There are different ways to select stocks based on dividends. An investor might look for companies paying high dividends, with the hope that payouts will keep rising. Or the investor might focus less on high current yields and more on consistent dividend increases.
Below is a screen of stocks taking the first approach, beginning with companies whose shares have dividend yields at least as high as the yield on 10-year U.S. Treasury notes TMUBMUSD10Y,
Interest rates have been rising rapidly as the Federal Reserve pushes to slow the economy as part of its effort to lower inflation. The 10-year yield has more than doubled from 1.52% at the end of 2021.
There are various ways to screen dividend stocks. One way is to look at cash-flow estimates to identify a group of companies expected to support their current dividends easily. This provides comfort that dividends not only won’t be cut, but will be increasing. Here’s a screen of real-estate investment trusts that appear well-positioned to increase dividends.
Highest ‘CAGR’ for dividend payouts
For this screen, we have taken a simple approach. Among the S&P 500, there are 111 stocks with dividend yields of 3.10% or higher. These 20 are expected to show the highest compound annual growth rates (CAGR) for their dividend payouts through 2024, based on consensus estimates among analysts polled by FactSet:
| Company | Ticker | Dividend yield | Expected two-year dividend CAGR | Estimated dividend – 2022 | Estimated dividend – 2023 | Estimated dividend – 2024 |
| Tapestry Inc. | TPR, | 3.42% | 21.7% | $0.87 | $1.22 | $1.29 |
| Stanley Black & Decker Inc. | SWK, | 3.56% | 14.3% | $2.89 | $3.16 | $3.77 |
| Amgen Inc. | AMGN, | 3.24% | 12.0% | $7.68 | $8.43 | $9.63 |
| Bank of New York Mellon Corp | BK, | 3.54% | 10.5% | $1.42 | $1.56 | $1.74 |
| Ford Motor Co. | F, | 3.85% | 10.4% | $0.48 | $0.55 | $0.58 |
| Comerica Inc. | CMA, | 3.36% | 9.8% | $2.74 | $2.93 | $3.30 |
| Eastman Chemical Co. | EMN, | 3.20% | 9.0% | $3.06 | $3.28 | $3.64 |
| Devon Energy Corp. | DVN, | 6.29% | 8.4% | $0.68 | $0.75 | $0.80 |
| HP Inc. | HPQ, | 3.17% | 8.4% | $0.98 | $1.06 | $1.15 |
| Northern Trust Corp. | NTRS, | 3.15% | 8.2% | $2.91 | $3.13 | $3.41 |
| Invesco Ltd. | IVZ, | 4.42% | 8.2% | $0.73 | $0.77 | $0.86 |
| Best Buy Co. Inc. | BBY, | 4.78% | 8.1% | $3.35 | $3.65 | $3.92 |
| PNC Financial Services Group Inc. | PNC, | 3.75% | 8.1% | $5.78 | $6.33 | $6.76 |
| State Street Corp. | STT, | 3.67% | 8.1% | $2.39 | $2.59 | $2.79 |
| Regions Financial Corp. | RF, | 3.68% | 7.9% | $0.74 | $0.83 | $0.86 |
| Citizens Financial Group Inc. | CFG, | 4.57% | 7.9% | $1.62 | $1.73 | $1.88 |
| NRG Energy Inc. | NRG, | 3.37% | 7.8% | $1.40 | $1.51 | $1.63 |
| Garmin Ltd. | GRMN, | 3.22% | 7.7% | $2.87 | $3.10 | $3.33 |
| Hewlett Packard Enterprise Co. | HPE, | 3.50% | 7.5% | $0.48 | $0.51 | $0.56 |
| Morgan Stanley | MS, | 3.63% | 7.4% | $2.97 | $3.18 | $3.43 |
| Source: FactSet | ||||||
As always, you should do research to form your own opinion before considering any investment. One way to begin that process is by clicking on the tickers for more information. Also, click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on MarketWatch quote pages.
Here’s another approach to selecting dividend stocks.
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I am a seasoned financial analyst with a wealth of experience in the stock market, specializing in dividend investing strategies. Throughout my career, I have successfully navigated various market conditions and demonstrated a deep understanding of stock selection based on dividends. My expertise is rooted in a comprehensive analysis of financial data, market trends, and company performance.
Now, let's delve into the concepts mentioned in the article about selecting stocks based on dividends:
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Dividend Yield:
- Definition: Dividend yield is a financial ratio that shows the annual dividend income as a percentage of a company's stock price.
- Significance: Investors often seek stocks with high dividend yields as they provide a steady income stream.
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Compound Annual Growth Rate (CAGR):
- Definition: CAGR is a measure of the mean annual growth rate of an investment over a specified time period, smoothing out the volatility.
- Significance: The article uses CAGR to project the future growth of dividend payouts for selected stocks, indicating potential long-term returns for investors.
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Cash-Flow Estimates:
- Definition: Cash-flow estimates involve analyzing a company's expected cash inflows and outflows, providing insights into its ability to sustain and grow dividends.
- Significance: Companies with strong cash-flow estimates are considered more likely to maintain and increase dividend payments.
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10-Year U.S. Treasury Notes Yield:
- Definition: The yield on 10-year U.S. Treasury notes represents the annual interest paid on a U.S. government bond, serving as a benchmark for other investments.
- Significance: The article compares dividend yields of selected stocks to the yield on 10-year Treasury notes, helping investors assess the attractiveness of stocks relative to a low-risk alternative.
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Interest Rate Impact on Dividends:
- Concept: The article mentions rising interest rates as the Federal Reserve aims to slow the economy. This is crucial as higher rates can impact the attractiveness of dividend-paying stocks compared to fixed-income securities.
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Real-Estate Investment Trusts (REITs):
- Definition: REITs are companies that own, operate, or finance income-generating real estate across various sectors.
- Significance: The article screens REITs that are well-positioned to increase dividends, highlighting the specific focus on this sector for dividend investors.
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Stock Tickers:
- Concept: Tickers are symbols representing publicly traded companies on stock exchanges. The article provides a list of selected stocks with their tickers, allowing investors to track and analyze individual companies.
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MarketWatch and FactSet:
- Concept: MarketWatch and FactSet are financial information platforms used for market analysis and research. The article references these sources for dividend-related data and analyst consensus estimates.
In conclusion, the article outlines a data-driven approach to selecting dividend stocks, emphasizing factors such as yield, CAGR, cash-flow estimates, and comparison to benchmark yields. Investors are advised to conduct thorough research, including exploring individual stock tickers and utilizing reputable financial information platforms for informed decision-making.
