Long-term investors buy stocks with the hopes of building their nest eggs over time as the stock market rises. However, dividend stock investors actually get paid for their patience. Dividend stocks take a portion of their profits and distribute it directly to investors on a quarterly or monthly basis.
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The top-tier dividend stocks are the Dividend Aristocrats, a group of S&P 500 stocks that have raised their dividends for at least 25 consecutive years as their stock prices have climbed. Here are 10 of the best dividend stocks to buy for guaranteed income, according to Bank of America analysts:
| Dividend stock | Analyst’s price target | Trailing dividend yield (as of July 17) |
| Realty Income Corp. (ticker: O) | $71 | 4.9% |
| International Business Machines Corp. (IBM) | $152 | 4.9% |
| Federal Realty Investment Trust (FRT) | $125 | 4.3% |
| Exxon Mobil Corp. (XOM) | $145 | 3.6% |
| Medtronic PLC (MDT) | $100 | 3.2% |
| Coca-Cola Co. (KO) | $74 | 3% |
| Cincinnati Financial Corp. (CINF) | $121 | 2.9% |
| J.M. Smucker Co. (SJM) | $170 | 2.8% |
| PepsiCo Inc. (PEP) | $210 | 2.5% |
| Sysco Corp. (SYY) | $90 | 2.7% |
Realty Income Corp. (O)
Realty Income is a retail real estate investment trust, or REIT, that owns, develops and manages primarily single tenant buildings throughout the U.S. Realty Income pays a 4.9% dividend, tied with the next pick for the highest yield on this list. Analyst Joshua Dennerlein says balance sheet strength and earnings growth potential are the two most important factors for triple-net REITs like Realty Income. Dennerlein says Realty’s diversified tenant base ensures the company doesn’t face as much risk tied to the credit quality of its portfolio as it has in the past. Bank of America has a “buy” rating and $71 price target for O stock, which closed at $61.29 on July 17.
Sector: Real estate Trailing dividend yield: 4.9%
International Business Machines Corp. (IBM)
IBM is a global technology company that provides enterprise software, infrastructure and services. Analyst Wamsi Mohan says IBM’s revenue and free cash flow growth turnaround will continue, and the stock is an excellent defensive investment with an attractive 4.9% dividend yield. Mohan says IBM’s high exposure to recurring sales, its potential for significant cost-cutting measures and its relatively stable margins make it a reliable dividend stock for long-term investors. He says IBM also has the financial flexibility to improve its product portfolio via acquisitions. Bank of America has a “buy” rating and $152 price target for IBM stock, which closed at $134.24 on July 17.
Sector: Technology Trailing dividend yield: 4.9%
Federal Realty Investment Trust (FRT)
Federal Realty Investment Trust is a retail REIT that owns, manages and redevelops community and neighborhood shopping centers. Analyst Jeffrey Spector recently met with management from several real estate industry executives based around Washington, D.C. and says government employees returning to the office is a key catalyst to watch in the greater metro area. Spector says high-density, mixed-use properties are a potential growth source, and Federal Realty’s approach of developing mixed-use properties on its own rather than relying on partners is an ideal strategy. Bank of America has a “buy” rating and $125 price target for FRT stock, which closed at $100.77 on July 17.
Sector: Real estate Trailing dividend yield: 4.3%
Exxon Mobil Corp. (XOM)
Exxon Mobil is the largest publicly traded U.S. integrated oil company. The oil and gas industry thrived in a difficult market in 2022, and analyst Doug Leggate says Exxon still has significant valuation upside from current levels. Leggate says Exxon has multiple growth projects transitioning to production in coming years, including Phase 3 of development in the Payara field in Guyana. He estimates the Payara project will generate about $2.3 billion in annual free cash flow for Exxon when it is in full production. Bank of America has a “buy” rating and $145 price target for XOM stock, which closed at $101.38 on July 17.
Sector: Energy Trailing dividend yield: 3.6%
Medtronic PLC (MDT)
Medtronic is a health care device manufacturer that operates in four segments: cardiovascular, medical surgical, neuroscience and diabetes. The company is planning to spin off its patient monitoring and respiratory interventions business as part of its plan to streamline its portfolio and focus on higher-growth sales. Analyst Travis Steed says Medtronic’s diabetes growth is expected to accelerate in fiscal 2024. Steed says the company’s 2024 financial guidance is likely conservative. The company already has 10,000 unique health care providers prescribing its new MiniMed 780G insulin pump. Bank of America has a “buy” rating and $100 price target for MDT stock, which closed at $86.71 on July 17.
Sector: Health care Trailing dividend yield: 3.2%
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Coca-Cola Co. (KO)
Coca-Cola is one of the world’s most valuable brands and is the largest manufacturer of soft drinks and syrups. Analyst Bryan Spillane says Coca-Cola has positive underlying business momentum and an attractive valuation heading into the second half of 2023. He says Coca-Cola shares are undervalued relative to its average premium to the S&P 500 over the past five years. Spillane says Coca-Cola deserves a steeper valuation than its beverage peers given the company’s solid execution, massive scale, pricing leverage and earnings power. Bank of America has a “buy” rating and $74 price target for KO stock, which closed at $60.81 on July 17.
Sector: Consumer staples Trailing dividend yield: 3%
Cincinnati Financial Corp. (CINF)
Cincinnati Financial is an insurance holding company that primarily markets property and casualty coverage but also provides life insurance and asset management services. Analyst Grace Carter projects $358 million in net catastrophe losses in the second quarter given exposure to storms in the Midwest and Southeast regions. However, Carter says forward earnings risk is skewed to the upside, and the company has a favorable common equity portfolio that will help Cincinnati Financial exceed its 2023 long-term average value creation goal of between 10% and 13%. Bank of America has a “buy” rating and $121 price target for CINF stock, which closed at $98.36 on July 17.
Sector: Financial Trailing dividend yield: 2.9%
J.M. Smucker Co. (SJM)
J.M. Smucker is a packaged foods company that produces coffee, peanut butter, fruit spreads, pet food and other food and beverage products. Analyst Peter Galbo says J.M. Smucker is one of the few companies he anticipates will grow underlying organic packaged food volumes in the near term. The company made several major divestitures in recent years, and Galbo says its streamlining has lowered the company’s overall price elasticity. He says J.M. Smucker has optimized its margins by reducing exposure to private label goods. Bank of America has a “buy” rating and $170 price target for SJM stock, which closed at $148.48 on July 17.
Sector: Consumer staples Trailing dividend yield: 2.8%
PepsiCo Inc. (PEP)
PepsiCo is a global beverage and snack company. Spillane says PesiCo has been generating solid organic sales momentum and impressive pricing leverage. He projects 9.8% organic sales growth and $1.90 in earnings per share in the second quarter. He anticipates Latin America strength could potentially offset weakness in Pepsi Beverages North America, where Gatorade’s transition from warehouse to direct distribution has been weighing on volumes. Spillane says PepsiCo’s business is positioned to generate sustained high-single-digit shareholder returns via sales growth and capital returns. Bank of America has a “buy” rating and $210 price target for PEP stock, which closed at $185.63 on July 17.
Sector: Consumer staples Trailing dividend yield: 2.5%
Sysco Corp. (SYY)
Sysco is a large distributor of food and related products to the food service and food-away-from-home industries. Analyst Kendall Toscano says restaurant spending continues to slow, but Sysco is well-positioned to navigate the near-term headwinds and execute its supply chain improvements. Toscano says Sysco should continue to gain market share from competitors in the long-term given its powerful combination of scale and strategic reinvestments. In addition, he projects Sysco’s margins will expand as the company improves supply chain efficiency and increases productivity. Bank of America has a “buy” rating and $90 price target for SYY stock, which closed at $73.41 on July 17.
Sector: Consumer staples Trailing dividend yield: 2.7%
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10 Awesome Dividend Stocks for Guaranteed Income originally appeared on usnews.com
Update 07/18/23: This story was previously published at an earlier date and has been updated with new information.
