7 Best Dividend Stocks to Buy for BOTH Cash Flow and Growth

Can you have both high dividend yields and high returns? Yes…but it’s also one of the biggest traps in dividend stocks if you don’t know where to look. I’ve made the mistake myself, just focusing on high yield dividend stocks without understanding how it affects growth. Don’t make the same mistake!

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High yield dividend stocks that are also growth stocks is one of the most requested themes I get from investors. Everyone wants stocks that pay high dividends to produce double-digit returns as well. The problem is when you only focus on that dividend yield, first picking only dividend stocks with yields of 10% or more. At that yield, there isn’t much left for growth or return and the stock price falls.

In this video, I’ll show you how to find dividend stocks with high yields that can also be growth stocks for high returns. We’ll go through a dividend stock screener that will filter for only the best dividend growth stocks to buy and then reveal the seven best dividend stocks to watch right now. As a bonus, I’ll also share a strategy to turn any stock into a dividend paying stock.

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I recently asked our Facebook group what kinds of stocks you wanted to see on the channel. The result was a mix of dividend stocks and growth stocks…and both! Unfortunately it’s also one of the biggest traps for investors so I wanted to make a video about it.

The problem is the tradeoff between high yield dividends and growth. A company paying almost all its earnings out as dividends isn’t saving enough back for growth. That means it could fall behind the competition and the share price will suffer as a result. Finding high dividend stocks that can also produce a good stock return means striking a balance between the two.

For our dividend stock list, we start with a basic screener that looks for stocks with a dividend yield of 4% or higher. That might not seem like a high yield but it’s twice the market average and most of the stocks we found offer 5% yields and more. We also screened for dividend stocks growing their dividend by 5% or more a year. That not only puts more money in your pocket but it’s a good sign the earnings are growing which should also support the stock price.

I also want to screen for stocks with trailing returns of 7% or more a year. That doesn’t mean they will continue to produce stock returns every year but it’s a good sign if a company can grow its dividend and its stock price in the past. Finally, I screen for companies with 5% sales growth or higher. That’s important because it flows through to earnings which are how a company pays its dividends and what the stock price is based on.

It’s a simple stock screener for dividends but will help you find those stocks with the potential for both high yields and returns. You might try relaxing some of the criteria like dividend growth or sales growth over the last year and see what other stocks come up. The last year was unique in its challenges for dividend stocks so I would focus more on the companies that did well before last year.

Check out that covered call option strategy to turn any stock into a dividend stock! Plus my five favorite strategies! https://youtu.be/owZNEuYL_N0

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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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