Dividend reinvesting allows you to receive higher distributions in subsequent quarters and increase your compounding returns. Many investors continue to reinvest their dividend payments until they are ready to live off their dividends and wish to retire.
While you can choose from many dividend-paying stocks, some of them are better than others. Finding stocks that combine respectable yields with consistent rate appreciation can result in good long-term returns. Many corporations raise their dividends each year and continue to reward shareholders with buybacks. These are some of the top dividend stocks to consider for reinvestment plans.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) looks like one of the best dividend stocks in the market. The company’s yield is close to 2% and it has been raising the dividend by over 10% each year. Broadcom regularly reports revenue and earnings growth while maintaining profit margins above 35%.
The semiconductor giant stands to benefit greatly from artificial intelligence. Although Nvidia (NASDAQ:NVDA) blew Broadcom away in stock gains, it’s been gaining considerable ground since the recent VMware acquisition.
Broadcom shares have more than doubled in the last year and have soared by 342% over the past five years. Broadcom seems destined to become a trillion-dollar company and is about halfway there. Unlike other big tech companies, Broadcom offers a healthy dividend and has consistently hiked it higher over the years.
Shares currently trade at a 24 forward P/E ratio. The world’s reliance on chips and Broadcom’s synergies with VMware make it an enticing long-term pick for dividend investors seeking growth.
Digital Realty Trust (DLR)
Digital Realty Trust (NYSE:DLR) was previously flat for multiple years but has surged by 32% year-to-date. That’s still more than 20% removed from its all-time high which the stock can reclaim as data centers gain demand.
Digital Realty Trust has a portfolio of over 300 data centers in more than 50 metro areas. The company has over 5,000 customers that use its space for their IT architecture. Companies involved in artificial intelligence, cloud computing and information technology need to invest in data centers like the ones DLR provides.
The potency of data centers combined with the growth of artificial intelligence contributed to an 18% year-over-year revenue growth rate for the third quarter. The company has formed ventures with GI Partners, TPG Real Estate, and Brookfield Infrastructure among others to expand its portfolio.
Digital Realty Trust has a healthy balance sheet which features almost twice as many total assets as total liabilities. The company’s dividend yield currently sits at 3.60%.
IBM (IBM)
Big Blue has been staging a comeback after several years of stagnancy for investors which included a lost decade depending on when you bought shares. Looking in the present, IBM (NYSE:IBM) has gained 16% year-to-date and is up by 52% over the past five years.
The turnaround is fueled by strategic acquisitions of companies like Red Hat along with artificial intelligence. Revenue only goes up by single digits while profit margins have been expanding nicely. The company reported 5% year-over-year revenue growth in the third quarter and more than doubled its net income.
Although IBM has staged good growth in recent quarters, it is still a mature company. Investors get to enjoy a dividend yield above 4%, but dividend growth is minimal. In 2023, the company hiked its quarterly dividend from $1.65 per share to $1.66 per share. That’s less than a 1% year-over-year increase for the dividend, and IBM has been hiking the dividend by only $0.01 per share since 2020.
Growing profits and top-line expansion can help the company raise its quarterly dividend by more than $0.01 per share each year. However, investors should view it as a blue-chip stock that offers more safety and a higher yield than other tech companies.
Stag Industrial (STAG)
Stag Industrial (NYSE:STAG) has a real estate portfolio of warehouses and storage facilities. The company has 568 properties encompassing 112 million square feet in 41 states. The company has a star-studded list of clients that include Amazon (NASDAQ:AMZN), FedEx (NYSE:FDX) and XPO Logistics (NYSE:XPO) among others.
Investors get to enjoy a 3.75% dividend yield and monthly dividend distributions. While you can get monthly dividends by investing in enough companies, some stocks like STAG make it easy to receive frequent payouts. The company recently raised its monthly dividend from $0.121667 per share to $0.1225 per share. The annual dividend currently comes to $1.47 per share. Last year, it was at $1.46 per share.
Investors should approach Stag Industrial with the same dividend growth expectations as IBM. You won’t get much dividend growth but get a high yield from a stable company. Shares have gained 22% year-to-date and are up by 60% over the past five years.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has the lowest dividend yield out of the stocks on this list but it makes up for it in every other way. It’s easy to overlook the 0.80% dividend yield when shares have gained 57% year-to-date and are up by 275% over the past five years.
Microsoft got its start with personal computers but rapidly expanded into other markets, such as cloud computing, artificial intelligence, social media through LinkedIn, and gaming. AI Copilots has many investors excited as this artificial intelligence bot will enhance the experience for Microsoft Office products. The technology was enough for Daniel Ives to raise his price target to $450. That price hike implies a 19.7% upside.
Investors should monitor how the copyright infringement battle plays out between The New York Times (NYSE:NYT) and Microsoft over its artificial intelligence tools. Microsoft has endured legal battles in the past and has rewarded shareholders all the same.
Oracle (ORCL)
Oracle (NYSE:ORCL) offers cloud applications and cloud infrastructure for businesses. The company’s technology helps corporations become more efficient, achieve lower costs and minimize the risk of cyberattacks.
Oracle also offers advertising solutions, customer relationship management software, workforce management tools, and other resources. The company has a 1.50% dividend yield and recently hiked its quarterly dividend from $0.32 per share to $0.40 per share. It’s a 25% increase. Oracle currently has a dividend schedule that indicates one increase every two years.
Oracle posted $12.9 billion in revenue in the second quarter of fiscal 2024. It’s a 5% year-over-year improvement but growth in the company’s cloud segments indicates more promise. Cloud revenue makes up more than a third of the company’s total revenue and increased by 25% year-over-year.
Cloud Infrastructure revenue was the biggest winner with 52% year-over-year growth. That segment makes up more than 10% of the company’s total revenue. During remarks about the earnings report, Oracle CEO Safra Catz expressed optimism about surging demand for cloud infrastructure and generative AI services.
Cisco (CSCO)
Cisco (NASDAQ:CSCO) is a mature big tech company that has a market cap of just over $200 billion. The company’s 15 P/E ratio offers reasonable safety compared to other stocks in the industry. Dividend investors get to enjoy a 3% dividend yield but the annual dividend growth rate is in the low single digits.
Cisco stock is another case of taking a relatively low risk with limited upside for a respectable yield. The stock has gained 5% year-to-date and is up by 18% over the past five years. Cisco has been acquiring companies to bolster growth and tap into the cloud. The recent acquisition of Isovalent and the headline-grabbing acquisition of Splunk (NASDAQ:SPLK) indicate the company is exploring opportunities for growth.
Cloud computing presents an attractive growth opportunity and can help Cisco achieve enticing revenue and earnings growth in the future. Revenue growth is in the high single digits to low double digits while net income continues to expand rapidly.
On this date of publication, Marc Guberti held long positions in AVGO and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.