If there were a “Magnificent Seven” in dividend stocks, these would be my top picks

The Magnificent Seven includes some of the most innovative technology-driven companies on the market. But what if there was a Magnificent Seven among dividend stocks?

microsoft (NASDAQ: MSFT), coca cola (NYSE:KO), procter and gamble (NYSE:PG), chevron (NYSE:CVX), home depot (New York Stock Exchange: HD), JP Morgan Chase (NYSE:JPM)and united parcel service (NYSE:UPS) They’re well-representative of their industries, and they’re all among the best dividend stocks you can expect to see for decades to come. Here’s why they’re on the Magnificent Seven list of dividend stocks.

1.Microsoft

Microsoft is the only stock in the Magnificent Seven dividend stock list. It is the most valuable company in the world. Microsoft has a yield of just 0.7%, but it pays the highest dividend of any U.S.-based company.

Microsoft’s low yield is due to the stock’s outperformance, not a lack of commitment to increasing its dividend. Since fiscal year 2019, Microsoft has raised its dividend by 9% to 11% every year like clockwork. Over the past eight years, its dividend has doubled, a faster growth rate than many of the top dividend stocks on the market.

Microsoft is monetizing artificial intelligence to grow its revenue and pave the way for generous dividend increases in the future. If stock prices decline, dividend yields will rise to even more attractive levels. But Microsoft shareholders would want a bigger return than a higher dividend yield.

2. Coca Cola

Coca-Cola uses dividends as the main way to reward loyal shareholders. Coca-Cola’s 3.2% yield allows investors to earn passive income from a true dividend king with a proven track record of delivering 62 consecutive annual dividend increases.

Coca-Cola is a low-growth company, so investors shouldn’t expect significant returns from its stock. But this is the Magnificent Seven of dividend stocks, not growth stocks. And when it comes to generating passive income, Coke couldn’t be more reliable.

Coke’s consistency is the main reason Warren Buffett is popular. berkshire hathaway I have held the stock for over 30 years.

story continues

If it was a choice between Coke and 10-year Treasuries, I’d drink Coke all day. The 10-year gives investors an additional 1 percentage point or so of yield, but no market participation. Of course, no stock is as safe as the risk-free rate, but Coke comes close. It’s an ideal investment for risk-averse investors and those looking to supplement their retirement income.

3. Procter & Gamble

Procter & Gamble has an extensive capital return program. This is a great example of a company using dividends and stock buybacks to reward shareholders.

The following chart is one of the prettiest charts I’ve ever seen from a crappy consumer staples company.

P&G’s stock price has more than doubled over the past decade, and its dividend has increased by more than 46%. P&G bought back a significant amount of stock, reducing the number of shares by 13%.

P&G may not be the most exciting business, but glitz and glamor isn’t what this list is about. When it comes to returning profits to shareholders, P&G does so in a variety of ways, and it has the business model and brand strength necessary to continue that performance.

4. Chevron

Chevron’s share buybacks aren’t as consistent as P&G’s. Big oil companies tend to buy back more of their own stock during upturns in the business cycle, and reduce share buybacks and capital spending when oil and gas prices fall.

However, Chevron’s dividend is as stable as ever. Chevron has increased its dividend for his 37th consecutive year. That means it was not able to do so during the COVID-19 crash, the 2014 and 2015 recessions, and the oil and gas recession since the late 1980s.

Chevron has the balance sheet, cost profile, and portfolio to consistently generate returns for shareholders. The dividend yield is 4.2%, making it one of the most reliable stocks with a high yield.

5. Home Depot

Home Depot has been a perfect dividend stock for the past decade. It crushed the entire market and somehow caused dividends to grow faster than ever.

Home Depot also cut its stock count by more than a quarter while expanding its business.

Although investors shouldn’t expect this level of growth over the next decade, Home Depot remains a good investment. The company is vulnerable to external factors such as the broader business cycle, the housing market, the construction industry, and consumer spending. However, the company is well-positioned and is one of the best cyclical dividend stocks to own for the long term.

6.JP Morgan Chase

Since Nov. 1, JPMorgan is up more than 38%, a big move for such a large and diversified bank. JP Morgan is currently worth american bank, wells fargoand half citygroup Combined. The Big Four banks have actually become JP Morgan and three others.

Banking is a cyclical industry that tends to rise and fall in line with the overall tone of the economy. Currently, JPMorgan’s profits are skyrocketing.

Still, what makes the company a good long-term investment and a worthy addition to the Magnificent Seven list of dividend stocks is that it regularly returns value to shareholders. Over the past 10 years, dividends have increased by 176%, but the number of shares has decreased by nearly a quarter.

JPMorgan cut most of its dividend in 2009 in the aftermath of the financial crisis. However, it has continued to increase its dividend every year since then. The dividend is now nearly triple what it was before the cut, and JPMorgan has turned to a high-quality passive income strategy.

JPMorgan’s yield has fallen to 2.2% due to the recent stock price rally. But the company is at the top of its game, representing the financial sector of the Magnificent Seven of dividend stocks.

7.UPS

UPS has increased its dividend every year for the past 21 years, except for 2009, when it held the dividend flat. While the company isn’t the most reliable dividend company on this list, it increasingly uses dividends as an important way to reward shareholders.

In 2022, UPS raised its dividend by 49%, a significant increase for its size. Currently, UPS’s yield is 4.3%, which is high for a leading industrial company.

UPS is a cyclical business that depends on the strength of the overall economy. During periods of economic expansion, the amount of packages delivered to companies increases. Similarly, when discretionary spending is high, the amount shipped to consumers also increases.

While UPS offers investors an attractive yield, it’s doubtful the company will increase its dividend this much in the future. Still, UPS stock would need to rise about 45% for the yield to fall below 3%, so current levels are quite high.

Different companies, similar investments

Microsoft, Coca-Cola, Procter & Gamble, Chevron, Home Depot, JPMorgan Chase, and UPS have a track record of increasing dividends, solid underlying businesses, future growth prospects, and industry leadership. Many of these companies offer stock buybacks to their shareholders and long-term capital gains to patient investors.

These companies don’t necessarily have the highest yields, but their earnings are growing and can set you up for future pay increases.

Where to invest $1,000 right now

When our analyst team has a stock tip, it’s worth listening. After all, the newsletter they’ve been running for 20 years is Motley Fool Stock Advisorhas more than tripled its market. *

they just made it clear what they believe Best 10 stocks Microsoft made the list of stocks that investors should buy right now, but there are nine others you may have overlooked.

See 10 stocks

*Stock Advisor returns as of March 21, 2024

Bank of America is an advertising partner of The Motley Fool’s Ascent. Wells Fargo is an advertising partner of The Motley Fool’s Ascent. JPMorgan Chase is an advertising partner of The Motley Fool’s Ascent. Citigroup is an advertising partner of The Motley Fool’s Ascent. Daniel Felber has no position in any stocks mentioned. The Motley Fool has positions in and recommends Bank of America, Berkshire Hathaway, Chevron, Home Depot, JPMorgan Chase, and Microsoft. The Motley Fool recommends United Parcel Service and recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.

If there were a “Magnificent Seven” in dividend stocks, these would be my top picks.