A dividend portfolio is one of the most reliable paths to passive income. You only need to buy a few dividend stocks, monitor them occasionally and watch the cash flow arrive. These assets make passive income accessible to anyone, but you have to pick the right stocks to compound your gains.
You have a few options once you have a solid group of dividend stocks. Some investors use dividends to cover their living expenses, while others reinvest them. Reinvesting your dividends will result in a higher quarterly payout and move you closer to your long-term financial goals.
Investors should look at a corporation’s financial growth and dividend history before committing to a stock. You can choose from numerous companies and dividend-income ETFs. Each stock you analyze will give you a better perspective of what to buy and avoid. You can use this list of top dividend stocks to get started.
Caterpillar (CAT)
Caterpillar (NYSE:CAT) is a construction equipment firm with almost 100 years of business experience. Investors appreciate stability, especially dividend investors who rely on dividends for their livelihoods.
The company started 2024 with flat revenue growth in the first quarter. Total profits per share was a different story. This metric greatly improved, going from $3.74 to $5.75. That’s a 53.7% year-over-year improvement. Caterpillar also deployed $5.1 billion into stock buybacks and dividend distributions.
The construction company hasn’t just kept up with the stock market. It’s comfortably outperformed the S&P 500 over several years. Caterpillar has gained 12% year-to-date and has soared by 159% over the past five years. The stock trades at a 15 P/E ratio and offers a 1.56% yield. Caterpillar has raised its dividend for over 30 consecutive years while maintaining an annualized dividend growth rate of 8.04% over the past decade.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is a semiconductor giant enjoying the tailwinds of artificial intelligence. The stock has marched 30% higher year-to-date and has surged by 429% over the past five years. Broadcom also has a 52 P/E ratio and a 1.49% yield.
The firm’s recent acquisition of VMware contributed to a 34% year-over-year revenue boost in Q1 2024. While revenue reached $11.96 billion, net income reached $1.32 billion. Broadcom may be the best AI story besides Nvidia (NASDAQ:NVDA), and Wall Street seems to agree. The stock is rated a Strong Buy with a projected 12% upside from current levels. The highest price target of $1,850 suggests Broadcom can gain an additional 31% from current levels.
Broadcom has been raising its dividend each year for more than a decade. It has also had an annualized dividend growth rate of 17.49% over the past five years. That high growth rate, combined with AI tailwinds, can lead to meaningful gains for patient investors.
American Express (AXP)
Credit and debit cards aren’t going out of style, and neither is American Express (NYSE:AXP) stock. The fintech firm has outperformed the S&P 500 with a 24% year-to-date gain and a 91% jump over the past five years. The stock currently has a 19 P/E ratio and a 1.20% yield.
American Express recently reported another solid quarter, featuring 11% year-over-year revenue growth and 34% year-over-year net income growth. Leadership intends to achieve revenue growth from 9% to 11% beyond 2026. EPS growth is expected to stay in the mid-teens during that stretch. These growth rates imply that American Express will continue to expand its profit margins.
The debit and credit card issuer have won Millennials and Gen Z consumers. The company’s ability to win these groups suggests it can deliver solid financial results for many years. Millennials and Gen Z consumers made up over 60% of the company’s new account openings in the first quarter.
Walmart (WMT)
Walmart (NYSE:WMT) has been a reliable retailer for consumers seeking affordable products. It’s also the leading grocer, so it offers a good blend of essential and discretionary products.
While Walmart’s physical presence has been the main story for many decades, the company is making great strides with e-commerce. Its online sales increased by 21% year-over-year in Q1 FY25, while advertising revenue jumped by 24% year-over-year. Walmart’s overall revenue was up by 6.0% year-over-year, reaching $161.5 billion.
The stock has been producing steady gains for patient investors. Shares are up by 24% year-to-date and have gained 81% over the past five years. Walmart trades at a 34 P/E ratio and offers a 1.26% yield. Although the global retailer isn’t known for meaningful dividend hikes, Walmart decided to raise its dividend by 9% this year. That’s the company’s highest dividend hike in more than a decade. Walmart’s 51st consecutive dividend is a good sign that growth may reaccelerate for its dividend payouts.
Main Street Capital (MAIN)
Main Street Capital (NYSE:MAIN) offers an impressive 5.91% yield and a reasonable 9 P/E ratio. Although Main Street Capital isn’t known for delivering high price returns, it’s up by a solid 12% year-to-date. Wall Street analysts rate the firm as a Moderate Buy with a projected 5% upside.
The business development company has a portfolio of 191 companies across various industries. The three largest sectors are Internet Software & Services, Machinery and Professional Services. Most of Main Street Capital’s portfolio companies are in the Western and Northeast United States.
Main Street Capital has strict requirements for its investments that minimize the risk of losses. To qualify for funding, companies must have revenue between $10 million and $150 million and EBITDA ranging from $3 million to $20 million. Investors looking for a high-yielding stock with monthly dividend payments may want to look closer at Main Street Capital.
United Parcel Service (UPS)
United Parcel Service (NYSE:UPS) is an essential logistics company that handles millions of daily deliveries. It’s a dividend-value stock that trades at a 20 P/E ratio after shedding 13% of its market price year-to-date. Shares have been up 35% over the past five years.
UPS benefits from the growing demand for e-commerce. As more people buy goods online, UPS will generate more business. While the long-term catalysts remain intact, UPS is going through some headwinds. Revenue and net income were down year-over-year in the first quarter of 2024.
Luckily, UPS anticipates a slight year-over-year revenue increase, indicating that headwinds are on their way out. While UPS reported $91 billion in revenue in fiscal 2023, the company projects fiscal 2024 revenue to range from $92.0 billion to $94.5 billion. A reasonable valuation, high yield and signs of improvements can lead to steady cash flow and returns for long-term investors.
Waste Management (WM)
Waste Management (NYSE:WM) offers an essential service for residential and commercial customers. The company picks up waste and removes it from communities. Clients stay for a while, which translates into regular revenue growth for the company.
Total revenue increased by 5.5% year-over-year in Q1 2024, while net income was up by 32.8% year-over-year. Those financials have helped the company deliver a 12% year-to-date return for its investors. The stock has gained 75% over the past five years and offers a 1.50% yield. Waste Management has raised its dividend for over 20 consecutive years and has an annualized dividend growth rate of 6.84% over the past decade.
Wall Street analysts have rated the stock a Moderate Buy. The average price target suggests a 12% upside from current levels, and the highest price target of $256 per share suggests that shares can go up by an additional 28%.
Waste Management looks ready to deliver those gains for investors. The company’s acquisition of Stericycle for $7.2 billion will give it more exposure to medical waste services.
On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.