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Feb 28, 2022

Are These The 10 Best Dividend Stocks to Watch?

By:Zani Smit

Dividends are often seen as the blueprint for longevity and building wealth due to the source of income they provide. Find out which dividend-paying companies are on investors’ radar in 2022.

WHAT’S ON THIS PAGE?

  1. Dividend stocks: what you need to know
  2. 10 best dividend stocks to watch
  3. How to trade and invest in dividend stocks
  4. Dividends: maximizing income and returns

DIVIDEND STOCKS: WHAT YOU NEED TO KNOW

Dividend stocks are seen as a steady way to earn additional income by many investors. At tastyworks, you can buy and sell outright shares of dividend stocks or create options strategies to capitalize on extremes in volatility as well as stock price.

Choosing dividend-paying companies takes more effort than just looking for a list of dividend aristocrats, which are public companies that have consistently raised dividends every year over the long term. Shareholders will look at the dividend yield, displayed as a percentage, to see what amount of money they will get each year relevant to the stock price.


When a company is able to pay regular dividends to shareholders from its net profit, it is perceived to have a good track record, and this often attracts more investors. Studying a company’s dividend payouts can thus give you some insight into its financial strength and management style.

WHAT ARE DIVIDEND STOCKS?

Dividends stocks are a regular distribution of a publicly listed company’s earnings to their shareholders who own their stock. The pay-out can be a cash distribution, usually annually or quarterly as approved by their board of directors.

10 BEST DIVIDEND STOCKS TO WATCH

  1. NiSource (NI)
  2. Duke Energy (DUK)
  3. Southern Company (SO)
  4. Consolidated Edison (ED)
  5. Johnson & Johnson (JNJ)
  6. Coca-Cola (KO)
  7. Target (TGT)
  8. 3M (MMM)
  9. PepsiCo (PEP)
  10. Realty Income (O)

You can trade all of the above common stock or common dividend at any major brokerage firm, like tastyworks. To get started, open an account and search for your chosen company on the award-winning tastyworks platform.1

The companies mentioned on this page aren’t necessarily the best stocks per se. Rather, they’ve been selected taking a number of factors into consideration, e.g. market demand, market cap, macroeconomic environment, investors’ interest and historical performance data.

Not interested in purchasing shares in dividend stocks? No worries! We’ll share some options trading information along the way.

Number 1 in a red circle

 NISOURCE (NI)

NiSource is considered one of the largest fully regulated utility companies in the United States. As of early February 2022, NiSource had a $11.07 billion market capitalization (total value of all a company's shares of stock).

When it comes to generating energy, NiSource uses traditional (coal) and renewable sources (wind, hydroelectric and natural gas). Their latest financial reports show their current revenue at $4.53 billion.

Its 2021 net operating earnings per share (non-GAAP) is between $1.32 and $1.36.2 Shareholders received 23.5 cents per share in the last quarterly dividend payout in February 2022 (an increase of 7%) from 2021. With this, the annual common dividend payout is 94 cents per share.

Since the start of 2022, the stock has traded in the mid to upper 20s, reaching highs of $30.19 in early February.

Number 2 in a red circle

 DUKE ENERGY (DUK)

A major player in the utility industry, Duke Energy is an electric power distributor with a $75.10 billion market capitalization. It was founded in the early 1900s by Dr. W. Gill Wylie, James Buchanan Duke and William States Lee. They had a shared vision of an integrated electric system of hydro-powered generating stations in the South.

Today the company is an industry leader in sustainable innovation that’s dedicated to providing clean, reliable and affordable energy in seven states across the Southeast and Midwest.

Duke Energy generally pays dividends to shareholders quarterly. Their track record shows that they’ve paid a quarterly cash dividend 96 consecutive times, the last quarterly payment in September 2021 of $0.985, was an increase of $0.02 per share. In the last year, $DUK stock has traded as high as 108.38 and as low as $85.56.

Number 3 in a red circle

 SOUTHERN COMPANY (SO)

Southern Company is a very strong competitor in the electric and natural gas utilities industry with a $66.62 billion market capitalization as of February 2022. Its core business consists of electric utilities, natural gas distribution, customized distributed energy solutions and fiber optics and wireless communications.

Southern Company’s message to potential investors is strong – they’re focused on energy efficiency. The company is the only electric utility in the U.S developing a portfolio of generation resources – natural gas nuclear, and renewables such as wind and solar.

Number 4 in a red circle

 CONSOLIDATED EDISON (ED)

Consolidated Edison is the second largest solar-power producer in North America with $29.88 billion in market capitalization since February 2022. It has paid their shareholders quarterly for 46 consecutive years. The company also offers investors with a minimum of 50 shares eligibility towards their automatic dividend reinvestment and cash payment plan (DRIP).

Learn More about Dividend Reinvesting at tastyworks

The company’s main focus is on climate change and reducing greenhouse gas emissions through robust investing in renewable energy. Consolidated Edison supports a transition to clean heating alternatives and are working towards using renewable gas where possible.

Number 5 in a red circle

 JOHNSON & JOHNSON (JNJ)

Johnson & Johnson has been around for 135 years and recently took the top spot on the pharmaceutical industry list. The company’s market cap is $436 billion as of February 2022, making it the world’s 15th most valuable company by market cap. Annual dividend yield is 2.43% and investors will receive $1.06 per stock as a quarterly dividend amount.

tastyworks account holders can view Market Cap and Dividend information on the “Overview” Tab on the downloadable platform.

Its core business is providing consumer health products for skin health, self-care and essential health brands; medical devices and a wide range of pharmaceutical products.

Number 6 in a red circle

 COCA-COLA (KO)

The Coca-Cola company has been refreshing the world with their products and making a long-lasting mark as a total beverage company with their branding for over 135 years.

Their most famous product, the Coca-Cola soft drink, has a global brand value of over $71 billion. Coca-Cola has a dividend yield of 2.71% and total market cap of $266.37 billion as of February 2022 making it the 31st most valuable company in the world. Its shareholders are paid quarterly and receive approximately $0.42 accordingly.

Number 7 in a red circle

 TARGET CORPORATION (TGT)

Target corporation was founded in 1902 by George Draper Dayton who was active in growing the company until his death in 1938. Today, this American retail giant sells a wide variety of food and general merchandise and has more than 1,926 stores in over 50 US states.

Shareholders received a $0.90 quarterly cash payout in February 2022 with a dividend yield of 1.68%.

Currently, IV Rank in $TGT sits high at 80%. IV Rank is used to help put context around current and historic IV levels. This could be seen as an attractive options premium selling opportunity for traders looking to incorporate probability and theta into their portfolio.

Number 8 in a red circle

 3M COMPANY (MMM)

3M is a Fortune 500 listed American conglomerate founded in 1902 with its headquarters in St. Paul, Minnesota, corporate operations in 70 countries and sales in 200 countries. The company has a diverse slate of businesses and their core segment includes home improvement products, industrial products, office supplies, personal safety items. 3M aims to prioritize science and innovation in its 60,000 products used in homes, businesses, schools and hospitals .

It’s had 63 years of consecutive annual increase and over 100 years of paid dividends without interruptions. Shareholders received $1.48 each quarter in 2021 with a dividend yield of 3.68%.

Number 9 in a red circle

 PEPSICO (PEP)

PepsiCo forms a large part of the non-alcoholic beverage and convenient food industry with its world-renowned brands like Pepsi-Cola, Lays, Doritos, Cheetos, Gatorade, Mountain Dew, Quaker, and SodaStream.

The company’s products are found in over 200 countries and are consumed more than one billion times a day. The company generated $8.14 billion in net revenue in 2021 for the twelve months ending September 30.

Shareholders received a quarterly dividend of $1.075 per share in January 2022, a 5% increase compared to the same quarter in 2020. This was the 49th consecutive annual dividend increase and consistent with PepsiCo’s annual dividend increase announcement to $4.30 per share from $4.09 per share. Since 1965, the company paid consecutive quarterly cash dividends.

Number 10 in a red circle

 REALTY INCOME (O)

Realty Income, the monthly dividend company, started out by using the rent collected from commercial properties held under long-term leases to support monthly dividends to shareholders. The founders, William and Joan Clark, grew this simple idea into paying an impressive 618 consecutive monthly dividends since the company was founded in 1969 until December 2021.

The compound average annual growth rate (CAGR) of Realty Income is 4.5% with 97 consecutive quarterly increases to December 2021. Realty Income’s property portfolio includes 11, 000 properties that are generally freestanding buildings located throughout all 50 states the UK, Spain and Puerto Rico.

HOW TO TRADE OR INVEST IN DIVIDEND STOCKS

You can start trading and investing in dividend stocks with these five steps:

  1. Learn about dividend stocks and how to trade them via stock and options
  2. Create a tastyworks account or learn more about opening an account at Tastyworks
  3. Create a trading plan and a risk management strategy
  4. Choose a dividend stock and open your position
  5. Monitor and close your position

    You can earn money from dividend stocks either by owning the dividend-yielding shares or by trading options on dividend stocks. Rather than collecting a dividend, options traders profit by speculating on what will happen to the price of the underlying as well as any changes in volatility. Here’s a breakdown of the difference between becoming a company shareholder (investing) and options trading.

    INVESTING (OWNING PHYSICAL SHARES OF A STOCK)

    OPTIONS TRADING

    Take full ownership of stock shares

    Trade without having to own the underlying asset

    Buy and sell underlying dividend stocks and ETFs

    Speculate on the price of dividend stocks rising, falling, or staying in a range

    Pay the full value of the shares

    Lower buying power required for options trading in certain account types

    You may get back less than you put in because the value of shares can fall as well as rise

    Gains and losses are influenced by stock performance

    But they are also influenced by changes in volatility relative to the options strategy, stock price, time until expiration, etc.

    Owning shares of a company allows you to vote for the board of directors

    No voting rights

    Learn more about what happens to long and short options around dividend dates.

    DIVIDENDS: MAXIMIZING INCOME AND RETURNS

    When it comes to maximizing income and returns with dividends, traders need to determine how many shares are needed from a specific company in order to generate a certain level of cash-flow per month.

    The calculation for dividend yields is as follows: dividend per share divided by share price times 100.

    Traders can also utilize options on dividend-producing stocks to accentuate or reduce the number of shares needed.

    For example, if you want to earn $150.00 per month with $55.00 stock from Company XYZ who has a 3.25% dividend yield, you can use the formula in the below image.

    Shares required

    = 12 x Desired monthly received
    -----------------------------------------------
    Share price x yield

    = 12 x $150 =1,007 shares
    -----------------------------------------------
    $55 x 0.0325

    $ amount needed

    = Shares required x Share price

    = 1,007 x $55 = $55,385 needed


    On tastyworks, traders can use the various trading interfaces to buy and sell stock at any lot size preferred.

    You can then accentuate the monthly cash-flow by selling covered calls. It’ll require less shares by using covered calls to replace some of the divided cash flow.

    BEST DIVIDEND STOCKS SUMMED UP

    • You can invest in stock with dividends or trade options on dividend-producing stocks
    • If an investor owns stock of a dividend-yielding company, they can expect cash payouts from the company’s earnings
    • Dividends are influenced by several factors such as corporate actions, market sentiment (bullish or bearish price trends), fundamentals and the long-term economic outlook
    • With options on dividend stocks, it’s important to know when a dividend paying out, to see whether or not your option position is at risk
    • Historically, utility-based stocks are on the forefront of many investor’s watchlists.

    1 Named the Best Online Broker by Investor’s Business Daily (IBD) in its ninth annual survey.
    2
    NiSource Annual Report, 2011

    tastyworks
    , Inc. and tastytrade, Inc. are separate but affiliated companies.

    Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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