We generally call stocks that pay consistent and higher dividends income stocks. These incomes stocks are some of the best stocks for dividend income, and investors often seek them out in hopes that the dividend payments will continue as they have historically.
There is no one “perfect” stock that’s right for every portfolio, but the best of these dividend stocks do typically have certain traits and are frequently found in specific financial sectors. Knowing these traits and where to find this type of investment helps income investors make the most from their investing capital.
Finding the best stocks for dividend income by sector
Not all economic sectors are designed the same. Some sectors are more volatile, with greater levels of speculative or aggressive stocks. The energy sector is an excellent example of this. On the other hand, some sectors, like consumer staples, provide less volatility due to their inherent nature. Companies behind consumer stocks have a base that habitually and continuously use their products, so there are steady sales regardless of the economy. Alternatively, the more volatile sectors have regular ups and downs within their business cycles.
To begin finding the best stocks for dividend income, consider looking into these economic sectors:
Utilities sector: The utilities sector involves a range of industries, from telecommunications to electric power. Steady dividends that rise over time are likely because of the need for these services on both consumer and business levels. This sector benefits particularly from healthy economic activity because this activity leads to a greater demand for power. Some investors that favor this industry will buy stock when they see prices go down in hopes of a dividend yield increase. For the best results, look for utility stocks that have a decade or more of profits.
Financial sector: Investing in bank stocks is a way to hold financial sector investments with lower amounts of risk and significant importance to the country’s economy. Top bank stocks also come with a historical record of providing dividend payments, and many of those dividends have grown throughout the years. Dividends from bank stocks are generally more secure than those in other sectors as well. If you want a lower amount of volatility with the potential for higher dividend yields, then bank stocks are a good place to start.
Consumer staples sector: As mentioned, the consumer staples sector has less volatility and fewer business interruptions from economic or business cycles. Top blue chip stocks within the consumer staples sector are some of the best stocks for dividend income because they often have a history of dividend payments. Many have raised their dividend payment amounts throughout that time. Top companies in this sector will also have strong balance sheets, manageable amounts of debt, and rising cash flow. Many of these companies, like Procter & Gamble (PG), have an array of products throughout a variety of markets that provide diversity. These companies change with the times to remain competitive and have brand recognition among consumers because of their success and industry prominence.
Technology sector: The technology sector, although more volatile than the aforementioned sectors, can involve more than just the best stocks for dividend income. This sector frequently houses some of the best growth stocks around. Investors should look at this sector, as it does a delicate dance between risk and rewards. There are higher levels of risk, because market volatility and speculation impact companies in this sector. Even so, investors seeking growth more than dividend income should target the tech sector, but look for the most stable and profitable companies within this sector for potential dividends as well.
Where do you place your focus when looking for more significant amounts of dividend income?