Best Dividend Stocks: Grow Your Wealth Steadily With Dividend Investing

motek 1This best dividend stocks article was written by Chloe Peng, Analyst at I Know First. Master of Science of Finance candidate at Brandeis University.


  • Dividend paying stocks are more stable and profitable and gradually gain over the long-run.
  • Investors need to mind investment dates in order to get the next dividend payment.
  • I Know First helps you identify the top investments among all dividend paying stocks.

The Charm Of Dividend-paying Stocks

Dividend stocks can provide investors with predictable income as well as long-term growth potential. They tend to be mature and profitable companies which usually survive economy downturns better than non-dividend paying stocks and are oftentimes less volatile. A stable dividend paying strategy is a sign of management’s confidence in the company’s future development. These companies aren’t likely to skyrocket immediately, however, a solid portfolio of dividend stocks can give investors massive amounts of wealth over long periods of time.

Take Procter& Gamble (NYSE:PG) as an example, the consumer product manufacture has gradually increased its dividend for 63 consecutive years. Its remarkable portfolio of consumer product brands, including Tide, Downy, Pampers and others, gives PG a significant stand in the industry. Moreover, the nature of its products grants sales no matter how the economy is performing. Thus, in the long-run, PG is particularly stable and continuously growing, supporting its astonishing dividend paying strategy with strong income. See the following chart of PG’s dividend payout and stock price over the past 30 years.

(Source: Macrotrends)

Dividend payout and stock price often interact with each other. Dividend payout boosts investors’ confidence and drives stock price up. Good business performance and strong earnings support further dividend payout. Here’s another example. Please see the following chart of Apple (NASDAQ: AAPL) dividend payout and stock price chart over the 31 years.

(Source: Macrotrends)

Top Dividend Stocks In 2020

In early 2020, the stock market plummeted deeply and caused significant panic among investors. However, some stocks quickly soared back to its all-time highs. There are some companies with solid businesses still paying dividends under the crisis. For example, Enterprise Products Partners (NYSE: EPD), IBM (NYSE: IBM) and W.P.Carey (NYSE: WPC) still have dividend yields over 4%. See chart below of the 2 companies’ dividend yields compared to S&P500’s.

Source: The Motley Fool

EPD has a conservative business approach, which helped it survive the shut down when energy demand is soft. The dividend yield of 9.51% highlights the company’s attractiveness among peers. Although many real estate investment trust has been struggling to collect rents, WPC managed to get paid from almost all of its tenants thanks to its diversification strategy and it even increased dividend payment in Q2. Besides, the big blue chip IBM did OK, its Q2 earning isn’t great and isn’t bad and generally beat analyst expectations. The company’s cloud revenue was up 30%, and its RedHat business expanded sales by 17%. IBM also managed to increase its gross profit margin by a full percentage point. The dividend yield of 5.15% gives investors satisfying return when the company keeps working on shifting its business to more in-demand offering.

When Do Dividends Get Paid?

The normal dividend process is straightforward as the following picture shows. But it can be tricky for beginners on when to purchase the stock in order to get the next payment. Since we want to invest in top dividend paying stocks, there are important dates we need to keep in mind in order to get the next dividend payment.

(Source: Turbo Intuit)

Trade date: This date is the date when you buy the stock.

Settlement date: You do not immediately take ownership of the stock you buy on trade date, rather, the purchase becomes finalized on settlement date, which is 2 business days after the trade date. On settlement date, you become a “shareholder of record” on the company’s book.

Ex-dividend date: It’s the first day a stock is traded without its dividend. If you buy a stock before the ex-dividend date, you are entitled to the dividend payment.

Record date: This date occurs 2 business days after the ex-dividend date. The company determines which shareholders will get paid and which will not.

Pay date: This is date when the dividends are finally given to investors.

(Source: Wall Street Mojo)

Is Dividend Paying Always Ideal?

If dividend payouts boost investors’ confidence and build a positive public image, why don’t all companies pay dividends?

To answer the question, I will first give you some examples of well-known companies that actually do not pay dividends. Just to name a few, Alphabet (GOOG), Facebook (FB), Amazon (AMZN) and Tesla (TSLA) have historically declined to pay dividends. You may realize that these companies are all fast-growing and much younger companies that develops new technology. These companies need the cash to reinvest in the business and power future growth. Although they can generate huge stock price increase over short period and give investors large capital gains, they are not the perfect targets for dividend investors.

Long- And Short-term Investing In Dividend Stocks

There can be long- and short-term investments on dividend stocks. Day traders use an active trading strategy called dividend capture that requires frequent buying and selling of stocks, holding them for a period only long enough to capture the dividend payment. Traders prefer large dividend amounts to generate as much profit as possible. However, markets tend to be somewhat efficient, stocks usually decline in value immediately following ex-dividend, the viability of this strategy has come into question.

Most commonly, dividend stocks are treated as long-term investment. There are too many market forces affecting the stock prices, many of which have no relationship with the underlying business itself. Thus, the most solid dividend stocks can go through volatile periods. People holding the stocks won’t worry too much about day to day up and downs because they will give you satisfying returns over the longer period. The first thing should be choosing the right stocks to buy.

Not all dividend paying stocks are great investments and many retail investors don’t know how to do research by themselves. Normally, a good dividend company has a long-term expected earning between 5% and 15%, strong cash flows, industrial strength and low debt-to-equity ratios. There can be more indicators to look at when picking the best ones, however the above 4 can already be a headache for many investors.

Luckily, we now have AI to analyze market data and pick stocks for us. In the next section, we will be discussing how I Know First can help you make decision on your next dividend stock investment.

The AI Algorithm Identifies The Top Dividend Stocks

I Know First provides dividend forecasting package for subscribers. We determine the best stocks carrying a dividend by screening our database daily using our advanced AI algorithm. The full dividend package includes a daily forecast for 20 stocks with bullish and bearish signals, namely top stocks to long and top stocks to short. We deliver the forecast in a heat map which presents signals and predictability for each stock.

In the forecast we sent out on April 24 2020, the forecasting algorithm gave bullish forecasts on the following 10 stocks. 3 months later, 10 out of 10 stocks generated positive returns. The greatest return came from QEP at 186.98%. Additional high returns came from CC and WES, at 63.32% and 38.86% respectively. The package saw an overall yield of 44.34% versus the S&P 500’s return of 14.93% implying a market premium of 29.41%. See chart below.

Here at I Know First, our AI-based algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing daily stock market forecast, gold prediction, Forex forecast, oil prices forecast, and, in particular, top tech stocks. Today, we are producing daily forecasts for over 10,500 assets. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.

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