Dividend stocks have gained popularity and have been on the rise this year on investors' drive for higher income in the current ultra-low rate environment. Additionally, the dividend paying securities are the major sources of consistent income for investors when returns from equity market are at risk.
While the broad U.S. equity market have hit multiple highs on several occasions, economic turmoil in Russia and Greece, China slowdown, lower oil prices, recession in Japan and disappointing data from Euro-zone have kept returns at check all along this year. This volatility has compelled investors to be defensive and turn their focus on dividend stocks that provide stability in the form of payouts and safety in the form of mature companies that are less vulnerable to the large swings in the stock prices.
The dividend-paying stocks have proven outperformers over the long term and are the safest ways to create wealth. This is especially true as the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Dividends Growing in Double Digits
According to the latest quarterly dividend factsheet, dividends per share for the S&P 500 (SPX) companies have risen for the 15th consecutive quarter marking an increase of 11.3% year over year to $37.99 for the 12-month period ending in October. In fact, dividend per share growth exceeds earnings per share growth of 7.6% for the index.
Notably, consumer discretionary led the way higher in the third quarter with a dividend per share gain of 18.8%, followed by 17.6% for financials services, 15.5% for telecom services, 14.6% for energy, 13.6% for information technology and 12.2% for industrials. The dividend payout ratio stands at 32% at the end of the third quarter, the highest since first quarter of 2010 and far above the 10-year average of 29%. Meanwhile, dividend yield is on par with the 10-year average of 1.9%.
In addition to robust yields, most of the dividend paying stocks have generated handsome returns this year as well. Below, we have highlighted five best performing dividend stocks that have at least a Zacks Rank #3 (Hold) or better, and pay a robust dividend yield that exceeds 5%. All of these provide a nice combination of annual dividend growth as well as capital appreciation opportunity irrespective of stock market directions.
Emerge Energy Services LP (EMES – Snapshot Report) – Dividend Yield 9.86%
