It’s been a great year for dividend growth stocks since the Federal Reserve hit the brakes on raising key interest rates. The dividend yield on the S&P 500 is over 2%, so there’s much more money to be made here than Treasury bonds. Remember, most dividends are tax-advantaged and taxed at a maximum federal rate of 23.8%. So, the S&P 500 actually yields more than a 10-year Treasury bond that is taxed at a maximum federal rate of 40.8%.
As such, yield-hungry investors will continue to pour into dividend stocks. There are two other great reasons why folks focus on dividends. One, a generous dividend payment often lowers a stock’s volatility. And two, dividends reveal how much money a company really has. If the company is willing to part with cash in the form of a dividend payment, then its balance sheet must be strong.
However, not all dividend stocks are created equal, meaning not all dividend stocks are worthy investments. Take WEC Energy Group, Inc. (WEC) and KAR Auction Services, Inc. (KAR), for example. Both companies offer dividend yields over 2% and posted good fourth-quarter earnings results. But both stocks also hold a D-rating in Dividend Grader, making them automatic sells.
There are a couple of factors behind the D-ratings. WEC’s dividend reliability is deteriorating, and forward dividend growth is slowing. KAR’s buying pressure is drying up, and its dividend growth rate has slipped in recent months. So, even though the earnings were good, these stocks do not represent good dividend stocks right now.
This is why it’s important to look at the whole picture. As you can see, there are a lot of factors that go into determining whether a dividend stock is a good investment or not (you can learn more about my formula for dividend stocks here). In the case of WEC and KAR, they no longer meet my strict critera.
I want to make sure you’re investing in the best, so, today, I’m sharing 10 A-rated dividend stocks that could be good portfolio boosters based on my Dividend Grader system. You can check them out below.
|Hi-Crush Partners LP||HCLP||36.75%||A|
|BP Prudhoe Bay Royalty Trust||BPT||18.86%||A|
|Sprague Resources LP||SRLP||16.9%||A|
|Marine Petroleum Trust||MARPS||15.27%||A|
|VOC Energy Trust||VOC||14.33%||A|
|USD Partners LP||USDP||13.33%||A|
|Cross Timbers Royalty Trust||CRT||12.68%||A|
|Andeavor Logistics LP||ANDX||11.64%||A|
|Dorchester Minerals, L.P.||DMLP||10.11%||A|
|AllianceBernstein Holding L.P.||AB||9.07%||A|