High-Dividend Stocks and How to Invest in 2024

Investing can be intimidating and daunting, particularly for beginners. If you are thinking about stock investing, you're probably already wondering—what top dividend stocks should I go for? A good approach is to dig into high-dividend stocks, which can set you up on a steady path of generating income.

In this guide, you'll find basic information about this investment option, the dividend benefits stocks, and how to make the best choice. What’s more, we present five top high-dividend stocks to buy in 2024, so keep reading to learn more.

High-Dividend Stocks: Knowing the Basics

Dividend stocks are shares of companies that regularly pay a portion of their profits to shareholders as dividends. In contrast to growth stocks that reinvest earnings, dividend stocks provide direct cash payouts to shareholders. Their appeal lies in the dividend yield, which is a percentage measure of the income a stock generates relative to its price. Higher yields are often seen in the highest dividend-paying stocks.

Benefits of the Highest Dividend Stocks

To fully understand how stocks with dividends work, let’s break down the key benefits they bring:

• Solid Income Stream: Dividend stocks provide a reliable stream of earnings, which is especially helpful for those seeking a passive income or hoping to supplement their existing gains.
• Capital Appreciation Potential: Investing in companies with a history of increasing dividends can lead to long-term financial growth, giving you the dual advantage of income and appreciation.
• Inflation Hedge: Dividend payments from reputable companies tend to rise over time, helping you keep up with inflation and maintain the purchasing power of your money.
• Portfolio Enhancement: Stocks from well-established companies across different sectors and industries help smooth out the impact of market volatility on your investment portfolio.

Challenges of the Highest Dividend Stocks

To make an informed choice when you consider this type of investment, it’s worth weighing not only the pros but also the drawbacks:

• Sensitivity to Interest Rates: When interest rates rise, it increases the financial burden on companies. As a result, dividend-paying stocks may see their prices drop.
• Dividend Sustainability: Some companies might offer high dividend yields due to financial troubles or unsustainable payout ratios. That’s why it’s crucial to do your homework and check the financial health of the stock issuers.
• Market Volatility: Economic downturns or industry-specific problems can pull down stock prices, reducing your overall returns.

How to Choose the Best Dividend Stocks?

The key to success here is not to jump into decisions hastily. While the dividend yield is an important metric to look at, the stocks with the highest dividends aren’t always the best choice for investment. Consider these additional factors:

• Growth Rate: Look for companies with a track record of consistent growth, which is a strong indicator of financial stability.
• Payout Ratio: A sustainable payout ratio indicates that the company can maintain or even raise its dividend payments over time.
• Financial Stability: Evaluate the company's overall financial strength. Keep an eye on key metrics like revenue growth, earnings stability, debt levels, and cash flow.
• Industry Trends: Consider broader economic and industry trends that might affect the company’s ability to keep paying dividends. It’s best to invest in sectors with stable cash flows and resilient business models.

If you are new to investing in stocks with dividends, there are tools available to help simplify your search. Online stock screeners, such as Yahoo Finance, FINVIZ, TradingView, and ZACKS (NASDAQ), allow you to filter stocks based on specific criteria.

To protect yourself from potential risks and unpredictable losses, balance income-generating assets like dividend stocks with growth-oriented investments to build a diversified portfolio. Include shares from sectors like utilities, consumer staples, healthcare, and real estate investment trusts (REITs). Besides that, consider other sources of passive income such as bonds, preferred stocks, rental properties, or ETFs.

Top 5 High-Dividend Stocks to Buy in 2024

Based on the criteria outlined above, we’ve made a list of five stocks with the highest dividend that are currently excelling. It’s worth noting that while you may find stocks with higher yields on the market, upon closer inspection, they often lack growth stability or fail in payment ratios.

Verizon Communications

Ticker: VZ

Dividend Yield: 6.47%

Dividend Growth Rate: Strong

Verizon Communications Inc. (VZ) is a well-known company that provides wireless and wireline telecommunication services and offers internet services over its reliable 4G LTE and 5G networks. Over the years, Verizon has demonstrated consistent financial performance, with steady revenue and earnings growth.

Altria Group

Ticker: MO

Dividend Yield: 7.60%

Dividend Growth Rate: Strong

A major global tobacco and cigarette manufacturer based in the United States, Altria Group is renowned for its generous dividend payouts. The company typically offers a high dividend yield compared to many other firms.

AT&T

Ticker: T

Dividend Yield: 5.29%

Dividend Growth Rate: Moderate

A direct competitor to Verizon Communications Inc., AT&T is a multinational conglomerate operating in the telecommunications, media, and technology sectors. Its diversified business model and regular dividend payouts make it a solid investment. AT&T's long history of paying dividends makes it attractive to those seeking stability and reliable income from their investments.

Exxon Mobil Corporation

Ticker: XOM

Dividend Yield: 3.36%

Dividend Growth Rate: Strong

Exxon Mobil is one of the world’s largest integrated oil and gas companies, with diversified operations in the exploration, production, refining, and marketing of petroleum products. The company operates globally and has a strong presence in both upstream and downstream segments. Diversified operations and an established track record of dividend payments make XOM a safe investment path. However, investors should note the stock’s sensitivity to oil and gas price fluctuations.

AbbVie Inc.

Ticker: ABBV

Dividend Yield: 3.19%

Dividend Growth Rate: Strong

AbbVie is a global pharmaceutical company focused on developing and commercializing therapies in immunology, oncology, and other areas. The company’s flagship product, Humira, is one of the best-selling drugs worldwide. With over 52 years of dividend growth history, ABBV is a go-to for investors who seek long-term returns on their investments. However, keep an eye on the regulatory and pricing challenges in the pharmaceutical sector.

Final Thoughts

While stocks with high dividends offer appealing income potential, they still come with inherent risks and uncertainties. That's why investors should dig deep into their research and consider their investment objectives, risk tolerance, and portfolio diversification strategy before making any moves. For personalized guidance, it's a good idea to check in with an experienced financial advisor before diving into the market.