Investing in stocks with dividends is a powerful strategy to both grow and protect portfolios of all sizes.
You see, dividend payouts can offset losses when stock prices dip, which provides portfolio protection. When the markets are heading higher, strong dividend payouts can help you continually outperform the markets.
And to help your investing capital grow, shareholders can reinvest dividends. This is referred to as a DRIP (dividend reinvestment program or dividend reinvestment plan).
That's a powerful way to increase long-term profit potential...
For example, Johnson & Johnson (NYSE: JNJ) first paid dividends in 1972, according to the company's website. However, it only paid out $0.009 for the whole year.
But by 1995, JNJ was paying over $0.06 per share per quarter. A $10,000 investment back on Jan. 1, 1995, would now be worth $118,134 through a DRIP, according to Dividend Channel.
In comparison, a $10,000 investment in JNJ during that time that didn't use a DRIP would be worth $90,504.
That's a staggering difference of $27,630.
Dividends Explained
Of course, you can't throw money at just any dividend stock and expect positive returns.
Just like with any investment, due diligence is required to find the best stocks. That's why we rounded up four of the best stocks with dividends from four of our financial gurus.
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Each stock operates in a unique market, which provides diversity for any portfolio. And they all have market-beating profit potential on top of their steady dividend payments.
Here are the four stocks with dividends to grow your wealth...
Grow Your Wealth with These Four Stocks with Dividends
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Stocks with Dividends No. 4: PIMCO Strategic Income Fund Inc.
PIMCO Strategic Income Fund Inc. (NYSE: RCS) has a global portfolio of income-producing securities of U.S. and foreign issuers. It also includes emerging-market issuers.
"I've called RCS my favorite 'money machine' in the past because of its ability to deliver double-digit yields to investors on a monthly - not quarterly - basis. Reinvested, those monthly payouts compound a lot faster than quarterly ones, especially with a starting yield that's as high as RCS offers," Money Morning Chief Investment Strategist Keith Fitz-Gerald said.
PIMCO pays its shareholders a dividend of $0.07, which is a very generous yield of 8.82%.
And on top of the generous dividend, RCS has outperformed the broader market.
So far in 2017, the RCS stock price has climbed 11.41%. In comparison, the Dow Jones Industrial Average is up just 6.12%.
Stocks with Dividends No. 3: Apple Inc.
Shares of Apple Inc. (Nasdaq: AAPL) were trading as low as $89.47 per share on May 11, 2016, due to concerns over iPhone sales. The Apple stock price rallied 41.98% by Feb. 1, 2017, but Money Morning Capital Wave Strategist Shah Gilani still thought shares were too cheap.
"Apple is absolutely a value stock, one of the market's most compelling buys right now," Gilani said on Feb. 7, 2017.
At the time of Gilani's recommendation, AAPL traded for $130.54 per share. From today's opening price of $153.95, that's a profit of 17.94% in just over three months.
Aside from profits from the surging stock price, Apple also pays its shareholders a dividend. Apple first paid a dividend of $0.10 in 1988, and while it stopped paying dividends in 1995, it resumed payments in 2012.
Right now, Apple pays a dividend of $0.63 per share. That's a yield of 1.63%, which is a huge bonus for shareholders.
Similar tech leaders like Facebook Inc. (Nasdasq: FB), Amazon.com Inc. (Nasdaq: AMZN), and Alphabet Inc. (Nasdaq: GOOGL) don't pay dividends.
Stocks with Dividends No. 2: Lockheed Martin
"In markets with no direction, defense stocks are a sector of choice among money managers," Money Morning Technical Trading Specialist D.R. Barton, Jr., said on May 10, 2016.
Barton said this before the "Trump Rally" for stocks, which sent the markets to record highs. However, geopolitical turmoil, speculation on interest rate hikes, and the mixed earnings reports have kept the Dow stuck under 21,000.
The market has no clear direction right now, which makes Lockheed Martin Corp. (NYSE: LMT) one of the best dividend stocks to own.
The stock price for the defense giant won't skyrocket on positive news like Apple, as it's up 8.03% in 2017. However, that's still better than an index fund that just tracks the Dow.
And unlike the Dow, LMT pays its shareholders a dividend.
Lockheed first paid shareholders a dividend of $0.17 in 1995. Today, it pays $1.82 per share, which is a yield of 2.70%.
Stocks with Dividends No. 1: Scotts Miracle-Gro
Scotts Miracle-Gro Co. (NYSE: SMG) has been in business since 1868.
It's a leader in the lawn and garden market, but it's also growing its revenue though another booming market: cannabis.
"Scotts is already the world's largest maker of lawn-care and gardening products, and is now making a big push into indoor plant cultivation, as evidenced by its April 2015 $150 million purchase of General Hydroponics and other pot-related acquisitions," Money Morning Director of Tech & Venture Capital Research Michael A. Robinson said on Nov. 10, 2016.
Because of its diversified revenue sources, and as sales see a boost in the spring and summer, analysts believe SMG stock could climb over the next 12 months.
According to FactSet, analysts covering Scotts have a one-year price target of $99.33 for the SMG stock price. From today's opening price of $87.10, that's a potential profit of 14.04%.
According to Dividend Channel, Scotts first paid a dividend of $0.12 in 2005.
Today, it pays shareholders a dividend of $0.52, which is a yield of 2.31%.
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