How To Find Great Dividend Stocks

Dividend-paying stocks have lagged lately but are due for a comeback. Here's what to look for in great dividend stocks.

stocks of coins leading to small gold bag with red arrow on top going up
(Image credit: Getty Images)

Dividend investors tend to be patient, but lately their patience has been tested. Dividend stocks have badly lagged the rest of the market recently. The S&P Dividend Aristocrats – a list of companies in the S&P 500 index that have raised their dividends for at least 25 years in a row – have returned less than 10% over the 12 months that ended February 29. The S&P 500 gained more than 30% over the same period. 

A major reason for the recent underperformance is the surge in interest rates that began in 2022. When rates on Treasury securities and cash accounts were stuck below 1%, dividend stocks' yields were attractive by comparison. But with short-term Treasury securities and cash accounts paying more than 4%, compared with the S&P 500's current yield of 1.5%, dividend stocks have been a tougher sell. That could change with expected rate cuts from the Fed later this year.

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Kim Clark
Senior Associate Editor, Kiplinger's Personal Finance

Kim Clark is a veteran financial journalist who has worked at Fortune, U.S News & World Report and Money magazines. She was part of a team that won a Gerald Loeb award for coverage of elder finances, and she won the Education Writers Association's top magazine investigative prize for exposing insurance agents who used false claims about college financial aid to sell policies. As a Kiplinger Fellow at Ohio State University, she studied delivery of digital news and information. Most recently, she worked as a deputy director of the Education Writers Association, leading the training of higher education journalists around the country. She is also a prize-winning gardener, and in her spare time, picks up litter.