If you’re starting your search for the market’s best dividend stocks, I have a suggestion:
Look for the best stocks that also pay dividends.
I know that sounds similar, but the emphasis matters. Sometimes, people seek out dividend stocks with yield in mind first, and quality second. While that can work out, it can also flame out spectacularly—after all, if a high payout is built on a shaky foundation, you might not receive that payout in perpetuity, and if that happens … well, it’s hard to imagine you’d love the stock you’re left with.
Instead, you want to primarily focus on high quality, for two reasons: 1.) It gives you a better chance of buying durable dividends that will keep delivering a steady (and even growing) stream of income over time, and 2.) it gives you a better chance of buying companies whose sales and profits will continue to improve, resulting in higher share prices over time, too.
If that sounds like a good plan to you, read on as I discuss the importance of dividends and dividend safety, followed by a look at 10 of the best dividend stocks through a high-quality lens.
Disclaimer: This article does not constitute individualized investment advice. These securities appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
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Why Dividend Stocks?
Dividend stocks can do wonders for the long-term performance of your portfolio. These companies pay a regular flow of their profits directly back to shareholders, meaning you receive some sort of return—even when share prices aren’t cooperating.
Stocks that can both grow and pay dividends are the ultimate long-term stocks given just how much in additional returns they can generate over the long term.
Here’s a look at the return someone could expect if they received just the price returns from the S&P 500 over the past 25 years:
Now look at how much better the return is when you factor in dividends had you had reinvested those dividends back into the S&P 500 (returns illustrated by an S&P 500-tracking ETF; note that expenses are included in performance):
The price return is a little less than 330%. The total return (price plus dividends) is more than 565%!
Just like price return on stocks can be improved upon with dividends, though, a stock that pays dividends but doesn’t go anywhere isn’t exactly ideal, either. Thus, the best dividend stocks will provide both a steady baseline of income and provide you with the potential for meaningful price upside.
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Dividend Yields (And Dividend Safety)
Dividend yield is a simple calculation—annual dividend / price x 100—that can mean a world of difference for investors, especially those reliant on income.
But dividend yield isn’t everything. Sometimes, stocks with high yields can look more attractive, but they’re actually flashing a warning signal that the dividend isn’t sustainable. You see, a company can get a very high annual dividend yield in two very different ways: the dividend growing very rapidly, or the share price falling very quickly.
For example, Alpha Corp., which trades for $100 per share, pays a 75¢-per-share quarterly dividend, or $3 across the whole year. It yields 3.0%. In a month, however, it yields 6.0%. Here are two ways that could have happened:
- Alpha Corp. doubled its dividend to $1.50 per share quarterly, good for a $6-per-share annual dividend. The share price stays the same. ($6 / $100 x 100 = 6.0%)
- Alpha Corp. kept its dividend at 75¢ quarterly ($3 annually), but its share price plunged in half to $50 per share. ($3 / $50 x 100 = 6.0%)
In one of those scenarios, Alpha Corp. has a very safe dividend. In the other one, Alpha’s dividend could be ready to implode.
So, if you’re sniffing out the best dividend stocks to buy for 2025, make sure you’re not just looking at yield, but also gauging a dividend’s safety. Among other things, you’ll want to look at payout ratio, which determines what percentage of a company’s profits, distributable cash flow, and other financial metrics (depending on the type of stock) are being used to finance the dividend. Generally speaking, the lower the payout ratio, the more sustainable the payout.
Related: 13 Best Long-Term Stocks to Buy and Hold Forever
How We Chose the Best Dividend Stocks to Buy
Before I started this article, I was video calling a colleague and joked, in a pseudo-philosophical voice, “What is a good dividend stock, anyways?”
But I was only partly kidding. What’s ideal to one investor might not fit the bill for another. Ultimately, though, I coalesced around safe dividends, with some capacity to grow, sporting above-average yields, paid by larger (and thus likelier to be more stable) companies. Specifically, they have to …
- Be in the S&P 500.
- Have a yield greater than 1.5%, to ensure they’re better than the overall market. Most of the stocks on here are around 2% or higher. (And if that’s too low a yield for you, I suggest you instead check out our list of high-yield dividend stocks, which have payouts of 5%-plus.)
- Have an earnings payout ratio below 60%. This is a generally safe level where there’s still at least some room for dividend growth, and the lower the payout ratio, typically the more growth potential there is. (Note: Free cash flow payout ratio is an even better metric, but screening data for this tends to be unreliable.)
- Have at least a consensus Buy rating according to analysts tracked by S&P Global Market Intelligence. S&P boils down consensus ratings down to a numerical system where anything less than 1.5 is a Strong Buy, 1.5 to 2.5 is a Buy, between 2.5 and 3.5 is a Hold, 3.5 to 4.5 is a Sell, and anything greater than 4.5 is a Strong Sell. In this case, I only included stocks with a 2.0 rating or less—so at least a pretty firm consensus Buy rating, if not an outright Strong Buy.
I also limited the energy sector to just one stock. Energy companies were extremely overrepresented in the screen; most problematic is that several sport variable dividends that rise and fall based on available cash flow, which is largely tethered to the motion of energy prices. So a 3% yield today could be 1% in a year, 2% the year after, and so on. Instead, the list is populated with stocks that have more traditional dividend programs—regular payouts that typically only change when the company announces a hike.
The equities here are listed in reverse order of their consensus analyst rating, starting with the worst-rated stock and ending with the best-rated stock.
Related: 7 Best High-Dividend ETFs for Income-Hungry Investors
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Best Dividend Stock #10: Bunge Global
- Sector: Consumer staples
- Market cap: $10.7 billion
- Dividend yield: 3.5%
- Consensus analyst rating: 2.00 (Buy)
Bunge Global (BG) is a leading agribusiness and food company, operating across the entire agricultural supply chain through its many subsidiaries. All told, its operations span roughly 23,000 employees across more than 300 facilities in over 40 countries.
Among other things, the U.S.-headquartered but Switzerland-incorporated firm is a leading global oilseed processor and producer of vegetable oils and protein meals. It sources, processes, and distributes grains such as soybeans, wheat, and corn. And it produces agricultural products such as fertilizers and sugars.
Bunge is very much a “patience stock” right now. The company continues to suffer from lower margins on crush (the process that produces soybean oil and protein meal). Moreover, its proposed mega-acquisition of Canadian grain handling business Viterra ran into a potential wall, with Canada’s Competition Bureau voicing concerns over the deal; the merger could be delayed into 2025.
Wall Street’s pros appear patient, though. Coverage isn’t exactly thick at 10 analysts currently, but of those, six call BG shares a Buy, while four call it a Hold—no Sells are on the table. BMO Capital Markets analyst Andrew Strelzik recently lowered his price target on BG shares and acknowledged near-term challenges, but he maintained his Outperform rating (equivalent of Buy) and said “shares are trading at a compelling entry point.”
“Viterra synergies and buybacks create a path to an improving setup as 2025 progresses, and BG’s through-cycle earnings potential remains well in excess of our 2025 outlook,” he added.
Bunge can pay investors at least a modest sum for their patience. The 3%-plus yield is more than a point better than the market average. And the dividend has grown by a total of 36% over the past four years. It’s as safe as you could want it, too, with Bunge maintaining a conservative payout ratio of 35%.
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Best Dividend Stock #9: Abbott Laboratories
- Sector: Health care
- Market cap: $196.1 billion
- Dividend yield: 2.1%
- Consensus analyst rating: 1.78 (Buy)
Abbott Laboratories (ABT) is a large health care firm that develops, makes, and sells medical devices, diagnostic products, nutritional products, and generic pharmaceuticals. Among other things, it’s responsible for FreeStyle (and FreeStyle Libre) glucose monitors, Pedialyte hydration products, Similac formulas, PediaSure children’s nutritional products, and BinaxNow COVID-19 antigen tests.
Medical devices are Abbott’s biggest breadwinner at about 45% of revenues, and has been a key driver of growth of late. The company has reported seven consecutive quarters of double-digit growth in medical devices, with strong high-teens organic growth in diabetes and structural heart products.
That’s among the many reasons William Blair is in a crowded bull camp of 23 Buys (versus five Holds and one Sell) on ABT shares.
“We continue to like the outlook heading into 2025 as the company laps COVID and returns to a more balanced bottom-line and accelerating top-line growth story,” William Blair’s analyst team says. “While we expect upside to potentially materialize in EPS should macro headwinds continue to ease in the coming quarters, we view 2024 as a transition year away with earnings reaccelerating to low-double-digit growth in 2025.”
Argus Research’s David Toung (Buy) offers other reasons to like Abbott right now:
“We believe that Abbott’s growth drivers (including the FreeStyle Libre, electrophysiology products, leadless pacemakers, and cardiovascular devices) and ability to develop and launch new products will lead to continued growth in sales and earnings,” Tongue says. “We note that Abbott plans to expand the FreeStyle portfolio beyond the diabetic market and into the athletic market. We are encouraged by the recovery of market share in the U.S. Pediatric Nutrition business.”
Abbott is a Dividend King—a Dividend Aristocrat with at least 50 consecutive years of payout growth—whose cash distribution streak has continued even after spinning off biopharma unit AbbVie (ABBV) at the start of 2013. And the dividend itself dates back a full century, to 1924. For now, a safe payout ratio of 46% of 2025’s projected earnings provides little reason to think both streaks won’t continue.
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Best Dividend Stock #8: Emerson Electric
- Sector: Industrials
- Market cap: $70.7 billion
- Dividend yield: 1.7%
- Consensus analyst rating: 1.75 (Buy)
Emerson Electric (EMR) is an industrial-sector firm that was founded in 1890 and headquartered in St. Louis. Emerson has established itself as a global leader in technology and engineering, providing innovative solutions in process control, industrial automation, heating, ventilation, and air conditioning (HVAC), and more.
The company’s emphasis on technological advancement and diversified market penetration has been crucial in maintaining a competitive edge over the last 125-plus years. What once was a maker of electric motors and fans is now a global industrial-technology giant that produces not just tens of thousands of products, but even industry, automation, and operations management software.
Argus Research has noted for a while now that Emerson has been “divesting legacy segments and investing in new businesses that target energy security and affordability, sustainability & decarbonization, nearshoring, and digital transformation.” And indeed, in Emerson’s Q4 earnings release, management said it plans to transform the company into a pure-play industrial technology company.
“Since Emerson began realigning its portfolio, the company has achieved sales growth at the high end or above its target of 4%-7%,” says Argus analyst Kristina Ruggeri, who says the company’s valuation, revenue and margin trends, and opportunities from its portfolio transformation efforts warrant a Buy call on shares right now.
That puts Ruggeri in a vast majority, as the pros have 20 Buys on EMR shares, greatly outnumbering six Holds and two Sells.
While its most recent payout increases haven’t been much to crow about, Emerson Electric is one of the best dividend stocks for payout growth. This industrial firm’s dividend track record spans 68 consecutive years, including a 1% uptick to its payout, to 52.75¢ per share quarterly, announced in November 2024. Meanwhile, the company pays out just 32% of 2025’s expected earnings—a conservative ratio that offers safety and room to grow.
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Best Dividend Stock #7: BlackRock
- Sector: Real estate
- Market cap: $108.4 billion
- Dividend yield: 3.3%
- Consensus analyst rating: 1.96 (Buy)
BlackRock (BLK) is one of the world’s largest asset management firms, boasting about $10 trillion in assets across its many lines of business. Individual investors know it well for both its BlackRock mutual funds and closed-end funds (CEFs), as well as its iShares exchange-traded funds (ETFs). But it also manages money for institutional clients, including pension plans, foundations, charities, and insurance companies, among others.
With the exception of a few understandable hiccups (COVID, for instance), BlackRock has been in a broader consistent uptrend since the depths of the Great Recession. That has come alongside similar progression in both the company’s top and bottom lines.
It’s difficult to find any Wall Street pros with something negative to say about BLK. Shares currently enjoy 14 Buy calls versus four Holds and no Sells, and the analysts’ consensus for long-term earnings growth sits near 14% annually.
“We believe that BLK remains well positioned to deliver above-peer organic growth given its unmatched product breadth and distribution footprint (helped by its iShares franchise),” say Keefe, Bruyette & Woods analysts Aidan Hall and Kyle Voigt, who rate BLK at Outperform. “Also, its scale and demonstrated ability to generate operating leverage bodes well for future earnings growth and operating leverage.”
BlackRock has been a fount of dividend growth since the Great Recession, too. In the past decade alone, BLK has managed to average 10% annual dividend growth, though that pace has been slowing in recent years—its most recent hike, announced in January 2024, was a mere 2% bump to $5.10 per share. Still, a payout ratio a hair above 50% should keep investors plenty confident in the dividend’s health and its ability to keep growing.
Related: 5 Best Vanguard Dividend Funds to Buy
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Best Dividend Stock #6: VICI Properties
- Sector: Real estate
- Market cap: $30.2 billion
- Dividend yield: 6.0%
- Consensus analyst rating: 1.61 (Buy)
VICI Properties (VICI) is a real estate investment trust (REIT) that specializes in gaming, hospitality, and entertainment properties. While you’re probably most familiar with its Vegas real estate, which includes Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas, VICI actually owns 54 gaming properties and 39 other “experiential” properties—such as golf courses and Bowlero bowling alleys—across roughly two dozen states and Canada.
VICI and other gaming REITs are a way to invest in gambling/gaming with the potential for less volatility. That’s because their revenues aren’t directly driven by ups and downs in the business—they collect rent. So while a prolonged economic downturn, say, could weigh on operators’ ability to pay their bills, VICI is a bit more insulated from quarter-to-quarter issues. Indeed, VICI specifically has lease escalators that help ensure steadier growth going forward, too.
That’s one of the reasons Baird analysts like the stock.
“VICI has a dominant footprint on the Las Vegas Strip and should benefit from changing traffic patterns proving an opportunity for operators to invest in the existing assets. In addition, there could be a large opportunity for VICI to help fund a large expansion at Empire City should they secure a full gaming license,” say Baird analysts, who rate the stock at Outperform. Also, “VICI has extensive relationships in the gaming industry and has established key relationships outside of gaming. The company looks to partner with growth-oriented companies, which should provide a steady flow of deals.”
JPMorgan’s North American Equity Research team, which rates VICI at Overweight (equivalent of Buy) and has the stock on its Analyst Focus List, sees those deals as necessary as a catalyst for further upside. Still, “we continue to think of VICI as being a blue chip name in the REIT space with a high quality portfolio and solid growth,” the team writes.
Those two firms represent two of the company’s 19 analyst Buy calls. Another four pros call VICI a Hold, while none say it’s a Sell.
A reminder that VICI Properties is a REIT, which is a special type of business structure that receives significant tax breaks, but in return, it must pay out at least 90% of its taxable income back to shareholders in the form of dividends. And unlike regular stocks, with which we use profits or free cash flow to determine payout ratio, REIT dividend coverage is typically gauged by funds from operations (FFO), a non-generally accepted accounting principles (GAAP) metric of profitability. FFO payout ratio standards are somewhat different, with 70% to 80% considered quite healthy.
VICI? It has an FFO payout ratio of 75%. That should help it continue its short streak of dividend hikes, which included a 4% bump in the payout in late 2024 to 43.25¢ per share.
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Best Dividend Stock #5: Merck
- Sector: Health care
- Market cap: $249.4 billion
- Dividend yield: 3.3%
- Consensus analyst rating: 1.68 (Strong Buy)
You’ll typically find multiple pharmaceutical stocks in any list of the best dividend stocks, and our grouping is no different. Coming in a few spots higher than Abbott is fellow Big Pharma name Merck (MRK).
Merck is one of the largest health care companies in the world. It offers a wide variety of products in oncology, immunology, neuroscience, virology, and diabetes—its blockbuster drug list includes the likes of cancer medicine Keytruda, HPV vaccine Gardasil, and diabetes pill Januvia. That said, it also has a sizable animal health unit that deals in vaccines, pharmaceuticals, even ID and monitoring products that it markets to not just pet owners, but also farmers, veterinarians, and more.
MRK shares have suffered a substandard 2024, but that’s largely thanks to a swift drop near the end of July, when Merck delivered mixed full-year guidance thanks in part to Gardasil weakness in China, as well as one-time charges related to this year’s acquisitions of oncology firm Harpoon Therapeutics and ophthalmology-focused biotech company EyeBio. And Merck’s losing 2024 also came alongside underperformance by the broader health care sector.
Still, Wall Street remains not just unfazed, but enthusiastic, going into the new year. MRK isn’t just one of the best dividend stocks for 2025, but one of the highest-rated stocks in pharmaceuticals, at 21 Buy ratings, seven Holds, and zero Sells.
Among them is BofA Global Research’s Tim Anderson, who recently re-launched coverage on global pharmaceuticals and biotechnology stocks. Merck, which he calls “arguably the best GARP (growth at a reasonable price) name in the category,” is one of three Buy-rated stocks among 11 U.S.-based large caps.
“[Merck] is a high-quality, blue-chip name that’s been a consistent ‘beat and raise’ story, largely due to Keytruda and Gardasil,” he says. “We argue that Gardasil expectations are now reset, and Keytruda (4x as large as Gardasil) will probably continue to surpass consensus, which should help MRK ‘beat and raise’ again in 2025 [and beyond].”
As for the dividend? Merck has raised its payout for 15 consecutive years, including a 5%-plus hike, to 81¢ per share quarterly, starting with its January 2025 dividend. And MRK has plenty more room to grow that dividend, paying out just 34% of 2025’s expected earnings.
Related: 9 Best Dividend Stocks for Beginners
Best Dividend Stock #4: Cigna Group
- Sector: Health care
- Market cap: $76.6 billion
- Dividend yield: 2.0%
- Consensus analyst rating: 1.60 (Buy)
Cigna Group (CI) is perhaps best known for the Cigna brand, which is one of America’s largest health insurers, offering health, dental, and other plans. But Cigna actually makes up less than half of Cigna Group’s revenues—60% come from its Evernorth Health Services unit, which includes its Express Scripts pharmacy and pharmacy benefit management businesses, Accredo specialty pharmacy, MDLive telehealth, and more.
One thing Cigna does not include is Humana—a possibility as far back as late 2023 when the companies discussed a merger. However, in November 2024, Cigna confirmed it would not be pursuing the rival insurer, so any purchase of Cigna would have to be on its own merits.
Fortunately, Wall Street seems to think there are plenty of those.
“Overall, we rate Cigna one of the most compelling investment opportunities in our universe, especially with confirmation of the cap deployment strategy,” Oppenheimer, which rates the stock at Outperformwrote in late October following the company’s third-quarter earnings report. “Cigna’s service-based model has continually produced stable growth, but at 10x 2025 [earnings per share], CI is not being rewarded. We believe CI is attractive for both short- and long-term investors.”
Oppenheimer is one of 21 Buy-equivalent ratings on CI shares. Meanwhile, the Street has four Holds and not a single Sell on the stock.
Unlike many of the dividend stocks on this list, Cigna doesn’t have a particularly illustrious dividend history. In 2004, the company cut its quarterly payout by 92%, to 2.5¢ per share (adjusted for its 3-for-1 stock split in 2007). Then in 2008, the company transitioned to 4¢ annual dividends, which lasted until 2021, when Cigna announced a new quarterly dividend of $1 per share. Since then, the company has raised its payout by another 40%.
Cigna certainly has more headroom for higher dividends going forward—the company’s current payout represents less than 20% of 2025’s expected earnings.
Best Dividend Stock #3: Targa Resources
- Sector: Energy
- Market cap: $38.9 billion
- Dividend yield: 1.7%
- Consensus analyst rating: 1.59 (Buy)
Energy businesses are typically referred to by their “stream.” Upstream companies search for and extract oil, gas, and other raw energy resources; midstream companies transport, store, and sometimes process those resources; and downstream companies refine these resources into final products such as gasoline, diesel, and natural gas liquids (NGLs).
Targa Resources (TRGP) deals in the midstream energy market segment—alongside its subsidiary, Targa Resource Partners LP, it owns a wide array of gathering, processing, logistics, and transportation assets across numerous natural resource plays, including the Permian Basin, Bakken Shale, Anadarko Basin, and the Gulf of Mexico, among others. The Permian Basin is arguably Targa’s biggest growth driver; roughly 3 in 5 lower-48 U.S. shale rigs are located there, and about 80% of Targa’s natural gas inlet volumes are sourced from there.
Targa went public in 2010, peaked in 2014, cratered, then largely hovered for a few years after that. But after bottoming out during COVID, the stock has roared back to life and has since eclipsed its decade-ago peaks to hit all-time highs. Even after a doubling for TRGP shares in 2024, the analyst community remains wildly bullish: 19 Buys dwarf a pair of Hold calls and a single Sell.
Much of this can be attributed to Targa’s positioning in the Permian.
“Targa will benefit from the Permian upside given its likely continued role as the largest gatherer and processor in the Basin, with significant capital spend this year on large downstream projects, including Daytona NGL Pipeline and Trains 9 and 10, helping ensure its leading status continues,” says Truist analyst Neal Dingmann (Buy). “As such, we continue to believe [TRGP] should exhibit among the best growth in the group.”
Energy infrastructure stocks are a different breed. Many of them are master limited partnerships (MLPs), which are required to return a majority of their income to unitholders (shares in MLPs) in the form of distributions (dividend-like payments to shareholders that have different tax consequences). Targa is technically a corporation, so it pays dividends like a traditional stock. But like an MLP, the proper metric for its payout ratio is distributable cash flow (DCF) … and by that gauge, Targa’s quarterly distribution is well-covered, indeed, at less than 20% of DCF projections for 2025, even after the company’s recent 50% hike to 75¢ per share.
“We continue to favor Targa’s attractive financial profile with leverage well within its 3.0x to 4.0x range and a dividend that is well covered,” say Stifel analysts, who rate the stock at Buy. “We believe TRGP should continue to generate meaningful FCF, which should allow for incremental return of capital longer-term.”
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Best Dividend Stock #2: Mondelez International
- Sector: Consumer staples
- Market cap: $79.6 billion
- Dividend yield: 3.1%
- Consensus analyst rating: 1.50 (Buy)
Mondelez International (MDLZ) is a prototypical defensive-minded, dividend-yielding consumer staples play that peddles its snacks to people in more than 150 countries worldwide. It’s responsible for brands including Oreo, Belvita, Tang, Cadbury, Philadelphia, Toblerone, and Halls. It’s the world’s top producer of cookies and crackers (they say “biscuits”; I decline) and No. 2 in chocolate.
There’s a reason “consumer staples” are often referred to as “consumer defensive.” That’s because while our consumption of certain products might ebb and flow with the economy, there are certain products we will hunker down and keep consuming no matter what. Sure, there are more true “needs” like basic produce, dairy, proteins, and personal-care items. But it applies to snacks too. After all, if the economy forces you to cut back on going out, you’ll still want treats at home—and price be darned, you probably won’t downgrade from Oreos to store-brand cookies unless you have no other choice.
Both Mondelez’s operational and stock performances have seemed downright agnostic for more than a decade, though it took a nasty fall near the end of 2024 to finish the year with a roughly 15% decline (even after factoring in dividends).
Analysts couldn’t be less worried.
“Mondelez remains a best-in-class global Consumer Staples company evidenced by its strong sales growth momentum driven by its category exposure, country exposure, and leading market share positions,” say Stifel analysts, who have one of the pros’ 23 Buy ratings on the stock. That’s offset by just three Holds and no Sells.
An interesting wrinkle: In early December, Bloomberg reported that Mondelez was interested in a buyout of chocolatier Hershey (HSY). However, just a couple days later, MDLZ announced a $9 billion stock buyback program authorization. Stifel believes the announcement “puts to rest the potential for Mondelez pursuing Hershey.”
A reminder: Mondelez was previously Kraft Foods, but it adopted the new name after it spun off Kraft Foods Group–the company’s North American grocery business—in 2012. Its dividend was stagnant for a few years before that transaction, but it has grown at a pretty reliable 10% average annual rate after that, including an 11% improvement, to 47¢ per share, announced in July 2024. And between Mondelez’s consistent earnings growth and moderate 55% payout ratio, MDLZ should have the resources to continue its brisk dividend-growth pace.
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Best Dividend Stock #1: NiSource
- Sector: Utilities
- Market cap: $17.0 billion
- Dividend yield: 2.9%
- Consensus analyst rating: 1.47 (Strong Buy)
The best dividend stock for 2025 comes from the utility sector, which is known for steady operations and sustainable dividends.
NiSource (NI) is a natural gas and electric utility company founded in 1847 that serves more than 4 million customers in six states across the Midwest and East Coast.
In 2024, NiSource hiked its quarterly dividend to 26¢ per share—up 4% from its previous payout, and 33% better than what it was paying six years ago. That’s good news for investors, who typically buy stocks like NI for their stability and income potential rather than dramatic growth narratives.
Remember: NiSource and many other utilities are regulated, which means they must request permission to raise their prices and usually only do so by a couple percent every year or two. Plus, much of their money tends to be reinvested in infrastructure like electric lines and water pipes, or distributed as dividends to shareholders. So there’s usually not much growth to be had here.
Still, Wall Street is downright gushing as it pertains to NiSource, with 13 Buys versus two Holds and no Sells.
“Over the past 24 months, NI has quietly had one of the better regulatory and financial execution track records in our coverage and is beginning to build a reputation of consistency and financial conservatism,” says BofA Global Research (Buy), which recently reinstated coverage on NI shares. “We think highly of the revamped senior management team members as they have shown an ability to deliver at the high end of its plan through various environments and events.”
There’s nothing exciting about buying a natural gas company and harvesting the dividends. But investors with little risk tolerance should love the chance to buy a low-priced stock that should net them reliable returns over time. Doubly so when that stock pays a dividend like NiSource’s, which at 57% of next year’s earnings is well-covered, especially compared to other utility names.
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