7 Must-Own Dividend Stocks for Income Investors (2024)

Dividend stocks offer passive cash flow for investors. The cash flow can compound each quarter if you reinvest your dividends. Contributing to your portfolio each month can further increase your payouts.

Dividend investing is a sound strategy to accumulate long-term wealth and use cash flow to cover expenses. However, some dividend stocks are better than others, especially for investors who want higher yields.

Dividend income investors can benefit from a mix of stocks that feature high yields and growing dividends. While stocks likeVerizon(NYSE:VZ) normally make these types of lists, this analysis will focus on growing companies that offer a blend of appreciation and respectable yields. These are some of the must-own dividends for investors seeking income.

Procter & Gamble (PG)

Procter & Gamble (NYSE:PG) produces many essential products that people will always need for their homes, cleanliness, and other purposes. Shares are flat year-to-date but have gained more than 60% over the past five years.

The stock trades at a 24 P/E ratio and currently yields 2.50%. The corporation raises its dividend each year and increased its quarterly payout from $0.9133 per share to $0.9407 per share this year. It represents a 3% year-over-year increase.

Procter & Gamble is a steady performer that isn’t likely to beat the market. However, the company’s array of essential products helps it resist economic downturns better than most companies. The company regularly posts double-digit profit margins and grows its top and bottom lines.

The12-month price targetfor Procter & Gamble is currently $163.44. This price level is the average target among 18 Wall Street analysts. This price target implies a 9% upside. The stock is rated as a moderate buy.

JPMorgan (JPM)

People and businesses always need the banking industry to store their money and borrow extra capital. While many banks offer adequate financial services,JPMorgan(NYSE:JPM) is the leader in the industry.

Shares have gained 4% year-to-date and are up by roughly 30% over the past five years. Most banking stocks are down for both of those stretches and their CDs look like better buys than their stocks. However, JPMorgan is one of the few exceptions to this rule.

The stock currently has a 3% dividend yield. The company opted against raising its dividend in 2022. However, JPMorganraised its dividendfrom $1 per share to $1.05 per share in 2023. This change represents a 5% year-over-year growth rate.

Just like Procter & Gamble, JPMorgan also regularly posts double-digit profit margins, but JPMorgan’s margins are higher. Theaverage price targetamong 18 Wall Street analysts is $173.89. This price point indicates a 24% potential upside.

Microsoft (MSFT)

Microsoft(NASDAQ:MSFT) isn’t the best pick for people who need money now. However, if you can wait ten years and want a stock that has historically outperformed the market, Microsoft is a great choice.

Microsoft is one of the stocks that’s keeping up the market. Shares have gained 44% year-to-date and have more than tripled over the past five years. Investors get to benefit from double-digit revenue and earnings growth along with a profit margin of close to 40%.

Microsoft’s dividend yield is below 1%, but the company has maintained an excellent growth rate. This year, Microsoftraised the quarterly dividendfrom $0.68 per share to $0.75 per share. That’s a 10.3% year-over-year increase.

Microsoft can realistically maintain a 10% dividend hike each year for the next five years. That beats inflation and would result in a quarterly dividend payment of $1.208 per share. Matching this forecasted dividend payout with the current stock price would result in a dividend yield of roughly 1.40%.

If Microsoft’s shares continue to increase by 10% per year, investors won’t notice the new dividend by looking at the company’s market yield. However, dividend yield is a function of your cost basis and the current dividend payments.

Buying shares now can help you secure a higher yield in the future. You will also enjoy the appreciation that comes with a stock tapping into many verticals.

Caterpillar (CAT)

Caterpillar(NYSE:CAT) is a construction company that produces top-tier equipment that is critical for many projects. While shares recently sold off after the earnings report, some analysts believethe drop was unwarranted.

The recent drop presents an opportunity for investors to accumulate shares in a company that has gained more than 80% over the past five years. Shares trade at a 12 P/E ratio and have a 2.30% dividend yield.

Caterpillar actually did well in that quarter. The company reported12% year-over-year revenue growthand returned $1 billion to shareholders through stock buybacks and dividends. Investors were more concerned with guidance.

However, the company has a sustainable business model that has been around for almost 100 years. Caterpillar has agood history of raising its dividend. The company maintained the dividend but didn’t raise it in 2020. However, it went right back to business with dividend hikes in 2021.

Delta (DAL)

Delta(NYSE:DAL) shares are currently trading at the same price level as they did at the start of 2014. The stock price held steady in the mid-50s and even exceeded $60/share in some instances right before the lockdowns.

Shares dropped by over 60% in a single month, and it made sense. The lockdowns cut off all travel which decimated the demand for air travel overnight. However, the world has returned to normal and Delta even postedrecord-breaking revenue and profits.

Delta has recovered its market share, and yet shares only trade at roughly $31/share. There’s still a big gap between Delta’s pre-pandemic price and its current price.

Shares currently have a 1.25% dividend yield but expect it to go up significantly in future years. Thequarterly dividendis only $0.10/share. However, the company should become a rapid dividend growth stock for the next few years as it reclaims the $0.4025 quarterly dividend payouts Delta maintained before the pandemic.

Travel looks like it is slowing down, but Delta seems like it should be trading closer to its pre-pandemic price than it is at the moment.

Broadcom (AVGO)

Broadcom(NASDAQ:AVGO) has been a top performer that combines a respectable dividend yield with incredible asset appreciation. Shares have gained 52% year-to-date and have soared by 281% over the past five years.

An artificial intelligence bump accelerated the gains in May, but this company had a lot going for it before AI became mainstream. Broadcom is gettingcloser to the finish linefor its acquisition of cloud computing companyVMware(NYSE:VMW).

Broadcom’s quarterly dividend currently sits at $4.60 per share. The company is due to raise its dividend in the next quarter. Historically, Broadcom has done a good job at raising its dividend. Last year, the company maintained a $4.10/share quarterly dividend. Broadcom regularly raises the dividend by over 10% each year.

Many Wall Street analysts are bullish about the semiconductor giant. Broadcom currently has a$984.94 average price targetwhich implies a 17% upside. The low price target of $900 still represents some upside, while the $1,050 high represents considerable gains if it comes to fruition.

Deere (DEE)

Deere(NYSE:DE) produces equipment for various purchases, such as farming, transporting heavy goods, and other purposes. The company even has a financial services segment.

Deere hasn’t been the most exciting stock year-to-date. Shares are down by 13% during that amount of time. However, the company has gained 158% over the past five years. Deere offers investors an opportunity to diversify into a growing company that isn’t oriented toward tech or a fad.

Deere has been around for over 185 years and currently trades at an 11 P/E ratio. Shares yield 1.50%.

The company has gone through stretches of not raising the dividend, but Deere has recentlyraised its dividend more than once per year. 2022 highlights this trend. The quarterly dividend started the year at $1.05 per share. Then, Deere raised it to $1.13 per share. The company closed out 2022 with a quarterly dividend of $1.20 per share.

Wall Street analysts are optimistic about shares and currently have anaverage price target of $441.03. That implies a 20% upside within one year.

On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to theInvestorPlace.comPublishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.