Dividend stocks are a great way to generate income and grow your wealth over time. They offer regular payments to shareholders, usually based on the company’s earnings and cash flow. Dividend stocks also tend to be more stable and less volatile than non-dividend-paying stocks, especially during market downturns.
But not all dividend stocks are created equal. Some may have high yields but low growth potential, while others may have low yields but high growth potential. Some may be overvalued or face competitive threats, while others may be undervalued or have strong competitive advantages.
So how do you find the best dividend stocks to buy in August 2023? Here are some criteria to look for:
- A solid track record of dividend payments and increases
- A reasonable payout ratio that leaves enough room for future growth
- A strong balance sheet and cash flow that can support the dividend
- A competitive edge and a sustainable business model that can withstand market challenges
- A fair valuation that offers a good entry point and a margin of safety
Based on these criteria, here are some of the top dividend stocks to buy in August 2023, according to Investopedia:
Apple Inc. (AAPL)
Apple is one of the world’s most valuable and profitable companies, with a loyal customer base and a dominant position in the smartphone, tablet, wearable, and personal computer markets. The company also has a fast-growing services segment that includes the App Store, Apple Music, Apple TV+, iCloud, Apple Pay, and more.
Apple has been paying dividends since 2012 and has increased them every year since then. The company has a payout ratio of 21%, which means it only pays out 21% of its earnings as dividends, leaving plenty of room for future growth. The company also has a strong balance sheet and cash flow that can easily cover the dividend.
Apple’s dividend yield is currently 1.2%, which may seem low compared to some other dividend stocks, but the company also offers strong capital appreciation potential. The company has a trailing 12-month earnings per share (EPS) growth rate of 36% and a forward price-to-earnings (P/E) ratio of 25, which suggests that the stock is still reasonably valued given its growth prospects.
Johnson & Johnson (JNJ)
Johnson & Johnson is a diversified health care giant that operates in three segments: pharmaceuticals, medical devices, and consumer health. The company has a wide portfolio of products that include drugs, vaccines, surgical instruments, orthopedic implants, contact lenses, baby care products, skin care products, and more.
Johnson & Johnson has been paying dividends since 1944 and has increased them for 59 consecutive years, making it one of the longest-running dividend aristocrats in the S&P 500. The company has a payout ratio of 46%, which means it pays out less than half of its earnings as dividends, leaving enough room for future growth. The company also has a strong balance sheet and cash flow that can support the dividend.
Johnson & Johnson’s dividend yield is currently 2.5%, which is higher than the average yield of the S&P 500. The company also offers moderate capital appreciation potential. The company has a trailing 12-month EPS growth rate of 18% and a forward P/E ratio of 18, which suggests that the stock is fairly valued given its growth prospects.
Verizon Communications Inc. (VZ)
Verizon is one of the largest telecommunications companies in the U.S., with over 120 million wireless subscribers and over 6 million broadband customers. The company also owns media assets such as Yahoo, AOL, HuffPost, TechCrunch, Engadget, and more.
Verizon has been paying dividends since 1984 and has increased them for 15 consecutive years, making it one of the dividend achievers in the S&P 500. The company has a payout ratio of 51%, which means it pays out slightly more than half of its earnings as dividends, leaving some room for future growth. The company also has a solid balance sheet and cash flow that can support the dividend.
Verizon’s dividend yield is currently 4.4%, which is one of the highest among the S&P 500 companies. The company also offers modest capital appreciation potential. The company has a trailing 12-month EPS growth rate of -1% and a forward P/E ratio of 11, which suggests that the stock is undervalued given its earnings prospects.
Costco Wholesale Corporation (COST)
Costco is one of the largest retailers in the world, with over 800 warehouse clubs in 12 countries. The company sells a wide range of products, from groceries and household goods to electronics and jewelry, at low prices and in bulk quantities. The company also offers services such as optical, pharmacy, travel, and photo.
Costco has been paying dividends since 2004 and has increased them for 17 consecutive years, making it another dividend achiever in the S&P 500. The company has a payout ratio of 29%, which means it pays out less than a third of its earnings as dividends, leaving plenty of room for future growth. The company also has a healthy balance sheet and cash flow that can support the dividend.
Costco’s dividend yield is currently 0.8%, which is lower than the average yield of the S&P 500, but the company also offers strong capital appreciation potential. The company has a trailing 12-month EPS growth rate of 21% and a forward P/E ratio of 38, which suggests that the stock is highly valued given its growth prospects.
Starbucks Corporation (SBUX)
Starbucks is the world’s largest coffee chain, with over 33,000 stores in 83 countries. The company sells a variety of coffee, tea, and other beverages, as well as food items such as pastries, sandwiches, salads, and snacks. The company also operates a loyalty program, a mobile app, a delivery service, and a digital platform.
Starbucks has been paying dividends since 2010 and has increased them for 11 consecutive years, making it one of the dividend contenders in the S&P 500. The company has a payout ratio of 51%, which means it pays out slightly more than half of its earnings as dividends, leaving some room for future growth. The company also has a robust balance sheet and cash flow that can support the dividend.
Starbucks’ dividend yield is currently 1.5%, which is slightly lower than the average yield of the S&P 500, but the company also offers high capital appreciation potential. The company has a trailing 12-month EPS growth rate of 108% and a forward P/E ratio of 34, which suggests that the stock is richly valued given its growth prospects.
