capital, free cash flow story … [and] attractive valuation.”
Coca-Cola currently boasts 63 years of unfettered dividend growth. Not only does that put it in the ranks of the Dividend Aristocrats, which have grown their payouts for at least 25 consecutive years, but a Dividend King (at least 50 years of increases). Its most recent hike came in February 2025, when it bumped the payout 5% higher to 51¢ per share. That comes out to a payout ratio of 70%, which is elevated compared to many of the names on this list. It’s still a very manageable number for a consistent company like Coca-Cola, but it does limit the company’s ability to rapidly improve the payout.
Related: 15 Best Investing Research & Stock Analysis Websites [2026]
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Best Dividend-Growth Stock #9: NiSource
— Sector: Utilities
— Market cap: $20.6 billion
— Dividend yield: 2.6%
— Consensus analyst rating: 1.57 (Buy)
NiSource (NI) is a natural gas and electric utility company founded in 1847 that serves more than 4 million customers in six states across the Midwest and East Coast.
The utility sector is (surprise, surprise) another place to find the market’s best dividend-growth stocks. You can thank its traditionally steady operations and sustainable distributions. Remember: NiSource and many other utilities are regulated, which means they must request permission to raise their prices and usually only do so by a couple percent every year or two. Plus, much of their money tends to be reinvested in infrastructure like electric lines and water pipes, or distributed as dividends to shareholders. So there’s usually not much growth to be had here.
Related: How to Rebalance Your Portfolio: A Quick Guide
Still, NiSource is coming off its fourth consecutive quarter of double-digit year-over-year revenue growth. That hasn’t fully translated into stock success—NI shares’ 13% total return (price plus dividends) in 2025, while normally good for a utility, actually underperformed the sector by a few points—but Wall Street remains bullish on the stock, at 11 Buys versus three Holds and no Sells.
“This Midwestern utility has streamlined operations and has been outpacing peers in terms of cost savings. The region has growing residential and manufacturing demographics,” says Argus Research analyst Marie Ferguson (Buy). “Management is optimistic that its capital plans can boost its base rate 9%-11% through 2033, including 8%-10% annualized growth through 2030.”
NiSource’s dividend is well-covered at 55% of this 2026’s projected earnings. That distribution also grew in January 2025, to 28¢ per share—up about 6% from its previous payout, and 40% better than what it was paying five years ago. That marked 13 consecutive years of dividend growth for NI’s stock.
There’s nothing exciting about buying a natural gas company and harvesting the dividends, but stability and income are nonetheless important aspects of many investors’ portfolios … and NiSource serves those needs.
Related: 7 Best High-Yield Dividend ETFs for Income-Hungry Investors
Best Dividend-Growth Stock #8: Xcel Energy
— Sector: Utilities
— Market cap: $44.8 billion
— Dividend yield: 3.0%
— Consensus analyst rating: 1.56 (Buy)
Xcel Energy (XEL) is a regulated utility provider that serves 3.7 million electricity and 2.1 million natural gas customers across eight states, primarily in the Midwest. It generates electricity through natural gas, oil, wind, nuclear, hydroelectric, solar, and other energy sources. The company also develops and leases natural gas pipelines, as well as storage and compression facilities.
Like many utility companies, XEL has seen its fortunes improve alongside artificial intelligence (AI) companies’ ravenous demand to churn out power-hungry datacenters.
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“XEL is projected to see above-average growth in data center demand by 2028,” says Argus Research analyst Marie Ferguson, who rates the stock at Buy. “The company has extensive multistate transmission services and is committed to electric and gas service expansion strategies in the company’s regulated service territories.
“Although these projects are long term in nature, there will be immediate growth in the base rate and drive earnings with allowable ROE. In addition to stronger fundamental growth, the company has grown its dividend faster than some peers, and management believes they can provide investors with a 9%-11% total return in the midterm.”
Argus’ Buy call is one of 15 on the stock; meanwhile, XEL has just two Holds and one Sell.
Xcel also offers a stereotypically above-average dividend yielding 3% right now. That dividend reached 22 years of uninterrupted growth in February 2025, when the company announced it would hike its payout by 4% to 57¢ per share.
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Best Dividend-Growth Stock #7: Linde
— Sector: Materials
— Market cap: $205.0 billion
— Dividend yield: 1.4%
— Consensus analyst rating: 1.50 (Strong Buy)
Materials companies are often extremely cyclical investments that tend to rise and fall based on broad-based economic trends and industrial demand. That said, a few have passed the test of time and managed to deliver consistent dividends regardless.
Case in point: Ireland-based Linde plc (LIN). Linde is the world’s largest industrial gas producer, offering oxygen, nitrogen, argon, helium, hydrogen, electronic gases, acetylene, and rare gases. It also produces air separation, synthesis, olefin, and other plants for third-party customers. And it does this across every continent.
While this is certainly a cyclical business, Linde offers some shelter from the economic shocks that many of its businessmates suffer. That’s in part because of its diverse offerings, but also because of the industries it supplies.
“The company has a strong presence in many defensive end markets, including health care, food and beverages, and electronics that should generate consistent revenues even in a soft economic environment,” says Argus Research analyst Alexandra Yates, who is one of 23 Buys on LIN shares (vs. two Holds and one Sell). “In addition, Linde currently manages a significant $10 billion backlog of projects, mostly under contract with blue-chip companies, which provide strong and steady cash flow and maintain a solid balance sheet. The long-term contracts allow for safe and consistent returns and position the company for future growth.”
In fact, its business has been so relatively stable that it has—by virtue of its 2018 merger with fellow gas giant Praxair—been able to deliver 32 consecutive years of increased dividends to its shareholders, most recently an 8% hike announced in February 2025, to $1.50 per share.
While long-term buy-and-holders might look away from the materials sector, Linde sticks out as both a Dividend Aristocrat and a surprisingly stable “forever stock.”
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Best Dividend-Growth Stock #6: Visa
— Sector: Financials
— Market cap: $636.7 billion
— Dividend yield: 0.8%
— Consensus analyst rating: 1.50 (Strong Buy)
Visa (V) is the world’s top payment card network, spanning some 4.9 billion Visa credit and debit cards accepted at more than 175 million locations in over 220 countries and territories. It’s not just individual consumers who swipe with Visa, either—many businesses actually purchase from other businesses using Visa’s plastic.
But what’s interesting about Visa is that, despite making it possible for literally $16 trillion-plus worth of annual transactions to go through, the company isn’t really responsible for any of the underlying funds. Visa itself is not a bank—instead, some 14,500-plus banks and other financial institutions use Visa’s technology to give its customers the ability to spend anywhere, anytime. So, if you use a Chase Visa, Chase Bank is taking on the financial risk; Visa is just the middleman between merchant and bank.
Not that Visa is exactly resting on its laurels as the leading card provider.
“We view Visa as a payment ecosystem platform that facilitates payment interactions and services for all ecosystem participants,” say William Blair’s Andrew Jeffrey and Cristopher Kennedy, who rate the stock at Outperform (equivalent of Buy). “At its foundation, Visa enables global money movement, underpinned by 12 billion endpoints. We think the efficiency of this infrastructure benefits from the rollout of next-generation Visa Net. The services layer is company building blocks, like 16 billion Visa tokens, up from just 10 billion in May 2024, supporting a goal of 100% tokenized e-commerce. Services also support the company’s burgeoning stablecoin offerings.”
Visa shares were recently rocked by calls from President Donald Trump to put a cap on credit-card interest rates. But Wall Street has generally dismissed such a move as extremely unlikely, and the stock still remains extremely highly rated, with 33 Buys versus seven Holds and no Sells.
“We see legal challenges to this proposal without any real manner to enforce it,” Citi analyst Bryan Keane says. “[An] act of Congress is not likely, nor an executive order, in our view.”
Another reason why Visa is among the best dividend-growth stocks to buy right now? Visa’s streak is at 17 consecutive years, and it has delivered a stellar 380% improvement on the payout over the past decade. Its most recent hike was a 14% boost to 67¢ per share, announced in late 2025. That’s just 20% of expected earnings for 2026, giving Visa the flexibility to keep the pedal down.
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Best Dividend-Growth Stock #5: Steel Dynamics
— Sector: Materials
— Market cap: $25.1 billion
— Dividend yield: 1.2%
— Consensus analyst rating: 1.45 (Strong Buy)
Steel Dynamics (STLD) is an unusual bird among industrial metals companies. It’s one of America’s steel producers, creating a bevy of products: hot- and cold-rolled steel, steel bars, rail products, engineered bar-quality products, and more. But where it stands out is its recycling operations—it also puts out lower-carbon-emission steel products by using recycled scrap as the primary input. It produces recycled aluminum and flat-rolled aluminum products, too.
Like Linde, this is a highly cyclical business, with both the top and bottom lines susceptible to massive peaks and valleys. Still, STLD has been among both the best operators and best-performing stocks in the space despite those results—and it’s among the best-loved, too. Currently, nine analysts have the stock listed as a Buy, while just two call it a Hold and no one has it as a Sell.
“Although demand/pricing environment currently remains muted, in our view Steel Dynamics is set to benefit from improved Sinton profitability and aluminum rolling mill ramp-up,” says Katja Jancic, a metals and mining analyst with BMO Capital Markets. “Further, with an elevated spending cycle largely completed, our view remains STLD is well-positioned to generate above-peer [free cash flow], which offers increased potential for shareholder returns.”
As a cyclical business, Steel Dynamics doesn’t spend a large portion of its profits on the dividend, which helps ensure its safety in downcycles. The 50¢ quarterly dividend currently represents just 25% of projections for full-year 2025 earnings, and 15% of the current year’s expected profits.
But it has been committed to improving that dividend, raising its payout annually for the past 13 years. It has done so at quite a clip, too—the distribution has doubled between 2020 and 2025.
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Best Dividend-Growth Stock #4: Walmart
— Sector: Consumer staples
— Market cap: $961.3 billion
— Dividend yield: 0.8%
— Consensus analyst rating: 1.40 (Strong Buy)
Walmart (WMT) needs no introduction, but I’ll give it one anyways.
Walmart is a global retailing behemoth, operating nearly 11,000 stores and clubs in 19 countries, including 4,600 stores—not just Supercenters, but also discount stores, Neighborhood Markets and small-format stores—in the U.S. That doesn’t even include its 600 Sam’s Club warehouse-club locations.
WMT is frequently contrasted with fellow big-box store Target—the former is considered a lower-priced but lower-quality retailer, while the latter is pricier but perceived to be more upscale. Fortunately for Walmart, at least part of that equation is changing.
“‘I don’t like shopping at Walmart’; well, there are solutions for that too,” says Truist managing director Scot Ciccarelli, one of 40 Buys on the stock (versus two Holds and one Sell). “Many ‘suburban soccer moms’ would often prefer Target to Walmart, given Target’s real estate strategy and focus on solid value in discretionary goods like apparel and home goods. However, we think these historical biases are fading, given the improvements to Walmart’s store standards, widening price gaps and, maybe most importantly, convenience and e-commerce options that simply didn’t exist years ago.”
Also helping Walmart is its continued rapid technological adoption to address changing consumer interests.
“E-commerce initiatives, including expanding marketplace and additional delivery options, should drive continued robust e-commerce growth, especially in today’s environment,” says Jefferies analyst Corey Tarlowe, who rates shares at Buy. “Overall, we expect WMT to command an increasingly large share of customer spending through bolstered omnichannel capabilities, partnerships, and services. This justifies above-historical-average growth.”
Walmart is also a leader among dividend-growth stocks. Its 52nd consecutive dividend improvement came in March 2025, when it juiced its distribution by 13%, to 23.5¢ per share. That’s easily covered, at 35% of 2026 earnings expectations, and its streak puts it in the ranks of both the Dividend Aristocrats and Kings.
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Best Dividend-Growth Stock #3: S&P Global
— Sector: Financials
— Market cap: $166.1 billion
— Dividend yield: 0.7%
— Consensus analyst rating: 1.35 (Strong Buy)
S&P Global (SPGI)—parent of S&P Dow Jones Indices, which produces the S&P 500—is one of the highest-rated dividend stocks on the market, and the highest-rated Dividend Aristocrat of them all.
The S&P 500, of course, is America’s most ubiquitous index—literally trillions of dollars worth of fund assets are either indexed to it or benchmarked against it. (And as I point out every year in my list of the best ETFs, active managers have a really hard time beating it.)
But S&P Global is more than just the S&P 500. It’s also responsible for the Dow Jones Industrial Average, the Dow Jones Transportation Index (the oldest index in use), and more than a million other indexes across a number of asset classes. It’s also home to …
— S&P Global Ratings: Credit ratings, research, and analytics
— S&P Global Commodity Insights: Information and benchmark prices for commodities and energy
— S&P Global Market Intelligence: A wide variety of financial markets and asset data and analytics, enterprise technology, and advisory services.
— S&P Global Mobility: Solutions for vehicle manufacturers, automotive suppliers, mobility service providers, and other companies in the automotive value chain. (Note: The company announced this year that Mobility will be spun off, likely sometime in 2026.)
“We are Buy rated on S&P Global (SPGI), seeing the company as a bellwether for the info services sector and a category leader for financial analytics and essential services,” says Citi analyst Peter Christiansen, who is one of 22 analysts with Buy-equivalent calls on SPGI, versus one Hold and no Sells. “We think investors can appreciate the company’s diversification across various asset classes and high degree of subscription/recurring revenue, which positions the company well in both positive and challenging market environments. … We also believe S&P Global’s AI initiatives present value-added features that can enhance user engagement and potentially, improved pricing power.”
SPGI is one of the best dividend-growth stocks in large part because of these varied and growing sets of businesses, which have allowed S&P Global to pay dividends every year since 1937, and grow them for 52 consecutive years. SPGI’s latest improvement was a 5.5% bump, to 96¢ per share, announced in January 2025. That’s less than 20% of the company’s expected annual profit this year, so SPGI has plenty of resources to keep its streak alive going forward.
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Best Dividend-Growth Stock #2: Broadcom
— Sector: Technology
— Market cap: $1.7 trillion
— Dividend yield: 0.8%
— Consensus analyst rating: 1.31 (Strong Buy)
Broadcom (AVGO) is one of the world’s largest semiconductor companies. It designs, develops, manufactures, and supplies semiconductor and infrastructure software products for a wide variety of uses, including (but hardly limited to) artificial intelligence (AI), data centers, networking, wireless, storage, and industrial automation.
The company has been an innovator in its own right, but you can also chalk up much of its scale to a history of aggressive merger-and-acquisition (M&A) activity. The company—itself the product of a 2016 merger between Broadcom Corporation and Avago Technologies (hence the AVGO ticker)—has swallowed up the likes of LSI Corporation, Brocade, CA Technologies, VMware, and Symantec’s enterprise security business.
Regardless of how it got there, the resulting entity is one of Wall Street’s most beloved chip stocks.
“We believe AVGO has one of the most strategically and financially attractive business models in semiconductors,” say Oppenheimer analysts, who rate the stock at Outperform. Among the reasons they love Broadcom are a “sustained competitive advantage in the high-end filter market, a ‘sticky’ non-mobile business, efficiently managed manufactory, and substantial earnings and free cash flow growth.
Like with many dividend stocks in the technology sector, Broadcom’s yield isn’t much to behold. But it’s a dividend-growth dynamo. The payout has exploded by 80% in just the past five years alone. In December 2024, AVGO hiked its dividend by 11%, to 59¢ per share, marking its 15th consecutive increase. And at 35% of profits, Broadcom has much more room to share.
Related: The 10 Best Dividend ETFs [Get Income + Diversify]
Best Dividend-Growth Stock #1: Microsoft
— Sector: Technology
— Market cap: $3.4 trillion
— Dividend yield: 0.8%
— Consensus analyst rating: 1.28 (Strong Buy)
Microsoft (MSFT) isn’t just the best dividend-growth stock according to Wall Street’s analyst community. It’s a dominant tech stock that has grown to well more than $3 trillion in value … and it’s showing very few signs of slowing down.
Curiously, part of Microsoft’s growth can be chalked up to its attraction as a technological safe haven. It’s an extremely diversified company, boasting “sticky” enterprise software, cloud, business intelligence, video games, and more—not to mention it’s sitting on about $102 billion in cash and investments.
The other part of Microsoft’s growth? Good ol’ fashioned growth growth.
“CEO Satya Nadella sees GenAI as a rare change to a fundamental computing paradigm, and Microsoft is moving to exploit the opportunities opened by Gen AI as quickly as possible, as demand currently outstrips the supply of its cloud services,” says Argus Research analyst Joseph Bonner (Buy). “Microsoft is racing against competitors Alphabet and Meta, as well as a host of smaller AI startups, to develop the new GenAI models/applications that may drive the emerging GenAI market as a whole.”
Microsoft is one of the most established names in tech, so no wonder that it has one of the sector’s most established dividends, at 20 consecutive years. The latest one was announced in September 2025—a nearly 10% improvement to 91¢ per share that represents less than 20% of 2026’s expected profits.
MSFT is the Street’s most-loved dividend-growth stock right now, too, at an incredible 55 Buy calls versus two Holds and no Sells.
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What Is Dividend Yield?
Perhaps the most important metric in the dividend universe is known as dividend yield. This is a simple financial ratio that tells you the percentage of a company’s share price that is paid out across a year’s worth of dividend distributions.
Expressed as a mathematical equation, it’s simply:
Dividend yield = annual dividend / price x 100
The idea here is to normalize dividend payments regardless of stock price, different quarterly payments, even different payment frequencies (quarterly is normal, but some dividend stocks pay monthly, while others pay semiannually or annually).
For instance, each of the following fictional stocks all have a dividend yield of 2.5%:
— Alpha Corp. currently trades for $40 a share. It pays a 25¢ quarterly dividend, for $1.00 per year in full. ($1 / $40 x 100 = 2.5%)
— Beta Inc. pays $1 in the first quarter, $2 in Q2, $3 in Q3 and $4 in Q4. That’s $10 in dividends for the full year. It trades for $400 a share. ($10 / $400 x 100 = 2.5%)
— Gamma Ltd. pays $2.50 just once per year. It trades for $100 a share. ($2.50 / $100 x 100 = 2.5%)
The idea is to focus on the percent of your initial investment you get back, and help you compare apples to apples.
Taking this math a step further, you learn that a company can suddenly feature a very high dividend yield through one of two very different ways: the share price falling very quickly, or the dividend growing very rapidly.
Alpha Corp., which trades for $40 per share, pays a 25¢ quarterly dividend that yields 2.5%. In a month, it yields 5.0%. Here are two ways that could have happened.
— Alpha Corp. doubled its dividend to 50¢ per share, for a full $2 per share across the year. The share price stays the same. ($2 / $40 x 100 = 5.0%)
— Alpha Corp. kept its dividend the same, but its share price plunged in half to $20 per share. ($1 / $20 x 100 = 5.0%)
Clearly, that 5% yield appears to be much safer and reliable in one scenario than the other.
What Is ‘Yield on Cost’?
When you look up a stock’s information, the dividend yield listed is based on the most recent dividend and the current stock price.
That yield is often actually different than the one current shareholders enjoy. That yield is called “yield on cost,” which is the payout based on what you paid, at the moment you invested.
Let’s say you buy a stock at $100, and it pays $1 per share. It yields 1.0% when you buy it ($1 / $100 x 100 = 1.0%).
In a year, that stock has doubled to $200 per share, and it also doubled its dividend to $2 per share. If you look up its information, its dividend is still 1.0% ($2 / $200 x 100 = 1.0%).
That’s not your yield on cost, however. You’re still receiving that higher dividend of $2 per share. But your cost basis is still the original $100 you bought the share at. So now, your yield on cost has doubled, to 2.0% ($2 / $100 * 100 = 2.0%)!
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7 High-Quality, High-Yield Dividend Stocks
It’s difficult to resist the charm of high-yield dividend stocks. Their ability to generate outsized amounts of cash makes them the stuff of dreams for those living on a fixed income—as well as for any investors who simply want a little performance ballast during periods of rough stock-price returns.
But we prefer quantity and quality. For instance, our favorite high-yield dividend stocks deliver much sweeter yields than the average stock, show more signs of fundamental quality than most, and have the confidence of Wall Street’s analyst community.
The 12 Best Vanguard ETFs for a Low-Cost Portfolio
Vanguard’s exchange-traded funds (ETFs) are among the most popular funds out there thanks to their low fees. But there’s more appeal to their ETF lineup than low costs alone.
Vanguard ETFs are big, liquid, and tend to track well-constructed indexes, meaning you’re not just paying low expenses … you’re actually getting some value out of your fees. And these Vanguard ETFs represent the best of the best.
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