The 7 Best Dividend Stocks to Buy in 2017

When you pick up shares of the best dividend stocks to buy now, you get two things - profits as share prices rise, and cash.

As you know, companies that have dividend policies pay you money each quarter just for holding their stock. You can take the cash or reinvest it (which is an incredibly profitable strategy that we outline for you in this video).

How Do Dividend Reinvestment Programs (DRIPs) Work?

The best dividend stocks (like the ones we're about to show you here) also outperform the broader stock market because they're financially stable.

For example, one of the most stable and popular dividend stocks is McDonald's Corp. (NYSE: MCD). Shares of this company are known for being unaffected by broader market volatility. During the financial crisis that lasted roughly from Aug. 10, 2007, to March 6, 2009, the Dow Jones plunged 46.8%. On the other hand, MCD stock actually gained 7.4% over the same period.

McDonald's is also a "dividend aristocrat." This refers to an S&P 500 company that's hiked its dividend at least 25 years in a row. The company has gone far beyond that minimum and raised its dividend once a year for the last 40 years.

It last hiked its dividend by 5.6% on Nov. 29, 2016, from a quarterly payout of $0.89 per share to $0.94. That gave the stock a yield of 3.1% -- the highest since November 2015.

But dividend investing isn't as simple as picking any popular dividend aristocrat, buying the stock, and sitting back.

Our Money Morning investing gurus select dividend stocks not only because they have a large dividend, but also because they're poised to keep that large dividend going forward. This ability to maintain payouts to shareholders comes from the company's presence in a strong and profitable market, which will also lead to share-price appreciation over time.

Here are seven of the best dividend stocks to buy this year...

Best Dividend Stocks to Buy No. 7: Magellan Midstream Partners LP

Company: Magellan Midstream Partners LP

Share Price: $72.79

Quarterly Dividend Payment: $0.87

Dividend Yield: 4.8%

Date of First Dividend Payment: April 27, 2001

One of Money Morning Global Energy Strategist Dr. Kent Moors' favorite energy stocks also happens to boast a strong dividend - Magellan Midstream Partners LP (NYSE: MMP).

Magellan is a master limited partnership (MLP), which is a company that makes 90% of its total revenue from oil or other natural resources and usually operates in the midstream sector. In other words, it stores and transports oil instead of producing (upstream) or selling (downstream).

Because MLPs only rely on transporting and storing oil, they make money regardless of how oil prices are performing. As long as the oil keeps flowing, companies like Magellan keep raking in revenue. As the WTI crude oil price fell 5.8% during Q1 2017, Magellan posted income of $222.7 million. That was up 7.6% from $207 million in the year-ago quarter.

But one of the biggest reasons we like Magellan in 2017 is its strong presence in the $1 trillion "Permania" oil boom. That refers to the insane output growth happening right now in the Permian Basin, which stretches across New Mexico and Texas. The U.S. Geological Survey reported in 2016 there were as many as 20 billion barrels of oil in just one region of the Permian Basin.

Since Magellan is one of North America's largest oil transporters with 10,000 miles of pipelines, it stands to earn millions in revenue from this massive oil boom. Magellan is also adding roughly 1.7 million barrels of new oil capacity to its pipelines that stretch from the Permian to its Gulf Coast facilities.

In other words, Magellan will be making a lot more money with newly expanded transportation capacity. The company already has a huge 36.4% profit margin, meaning 36.4% of Magellan's revenue becomes profit. As revenue increases from the Permian boom, the firm's big profit margin ensures profits will increase as well.

According to a survey of Thomson Reuters analysts, MMP stock could rise 23.6% from its current $72.79 price to $90 by May 2018.

And the Magellan dividend makes this an even stronger investment. It currently boasts an annual dividend of $3.48 for a yield of 4.8%. That's more than double the average 1.93% yield of the entire S&P 500.

Magellan's combination of a 23.6% return and 4.8% yield make it one of the best oil dividend stocks to invest in this year.

Best Dividend Stocks to Buy No. 6: American Water Works Co. Inc.

Company: American Water Works Co. Inc.

Share Price: $77.93

Quarterly Dividend Payment: $0.41

Dividend Yield: 2.13%

Date of First Dividend Payment: Aug. 13, 2008

Freshwater is a much scarcer resource than people realize, and American Water Works Co. Inc. (NYSE: AWK) is the best way to make big returns from the growing problem.

Although 70% of the Earth is covered in water, only about 2.5% of it is usable for bathing, drinking, and cooking. National Geographic also estimates that only 0.007% of the Earth's water is available to the global population of 7.5 billion people.

This chart shows just how bad the problem could become...

best dividend stocks to buy

As you can see, time is quickly running out to solve the problem. According to data from the United Nations, there will be 40% less water than we need by 2030 if the problem continues at its current rate. This - combined with the global population projected to increase by 29% to 9.7 billion people by 2050 - could turn the freshwater problem into a full-blown crisis.

This freshwater scarcity ties into two of Money Morning Keith Fitz-Gerald's "Unstoppable Trends."

You see, the trick to making huge profits is to find "must-have" companies that fall into what Keith calls the six Unstoppable Trends: medicine, technology, demographics, scarcity and allocation, energy, and war, terrorism, and ugliness (also known as defense). The Unstoppable Trends are backed by trillions of dollars that Washington cannot derail, the Fed cannot meddle with, and Wall Street cannot hijack.

The Unstoppable Trends we're targeting here are "demographics and scarcity/allocation." The demographics trend ties into the massive population growth projected by the UN. Meanwhile, the scarcity/allocation trend ties into the simple fact that Earth's resources - especially water - will run out eventually. And every resource shortage always creates a transfer of wealth that opens up huge profit opportunities for investors who know where to look.

That's why Keith's recommended investing in AWK stock since December 2011. American Water Works is the largest public water utility company in the United States and serves 15 million people. It provides maintenance for wastewater facilities and sewer lines that transport water across the country.

If you bought AWK stock near $31.20 in December 2011 and held it until $77.93 today, you'd have a 149.8% return. Those returns will only keep growing thanks to the company's presence in a market with everlasting demand.

"American Water Works is a rock-solid choice that will shield you from market volatility," Keith said.

The quarterly AWK dividend has also grown considerably over the last six years. In fact, it's nearly doubled from $0.23 per share in December 2011 to $0.41 today, currently boasting a 2.13% yield. Since its IPO in April 2008, American Water Works has raised its dividend every single year. The AWK dividend even saw double-digit increases every year between 2013 and 2016, rising 12%, 11%, 10%, and 10%, respectively.

Best Dividend Stocks to Buy No. 5: Apple Inc.

Company: Apple Inc.

Share Price: $153

Quarterly Dividend Payment: $0.63

Dividend Yield: 1.65%

Date of First Dividend Payment: Nov. 21, 1988

Yes, its 32.2% return to $153 a share this year has made it one of the most profitable tech stocks of 2017. But Apple Inc. (Nasdaq: AAPL) also boasts one of the strongest dividends on the market despite problems with its dividend policy in the past.

You see, Apple paid steady dividends from 1988 to 1995. Over that time period, the quarterly payout increased 20% from $0.10 per share to $0.12.

However, the company started mounting huge losses mainly due to the sales failure of the Newton, a line of personal digital assistants that sucked $100 million out of Apple during the mid-1990s. When co-founder Steve Jobs returned to the company in 1997, the dividend policy was nixed so Apple could start growing its cash reserves.

By August 2012, Apple's cash reserves had reached around $100 billion. That was when the firm decided to reinstate its dividend at $0.38 per quarter - more than triple its last $0.12 quarterly payout 17 years prior. The quarterly AAPL dividend currently sits at $0.63 per share.

best dividend stocks

With that, Apple is one of the only leading tech companies to pay a dividend. Other giants like Alphabet Inc. (Nasdaq: GOOGL), Inc. (Nasdaq: AMZN), and Facebook Inc. (Nasdaq: FB) don't have dividend policies.

That's one reason Money Morning Capital Wave Strategist Shah Gilani considers Apple stock one of the best value stocks to buy. But it's undoubtedly proved to be a great growth stock as it's gained 17.2% to $153 since Shah re-recommended it on Feb. 7, when shares traded at $130.54.

"Apple Inc. keeps defying gravity," Shah told Money Morning readers on Feb. 7. "Its most recent earnings story was just extraordinary. Records are just being blown away left and right. And, believe it or not (and you'd better believe it), the stock is still cheap."

Apple's share appreciation and generous dividend compared to other tech titans makes it more than worth your money this year.

Best Dividend Stocks to Buy No. 4: Scotts Miracle-Gro Co.

Company: Scotts Miracle-Gro Co.

Share Price: $86.32

Quarterly Dividend Payment: $0.50

Dividend Yield: 2.32%

Date of First Dividend Payment: Aug. 16, 2005

Founded in 1868, Scotts Miracle-Gro Co. (NYSE: SMG) manufactures and sells a wide variety of garden products. The uses for its line of products have traditionally included insect control, lawn fertilization, gardening, and landscaping.

While it's long been a leader in the gardening and lawn-care market, Scotts Miracle-Gro has recently been pushing into the marijuana sector. This is one of the biggest reasons why Money Morning Director of Tech & Venture Capital Research Michael A. Robinson likes SMG stock.

"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," Robinson said in November 2016.

Must Read: Former Google Exec Quits Dream Job to Launch Marijuana Empire

The explosive growth of the marijuana market will be a huge catalyst for the SMG stock price. According to New Frontier Data's 2017 Cannabis Industry Annual Report, medical marijuana sales are expected to soar from $4.7 billion last year to $13.3 billion by 2020. The cannabis industry is also expected to create more than 250,000 jobs in the next three years - more than utilities, manufacturing, or even government jobs.

A recent Yahoo Finance survey of analysts show shares of Scotts Miracle-Gro could rise to $105 in the next 12 months. That would be a return of 21.6% from the current price of $86.32.

While that may not be a huge profit, SMG stock more than makes up for it with a yield of 2.32% and quarterly dividend of $0.50 per share. The firm's dividend has increased every year since 2013, rising 13.6% from $0.44 to $0.50.

The SMG dividend is also bigger than those offered by close peers Central Garden & Pet Co. (Nasdaq: CENT) and Andersons Inc. (Nasdaq: ANDE). Central Garden doesn't offer a dividend, while Andersons only pays $0.16 per share for a 1.82% yield.

Best Dividend Stocks to Buy No. 3: Lockheed Martin Corp.

Company: Lockheed Martin Corp.

Share Price: $279.88

Quarterly Dividend Payment: $1.82

Dividend Yield: 2.6%

Date of First Dividend Payment: May 25, 1995

With shares currently at an all-time high and expected to go higher, Lockheed Martin Corp. (NYSE: LMT) is one of the best defense stocks to own that also happens to have a strong dividend.

On Monday, May 22, LMT stock climbed 1.5% to a record high of $276.92. The gains came after President Trump made a deal with Saudi Arabia for the country to purchase more than $28 billion worth of missiles, Black Hawk helicopters, and other defense weapons from Lockheed. The Saudi government agreed to spend $110 billion overall on defense contracts, which also lifted shares of peers Raytheon Co. (NYSE: RTN) and Boeing Co. (NYSE: BA).

Lockheed Martin stock is up 18.5% since May 2016 thanks mostly to Trump's promise to increase military spending by $54 billion. That - combined with clearly strong international demand for the company's products - could send the LMT stock price soaring this year.

Money Morning Technical Trading Specialist D.R. Barton consistently recommends Lockheed Martin stock. Since his last recommendation on May 10, 2016, shares have gained 12.7% from $244.36 to the current price of $279.88.

But shares still have more room to run. Analysts say the stock could rise to $330 per share by May 2018. This would represent a 17.9% return for investors if they buy in at the current price.

On top of those solid gains, Lockheed offers shareholders a quarterly dividend of $1.82, good for a 2.6% yield. That beats out the Northrop Grumman Corp. (NYSE: NOC) dividend of $1 (1.55% yield) and United Technologies Corp. (NYSE: UTX) dividend of $0.66 (2.18% yield).

With growing demand for defense weapons overseas and a big dividend to boot, LMT is a great investment for both growth and value investors.

Best Dividend Stocks to Buy No. 2: Sanofi SA

Company: Sanofi SA

Share Price: $49.41

Quarterly Dividend Payment: $1.58

Dividend Yield: 3.19%

Date of First Dividend Payment: May 28, 2003

Another one of the best dividend stocks to buy in 2017 is France's largest pharmaceutical company - Sanofi SA (NYSE ADR: SNY).

This pharma giant - which is also the fifth-largest drugmaker in the world - produces some of the most recognizable and consumed medications on the market. These brands include leukemia treatment Lemtrada and sleeping medication Ambien.

Michael Robinson likes Sanofi because of its huge pipeline of blockbuster drugs coming to market. Of the 44 total medications in the pipeline, 13 of them are already in phase 3 clinical trials. According to Michael, about half of those drugs in phase 3 have come from partnerships with other companies.

Sanofi's collaboration with other firms is a good way to save cash that could later be used to hike its dividend or fund other projects.

"This is something we're seeing more and more of in pharma these days," Michael told Money Morning readers on April 26. "In my view, it's a smart move to help split up the costs and risks of new drug development."

But the even bigger catalyst for SNY stock will be the company's expansion into the Chinese market.

China already makes up one-third of Sanofi's revenue and is the firm's third-largest buyer behind the United States and France. According to a March 21 report by The Wall Street Journal, the company projects sales in China will increase by at least 10% in 2017. That would be up from a strong 2 billion euros ($2.15 billion) last year.

With plans to release more than 10 new drugs in China by 2020, Sanofi is perfectly poised for long-term growth just in that market alone.

"Given the relative immaturity of China's biotech and generic drugmakers, it will be years until they stop looking to the West for help managing their pharmaceutical demands," Michael said. "Those years of baked-in growth suit Sanofi just fine."

Sanofi provides a dividend of $1.58 per share and has a 3.19% dividend yield. For comparison, the SNY dividend beats out Merck & Co. Inc.'s (NYSE: MRK) $0.47 dividend (2.88% yield) and Johnson & Johnson's (NYSE: JNJ) $0.84 dividend (2.62%).

Now, our No. 1 dividend stock pick isn't exactly a traditional stock. It primarily focuses on bonds and income investments rather than goods and services, like the previous six companies.

However, this company has the highest yield out of any of our picks, meaning it's the company that's arguably the most dedicated to giving most of its profits back to shareholders.

Here's our pick...

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Best Dividend Stocks to Buy No. 1: PIMCO Strategic Income Fund Inc.

Company: PIMCO Strategic Income Fund Inc.

Share Price: $10.20

Monthly Dividend Payment: $0.07

Dividend Yield: 8.47%

Date of First Dividend Payment: Sept. 13, 1995

You may not recognize its name, but PIMCO Strategic Income Fund Inc. (NYSE: RCS) is the best way to earn passive income from both U.S. and foreign-issued bonds. It's so effective that Keith calls it a "money machine."

"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," Keith explained. "Reinvested, those monthly payouts compound a lot faster than quarterly ones, especially with a starting yield that's as high as RCS offers."

PIMCO Strategic Income Fund offers exposure to debt investments like corporate bonds and mortgage-backed securities (MBSs). Both of these instruments have posted positive returns this year and let investors earn passive, steady income. The Bloomberg U.S. Corporate Bond Index and Vanguard Mortgage-Backed Securities Index Fund - which are proxies for their respective investments - have gained 3.3% and 1.1% in 2017, respectively.

This growth in the income investment sector has allowed RCS to fly over traditional growth stocks. The RCS stock price is up 16% so far this year. That beats the Dow Jones and S&P 500, which have climbed 6.2% and 7.6% over the same period.

Not to mention it currently trades at a discount compared to similar income funds. RCS trades at $10.20 per share right now. Its price is much cheaper than other PIMCO income funds like the Dynamic Credit and Mortgage Income Fund (NYSE: PCI) and Global Stocks Income Fund (NYSE: PGP). Those cost $22.20 and $19.33 per share, respectively.

RCS pays shareholders a quarterly dividend of $0.07. While that may not be a stunning dividend, it represents a massive yield of 8.47%. That means the firm is giving most of its profit back to shareholders - a strong indication of a reliable company that puts investors first.

This "Secret" Helped Transform Two Teachers into Millionaires: Today Donna and Dave R. are retired millionaires who are also earning $10,000 a month in income. Much of their wealth is due to a Great Depression-era "program" most have no idea exists. Learn more...

Alex McGuire is an associate editor for Money Morning. Follow him on Twitter.

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