- Investors can earn returns in stocks through stock price increases or dividend payments.
- You can also do both and then reinvest the dividends.
- TipRanks has compiled stocks with buy recommendations and high dividend yields, including Ford and Mercedes-Benz.
One way to make profits in the stock market is to bet on a company’s ability to increase its stock price over time.
Another option is to buy shares in a company that pays dividends. Some investors then employ a dividend reinvestment plan that reinvests the dividends back into the stock, potentially skyrocketing their position and increasing the payout over time.
Investors can aim for the best of both worlds by looking for dividend stocks with upside potential.
One way to find these names is to review Wall Street analysts’ stock ratings and compare them to their dividend yields.
However, when browsing a list of dividend payers, investors need to do additional research. “One thing to watch for is what each company is paying out compared to the industry average,” said Max Wasserman, dividend investor and founder and chief portfolio manager of Miramar Capital.
For example, utilities and energy stocks tend to have higher returns than consumer staples and financials. Wasserman worries a bit when companies start to outperform their typical industry averages. He recommends reviewing the stock’s historical payout over a five- to 10-year period to see if it’s increased gradually. A sudden increase in payouts combined with a drop in the stock price could be a red flag, he noted.
Also, since the dividend yield is calculated as the annual dividend per share divided by the stock price, a stock’s dividend yield can be high because its price is falling.
Below is a list of 20 stocks that are recommended buy and pay dividends, including some with double-digit yields. Dividend yields come from Nasdaq, while ratings are compiled by TipRanks, a financial data company that aggregates and analyzes stock market data.
TipRanks describes strong buys as stocks analysts expect to “well above the market’s average return” and moderate buys as stocks expected to “beat” the market.