Here Are the Best Dividend Stocks to Buy and Hold in 2023

Key takeaways

• A dividend stock is where a company pays out a portion of its profits to shareholders
• Not every company pays them and a dividend can go up, down or even be cut altogether
• McDonald’s, Verizon and Target are classic examples of dividend stocks to buy and hold

Some investors like to play big and win big, while others prefer to boost their income via dividends. Not every company pays them out, but those who invest in the businesses that do can enjoy a relatively steady stream of returns. We’ve got the lowdown on what a dividend stock is and which stocks income investors should look at.

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What is a dividend stock?

When you stock in a company, some of these will pay out a portion of their profits as dividends to shareholders. These can go up or down depending on the company’s performance. So, a dividend stock is a good form of passive income as they’re usually handed out as cash payments.

Dividend frequency depends on the company: sometimes they’re paid out annually, others quarterly. Companies also have the right to cut dividends if they choose to reinvest profits into the business, so a dividend payout is never guaranteed.

Dividend stock examples in 2023

That being said, some companies have given out consistent dividends over the years and they’re as close to reliable as you can get. Here are some examples.

McDonald’s

The household-name fast food chain offers a 2.1% dividend yield and has paid out dividends since 1989, making the stock a great lower-risk option for income investors.

There are good signs about the stock’s future, too. McDonald’s reported a comparable-store sales increase of 13% in the last quarter thanks to raising its prices, and its operating profit margin has risen to 45% of sales. As for the share price, it’s gained nearly 11% this year.

Target

Retail conglomerate Target has seen its total yield increase 12% from ten years ago. In fact, Target investors recently received the good news that the company is increasing its periodic dividend payment to $1.10, which is 1.9% more than last year and takes the total yield to 3.2%.

There haven’t been any cuts to the dividend in a long time, though some have raised concerns over how much Target is paying out as dividends compared to reinvesting profit.

Verizon

Another long-term dividend payer is telecoms company Verizon, which has rewarded its shareholders consistently since 1986. As only one of three companies in the U.S. providing wireless service, its 7.2% annual dividend yield speaks for itself.

However, network upgrades for 5G connectivity and upcoming 6G tech could dent the company’s profits in the long term. Income investors may not see much increase in dividend growth in the coming years.

The bottom line

Investing in companies that have solid dividend yields can be a way to secure passive income. But it’s always necessary to research which companies are best for your investing strategy because no dividend is ever a dead cert.

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