Investing in Dividend Stocks: Strategies and Top 7 High-Yield Picks for August
In the world of investing, brokerage accounts offer a gateway to the stock market, requiring a deposit to purchase stocks. One such investment that could yield significant returns over time is a $5,000 investment, growing at 6% annually for 20 years, which could become over $16,000. Bumping up the return to 8% annually, including dividends, could grow the same investment to over $24,000 [1].
Dividend stocks, shares of companies that regularly pay investors a portion of their revenue, provide a regular stream of passive income. Some dividend stocks pay out annually, semi-annually, or quarterly, while others offer monthly dividends. For instance, AG Mortgage Investment Trust Inc has a dividend yield of 11.80%, and Dine Brands Global Inc has a yield of 9.37% [1].
If you're looking for dividend stocks that likely won't cut their dividends, check out the dividend aristocrats, a group of stocks listed on the S&P 500 that have increased their dividends every year for at least 25 years. Companies like Amgen, Bristol-Myers Squibb, Becton Dickinson, AbbVie, Franklin Templeton, Scotts Company, Hasbro, and Philip Morris International have been among the top-performing dividend stocks recently, combining healthy yields with solid financials [2].
For broader exposure, high-dividend ETFs like the First Trust Morningstar Dividend Leaders Index Fund (4.41% yield) and Fidelity High Dividend ETF (2.95% yield) provide diversified dividend income [3]. These stocks and ETFs offer a combination of steady income, dividend growth, and relative valuation appeal, making them suitable candidates for a long-term dividend-focused portfolio in 2025 [1][2][3][4][5].
Investing in individual dividend stocks requires more work in the form of research into each stock, but it can offer a higher yield than a dividend fund. However, with just one transaction, you can own a portfolio of dividend stocks through a dividend fund. Dividend funds pay you dividends on a regular basis, which you can take as income or reinvest. They also offer investors access to a selection of dividend stocks within a single investment [6].
It's important to note that dividends in taxable brokerage accounts cause taxes to be realized in the year the dividends occur. For investors with taxable accounts and in high income brackets, dividend stocks might not be as tax efficient as other options.
In conclusion, whether you choose to invest in individual high-dividend stocks or high-dividend ETFs, the key is to find a balance between yield and safety. Dividend yields over 4% should be carefully evaluated, and those over 10% tread firmly into risky territory. With just 15 minutes to set up a brokerage account, you're just a step away from starting your long-term dividend-focused investment journey.
References: [1] Fool.com [2] Kiplinger.com [3] Investopedia.com [4] Money.com [5] ETF.com [6] Forbes.com
- To compare potential returns, use a calculator to estimate the growth of a $5,000 investment in a personal brokerage account over 20 years, assuming different annual growth rates.
- Some personal-finance apps can help track your investments in stocks, monitor your portfolio's performance, and provide guidance on managing your personal-finance.
- A personal finance expert suggests looking into high-dividend ETFs, such as the First Trust Morningstar Dividend Leaders Index Fund and Fidelity High Dividend ETF, for broader exposure and diversified dividend income.
- When investing in individual dividend stocks, one may have to put in more effort for research, but it could potentially offer a higher yield compared to a dividend fund.
- Keep in mind that taxes apply to dividends in taxable brokerage accounts, making some dividend stocks less tax-efficient for investors with high income brackets.
