10 Superior U.S. Dividend Stocks

These stocks are good choices whether you're looking for dividend growth, down-market defense, or inflation protection.

Susan Dziubinski 14 May, 2021 | 4:28AM
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While they may not be the highest-yielding stocks around, dividend-growth stocks--those that have a history of increasing their payouts over time--have plenty going for them.

For starters, the management teams at these companies are focused on delivering a growing cash stream to their shareholders--and income is a key component of total return. That's a shareholder-friendly mindset.

Moreover, companies that consistently ratchet up their dividends are usually profitable and financially healthy--two especially valuable qualities during a market downturn.

And lastly, dividend growers can provide some inflation protection, which is a plus for retirees. "Income-focused investors receive a little 'raise' when a company increases its dividend," reminds Morningstar director of personal finance Christine Benz.

Given their multipurpose role, dividend-growth stocks are suitable for almost any type of investor.

We found some good ones in Canada recently, but to uncover a dividend-growth stocks in the U.S., we're turning to the top constituents in the Morningstar US Dividend Growth Index.

Dividends That Can Last

The index focuses on companies with a history of dividend growth and an ability to sustain it. The index includes U.S.-based securities that pay qualified dividends and that have increased their dividend payments over the past five years. To gauge the sustainability of dividend growth into the future, eligible constituents must display positive consensus earnings forecasts from the analyst community, and must also pay out no more than 75% of their earnings in the form of dividends. Constituents are weighted in proportion to the total pool of dividends available to investors. (Read more about the index specifics here.)

Given the index's construction rules, its largest constituents are relatively stable mega-cap companies. Most of these names are fairly valued as of this writing, but they're fine watchlist candidates.

List of 10 largest positions in Morningstar US Dividend Index

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Apple Inc174.92 USD-0.93Rating
Cisco Systems Inc48.89 USD0.81Rating
Johnson & Johnson149.18 USD1.12Rating
JPMorgan Chase & Co186.91 USD2.25Rating
Merck & Co Inc127.57 USD1.46Rating
Microsoft Corp424.00 USD0.50Rating
Pfizer Inc26.08 USD0.85Rating
Procter & Gamble Co156.38 USD0.68Rating
The Home Depot Inc340.90 USD-0.57Rating
Verizon Communications Inc40.18 USD1.15Rating

About Author

Susan Dziubinski

Susan Dziubinski  is an investment specialist with more than 30 years of experience at Morningstar covering stocks, funds, and portfolios. She previously managed the company's newsletter and books businesses and led the team that created content for Morningstar's Investing Classroom.

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