The Kiplinger Dividend 15: Our Favorite Dividend-Paying Stocks

The Kiplinger Dividend 15 are poised to benefit as falling interest rates lure investors back to dividend-paying stocks.

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Investors have ignored dividend stocks for the greater part of two years while visions of other investing sugarplums danced in their heads.

Money market funds and Treasuries offered better yields for no risk, for a start, and then came the artificial intelligence (AI) boom in growth stocks, all of which "sucked the capital out of the rest of the market," says Jay Hatfield, chief executive of Infrastructure Capital Advisors and manager of the InfraCap Equity Income exchange-traded fund.

Little wonder, then, that dividend stocks have lagged the S&P 500 in recent years.

But the tide seems to be turning, in part because interest rates are coming down, which helps to make dividend stocks more appealing. In recent months, "dividend stocks have taken off like a rocket," Hatfield says. "We think this trend will continue."

Indeed, investors have forgotten some truisms about dividend-stock investing. Over the long haul, for one, dividend-paying stocks have outpaced non-dividend payers, and they've been less volatile, too, says John Buckingham, editor of the investing newsletter The Prudent Speculator.

"Everyone's holy grail is higher returns and lower risk, and it's sitting right in front of us with dividend-paying stocks," he says.

What's more, dividend payouts aren't static like bond coupon payments; they increase over time. Over the past 10 years – a period that includes the pandemic, when many companies suspended dividends – payouts in the S&P 500 have increased by nearly 90%.

Enter the Kiplinger Dividend 15, the list of our favorite dividend-paying stocks, which we have been shepherding since 2017.

Our picks for the Kiplinger Dividend 15 fall into one of three categories. The stalwarts are steady payers that have racked up decades of consistent dividend hikes. The dividend growers boast sizable increases every year and the potential for healthy stock-price appreciation. And then there are the high-yielders, which offer big payouts.

Choose some from each group to get a mix of stocks with different income and growth profiles to suit your goals.

You might emphasize the stalwarts, say, if low volatility is important to you, or the high-yielders if income matters more.

Keep in mind that stocks with the highest dividend yields probably won't deliver sizable share-price gains, while those with greater dividend growth (and lower yields) may experience stronger price advances.

The S&P 500 Index is essentially flat since the start of the year, but over the past 12 months, it sports a 14% gain. As a group, the Kiplinger Dividend 15 beat the S&P 500 over both periods.

Five of the 15 have raised their payouts since late January: Walmart (WMT) by 13%; Johnson & Johnson (JNJ) and Procter & Gamble (PG) by 5%; and Realty Income (O) and Home Depot (HD) by 2%.

Annual dividend is based on the most recent dividend payment. Five-year dividend growth rate is annualized. Sources: Company websites, Morningstar, S&P Dow Jones Indices, Yahoo Finance. Returns and data are through May 31, unless noted otherwise.

Nellie S. Huang
Senior Editor, Kiplinger Personal Finance Magazine

Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.