The best dividend stocks to buy offer the right mix of yield, growth, and value. At first, this may sound like a contradiction, given how there are both growth and value camps of investing styles. There are also investment strategies focused primarily on yield, with less consideration of underlying growth or value.
However, there are indeed stocks that offer this winning combination for solid long-term total returns. When it comes to yield, your focus shouldn’t necessarily be on the highest-yielding stocks. Plenty of them are best described as yield traps, also known as dividend value traps.
Rather, top dividend stocks offer moderately-high yields, but with the potential for dividend growth over time. Speaking of growth, stocks with dividend growth are typically companies with earnings growth potential. This growth also typically translates into long-term price appreciation.
Regarding value, not all stocks with promising growth prospects trade at high valuations. There are names out there that are reasonably or more-than-reasonably priced, that nonetheless offer the prospect of steady growth.
Screening for stocks using this criteria, I have come across the following seven best dividend stocks to buy.
Citigroup (C)
At current prices, Citigroup (NYSE:C) has a forward dividend yield of 3.38%. Admittedly, shares in the money center bank have not experienced much in the way of dividend growth over the past few years.
In 2023, Citi raised its quarterly payout from 51 cents to 53 cents per share, but prior to that, the last dividend increase had been implemented in 2019. However, given a key catalyst for C stock, a dividend growth spurt may be due. As I recently discussed, an in-progress turnaround may soon result in a big improvement to profitability.
Sell side forecasts call for Citigroup to report $7.18 per share in earnings next year. This estimate represents a 22.1% jump from forecasted 2024 earnings. These additional earnings could be key in the next series of dividend increases for the bank. Earnings growth would also likely result in price appreciation for shares.
General Dynamics (GD)
There is more than one reason why General Dynamics (NYSE:GD) is one of the best dividend stocks to buy. For one, the defense contractor is a “dividend aristocrat,” with a 29-year track record of dividend increases.
GD’s forward yield of 1.94% may not sound very high, but the company’s dividend increases have averaged 7.14% annually over the past five years. Besides its dividend growth track record, GD stock is one of the top dividend stocks, thanks to the recession resistant nature of its underlying industry.
In fact, as geopolitical conflict intensifies across the globe, spurring demand from the U.S. and its allies, growth prospects are bright. Analyst consensus calls for General Dynamics to grow earnings by nearly 12% next year. If achieved, this growth will be sufficient to sustain recent levels of dividend growth, as well as drive a steady move higher for the stock.
Hasbro (HAS)
Hasbro (NASDAQ:HAS) has been on a tear, and recent indication of success with its turnaround has fueled the latest rally. During the March quarter, Hasbro reported revenue and earnings that handily beat sell-side expectations.
After this post-earnings surge in price, HAS stock is up nearly 20% year-to-date, and has climbed more than 41% higher over the past six months. Yet while this may imply that the Hasbro comeback is already priced-in, I wouldn’t make that assumption. As the turnaround continues, further boosts to earnings may lie ahead.
The high end of forecasts for 2025 call for as much as $4.79 per share in annual earnings. This makes HAS reasonably priced at around $61 per share. Turnaround success also suggests that the company will maintain its dividend as is. That means investors can receive a 4.57% yield while they wait for the comeback to fully play out.
Lancaster Colony (LANC)
Lancaster Colony (NASDAQ:LANC) may not be a company you’ve heard of, but chances are you know of at least one of this food purveyor’s branded food products. These products include New York Bakery garlic bread and Marzetti salad dressing.
Even if you are not a fan or even aware of these products, it’s hard to dispute that LANC stock isn’t one of the best dividend stocks to buy. With a 60 year dividend growth track record, forget about mere “dividend aristocrat” status, for LANC is a “dividend king.”
Shares currently yield 1.83%. Payouts have grown by an average of 6.96% annually for the past five years. Although pricey on paper, at 31.2 times forward earnings, as earnings continue to grow at a high single-digit/low double-digit clip, this valuation is likely sustainable. After a pullback in early April, now may be an opportune time to buy.
Paychex (PAYX)
In prior coverage of top dividend stocks, I’ve talked about Paychex’s (NASDAQ:PAYX) key rival in the payroll processing space: Automatic Data Processing (NASDAQ:ADP). However, PAYX has many of the same dividend growth bona fides as its larger competitor.
Although not quite yet at “dividend aristocrat” status, PAYX stock appears to be on the path towards reaching this status. Paychex has increased its payout 9 years in a row, and by an average of 9.68% over the past five years.
Shares currently sport a 3.23% forward yield, which is well above ADP’s forward yield of 2.28%. Yes, this gap may have a lot to do with ADP’s higher level of expected earnings growth. However, if you are looking for returns driven more strongly by dividend payouts than price appreciation, between these two solid dividend growth opportunities, PAYX could be your preferred option.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is another of the best dividend stocks to buy that has been performing well lately. Shares in the mobile chip company have hit a new 52-week high, thanks to the reporting of strong quarterly results on May 1.
In the release, Qualcomm beat forecasts, as well as provided updates to guidance that exceeded Wall Street’s expectations. These latest numbers provide a stronger indication that normalizing device chip demand, plus rising demand for the company’s automotive and AI chips, will lead to further strong results in the quarters ahead.
Besides keeping QCOM stock, reasonably priced at 18.2 times forward earnings, on an upward trajectory, earnings growth may also result in further dividend growth. QCOM currently has a forward yield of 1.88%, but the company has raised its payout 20 years in a row and by an average of 5.23% annually over the past five years.
VICI Properties (VICI)
VICI Properties (NYSE:VICI) is a real estate investment trust (REIT) specializing in the ownership of casino real estate. This REIT owns the land and buildings housing many of Las Vegas’ legendary casinos, as well as properties housing regional casinos across the U.S. and Canada.
With the steady rental income generated from these properties, investors in this house always win. VICI stock today has a forward dividend yield of 5.67%. Since going public in 2017, Vici has raised its payout each year. The REIT implemented its latest increase last September, raising the quarterly payout by 6.4% to 41.5 cents per share.
Besides benefiting from further lease escalations, there’s also another driver for future growth. With billions in liquidity on hand, Vici has the capability to make more needle-moving acquisitions and investments. All of this makes VICI one of the best dividend stocks to buy right now.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
