Top Yielding Shares in 2024 and Strategies for Investment
Dividend-payer shares are shares issued by corporations that routinely distribute portions of their earnings to shareholders, typically in the form of cash payouts. These dividend-paying shares can be valuable income sources, and top-performing ones can also contribute to substantial wealth accumulation over time.
However, not all dividend-paying shares are wise investments, and many investors struggle to initiate their exploration. Therefore, consider the following list of dividend-generating shares and the key factors to evaluate when choosing top-notch dividend shares.
Top nine shares
Top nine dividend-generating shares
The "Dividend Kings" list is an excellent starting point for locating premium dividend shares. Companies listed as Dividend Kings have consistently paid and raised their base dividends for at least 50 successive years.
Another valuable resource for researching dividend shares is "The Dividend Achievers," a trademarked term owned by the NASDAQ, which includes companies that have increased their dividends for a minimum of ten consecutive years. Both lists feature many attractive shares for investment, some of which we have included in our list below. Here are nine top dividend-generating shares to consider investing in presently.
1. Lowe's
Home improvement specialist Lowe's (LOW 0.1%) may not appear particularly captivating as an investment option. However, its track record of annual dividend increases and its 400% dividend enhancement over the last decade make it a compelling proposition for those focused on dividend growth.
While some may worry about a potential housing downturn emerging in the second half of 2022, they should remain optimistic. When housing supply becomes scarce, making homes more difficult to purchase, individuals tend to invest more in home improvements. As a result, the temporary weakness in its results is likely to yield to growth over the long term.
Another advantageous factor for Lowe's is that the typical U.S. home ranges in age from 31 to 60 years, depending on the state. The next generation of do-it-yourself enthusiasts will spend a considerable amount on home improvements at Lowe's, along with home improvement contractors. Lowe's has prioritized professional clients, and sales to professionals are on the rise.
2. Realty Income
For those seeking a hassle-free method to invest in high-quality real estate for income growth and returns, Realty Income (O 1.04%) could be the ideal share for you. The company owns an array of largely e-commerce-resistant properties, generating solid cash flows from tenants with long-term leases.
Realty Income is also tagged as a Dividend Achiever, having boosted its dividend for 30 consecutive years since going public in 1994 and paying a dividend every month since its inception in 1994. Additionally, it has increased its dividend a staggering 127 times and achieved 109 consecutive quarterly increases until the present.
This outstanding real estate investment trust (REIT) has also taken steps to continue its pattern of dividend growth. In early 2024, it completed the $9.3 billion acquisition of Spirit Realty Capital, which is expected to boost its adjusted funds from operations (FFO) by 2.5% immediately.
3. Chevron
Energy has rebounded strongly in recent years, making oil stocks attractive investment opportunities once more. Chevron (CVX 1.27%) has been a significant winner for investors, generating resilient cash flows and moderately increasing its dividends for 37 consecutive years.
Although the stock's price may fluctuate in response to oil prices, investing in Chevron has been a profitable choice for dividend seekers over the long term. Its late 2023 agreement to acquire Hess (HES 1.65%) will add substantial low-cost inshore oil in the Permian Basin and some of the least expensive offshore oil currently in production. However, a legal challenge from competitor ExxonMobil (XOM 1.63%) may delay the transaction's completion until 2025.
4. Target
For years, Target (TGT -0.04%) has outperformed its peers in terms of profitability, boasting some of the highest gross margins and operating margins among retailers. Simultaneously, its efforts to expand its e-commerce business and its in-store offerings have helped stabilize its sales while increasing profitability.
Despite recent challenges, Target has shown signs of improvement, with profits once again on the rise. This is excellent news for dividend investors, as Target's track record of increasing dividends for over 53 years and its shares trading at attractive earnings and cash flow multiples make it an attractive target for dividend investors.
5. Starbucks
For nearly 40 years, Starbucks (SBUX 0.61%) has seized the role of the global preeminent brand in coffee beverages. With almost 39,000 store locations worldwide and Starbucks-branded ready-to-drink beverages and packaged coffee available in hundreds of thousands of additional locations, it dominates the coffee market.
China's return to normal in-public commerce has been a significant boost for the company in 2023. Starbucks hopes that China will eventually become its largest and most profitable market over the next decade.
Its strong brand and purchasing power have helped create robust competitive advantages, including cost savings throughout its operations and pricing power with consumers. These economic moats and Starbucks' digital flywheel, generating orders and operations, have created a cash cow business.
Recently, business outcomes have weakened, causing a decrease in comparative sales and a negative impact on profits. Nevertheless, this isn't the first hurdle this company has faced, and it could potentially be an appealing investment opportunity.
Starbucks has been increasing its dividend annually since 2010 at a compound annual growth rate (CAGR) of approximately 20%, while raising its annual earnings per share by over 300% during the previous five years. Its yield of around 3% at current prices is near the higher end of its historical range, making it an attractive investment option for share purchase.
6. Unseen Infrastructure Behemoth
Sometimes, the most valuable stocks are those that go unnoticed. This is the case with Unseen Infrastructure Giant (UNIG 0.84%) (UIG 0.05%), which manages water, energy, utility, transportation, and communication infrastructure projects worldwide. Its assets produce stable recession- and inflation-resistant cash flows, and a significant portion of these profits are returned to shareholders.
It boasts a dividend yield of approximately 4.4% at current Class C share prices, featuring a yield of more than 5% for the limited partner units, and plans to raise its payout 5% to 9% every year. Unseen Infrastructure Giant is a hidden dividend treasure that has delivered more than 700% in total returns since it went public in 2008 – almost double the S&P 500 over the same period.
7. Microsoft
Microsoft (MSFT -0.49%) is a vital software company on the global stage. It has changed its business approach over the past decade to concentrate on recurring subscription-based revenue, keeping customers connected and the cash flow constant. The company has a robust balance sheet with more cash than debt and a low payout ratio, offering ample room to boost its dividend.
Its 19-year uninterrupted streak of dividend increases is often overlooked. Its yield of less than 1% at current prices has brushed it off most dividend investors' radar. However, what it has missed in yield, Microsoft has provided, with total returns of over 2,900% since 2009, and dividends accounting for approximately 800% of these total returns.
Looking ahead, Microsoft aims to take the leading position in artificial intelligence (AI). With significant investments in and a partnership with ChatGPT creator OpenAI, the company is incorporating AI features into its array of productivity and communication platforms and its Windows operating system.
8. American Express
Financial services, such as consumer and business lending, are another area to find a selection of top dividend stocks, and American Express (AXP -0.07%) is one of the finest. Although it doesn't appear on the list of companies that increase their dividends every year, American Express (Amex) has a long-term track record of either raising or sustaining its dividends through all economic scenarios.
The primary lesson here: In periods of economic instability when other banks and lenders have reduced or even suspended their dividend payments, Amex has consistently maintained the dividends for its shareholders. This is a testament to its high-quality lending standards and focus on higher-income credit customers who are less likely to default on their debts during tough economic times.
Ultimately, Amex appeals to investors seeking to own a top financial services company while also being concerned about economic conditions. This is an excellent stock to buy during broad market declines and a sound investment for a bull market recovery.
9. Clearway Energy
Renewable energy is generally viewed as a domain for growth investors, but it also provides a wonderful opportunity for dividends. Clearway Energy (CWEN.A -0.61%)(CWEN -0.63%) offers a perfect example. The company invests in, acquires, and manages renewable facilities, selling the produced power on long-term contracts – think decades, not years – to utility companies and large power consumers.
Following the stock's significant surge during the COVID-19 pandemic, it has essentially returned all its gains in 2023 and early 2024 due to concerns that rising interest rates and perceived decreasing demand for renewables could affect its operations. The market is presently "valuing" these concerns, with a dividend yield of around 6.5% as of December 2024.
However, these fears are likely to be significantly overstated. Yes, rising rates and inflation have influenced wind and solar into a downturn. These are cyclical industries that fluctuate. Moreover, Clearway's earnings originate from long-term energy production, and power utilities continue to request an increasing amount of clean power.
Management maintains that their long-term objectives remain unchanged. With ample opportunities ahead and plenty of access to funding, Clearway claims it can continue to expand profits and increment the payout by 5% to 8% every year.
Did you realize...? Dividend investors ought to prioritize dividend percentage rather than dividend amount.
How to invest
How to invest in dividend shares
This article touches on a few things to steer clear of (such as focusing too much on a high percentage that might be a trap) and the power of dividend growth shares as some of the top winners. Here are some key aspects to consider when investing in dividend stocks.
- Identify dividend shares that meet your standards. You may be searching for a percentage for income, a record of dividend growth, and so forth.
- Analyze the history of profit growth. Dividend growth is sustainable only if a company's profits have also steadily grown at a similar or higher rate over time.
- Take into account valuation.** Paying a moderate premium for a high-quality business can sometimes be reasonable, but overpaying can significantly impact long-term returns.
- Determine position sizing. Consider how much exposure you want to a particular share, how much income you expect it to generate, and other factors to ensure you purchase an appropriate amount.
- Focus on the long term. Dividend shares perform best when bought and held for many years. Having patience and allowing exceptional managers to run great companies while you just sit back and own them is how you get the best returns from dividend shares.
What to look for
What to look for in dividend shares
If you're new to dividend investing, it's wise to get acquainted with dividend shares and why they can make excellent investments. Once you have a clear understanding of how dividends work, a few key concepts can help you find excellent dividend shares for your portfolio.
- Dividend payout ratio: A share's dividend payout ratio is the amount of money the company pays per share in dividends divided by its earnings per share. In other words, this tells you the percentage of earnings a share pays to shareholders. A reasonably low payout ratio (said, 70% or less) is a good indication that the dividend is sustainable.
- History of increases: It's a very good sign when a company raises its dividend year after year, especially during recessions and other tough economic times, such as the COVID-19 pandemic.
- Consistent revenue and earnings growth: When looking for the best dividend shares to own for the long term, prioritize stability. Irregular revenue (up one year, down the next) and fluctuating earnings can be indications of trouble.
- Durable competitive advantages: This is perhaps the most crucial feature. A sustainable competitive advantage can take several forms, such as proprietary technology, high barriers to entry, high consumer switching costs, or a powerful brand name.
- Supportable yield: This is last on the list for a reason. A high yield is obviously preferable to a lower one, but only if the other four criteria are met first. A high dividend is only as strong as the business that supports it. So, compare dividend yields after ensuring the business is healthy and the payout is steady.
Related investing topics
**#### Investing in Oil Shares That Pay Dividends
These strong dividend shares could boost your portfolio's returns.****#### The 5 Best Small-Cap Dividend Shares
Small-cap shares that pay dividends can range from high-yield value shares to faster-growing small-cap shares. Here are the top five shares............
Renewable Energy Dividend Shares
Going green is the future of energy. And investing in this sector means you can see some green, too.****#### Top 8 Index Funds for Dividends in 2024
These 8 top index funds pay dividends, too. Learn more about these potential investments.## Dividend shares are long-term investments
Even the most dependable dividend shares can experience significant fluctuations over short periods. There are simply too many market forces that can impact them up or down over days or weeks. And many have nothing to do with the underlying business itself.
So, while the companies above should make excellent long-term dividend shares investments, don't worry too much about day-to-day price movements. Instead, focus on finding companies with outstanding businesses, stable income streams, and (ideally) a strong dividend track record. The long term will take care of itself.
FAQ
Best dividend shares FAQ
What shares pay the highest dividend?
While chasing yield can often lead to poor outcomes, some shares are just geared up to be yield machines. Two categories known for paying above-average yields are utilities and REITs, or real estate investment trusts. But just as with any other dividend share, don't assume that the highest-yielding ones are the best. Be sure to evaluate business quality and whether a company's cash flows support a dividend.
What are dividends in shares?
Dividends are payments made by a company to its shareholders. U.S. companies typically pay dividends quarterly, though some pay less often, and a few even pay monthly.
Dividends are generally paid in cash, but some companies pay in "scrip," which is dividends paid in shares. Note that this is not the same as a dividend reinvestment program, or DRIP, where a company (or your brokerage) automatically takes your cash dividend and purchases shares for you.
A reliable indicator for assessing a dividend's stability is the dividend payout ratio, which signifies the proportion of a firm's earnings allocated towards dividend payments. A lower payout ratio generally implies a safer dividend.
Should I consider investing in dividend-paying stocks?
Indeed, it's a sensible choice. Regardless of your financial objective, be it income generation or maximizing total returns, numerous dividend stocks can serve as effective avenues to achieve your financial goals. However, it's worth noting that yield may not always be the predominant factor; a company's capacity to sustain and boost the payout for an extended period is of significant importance.
What constitutes a dividend?
A dividend refers to money (or sometimes shares, albeit rarely) given out by a company to its shareholders. Once a company reaches a stage where it consistently accrues more earnings than its management can effectively reinvest, establishing a dividend policy and returning those surplus profits to investors becomes a prudent decision.
American Express is an advertising partner of Our Website Money. Rachel Warren holds no stock investments in the mentioned companies. Our Website owns shares in Chevron, Microsoft, Realty Income, Starbucks, and Target. Our Website suggests Brookfield Infrastructure Partners and Lowe's Companies and holds the following options: a long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. Our Website adheres to a disclosure policy.
- After researching several dividend-generating shares, I'm considering investing in Lowe's due to its consistent annual dividend increases and significant dividend enhancement over the past decade, despite potential concerns about a housing downturn.
- Realty Income's status as a Dividend Achiever, having boosted its dividend for 30 consecutive years and paying a dividend every month since its inception, makes it an appealing choice for those seeking a hassle-free method to invest in high-quality real estate for income growth and returns.
