The 3 Best Dividend Stocks I’m Considering Adding in May

No matter what company, sector or group of stocks an individual is talking about, defining what the “best” companies in any particular area of the market are comes with some inherent subjectivity. Indeed, what’s “best” for me may be far from ideal for other investors who have investing goals that are different from mine. 

I’m a long-term investor looking to identify the best-quality companies with rock-solid balance sheets and stable and consistent dividends I can buy and hold for the long-term. With that in mind, here’s my shopping list right now as it pertains to dividend-paying stocks, and why I think these particular companies could have much more room to run to the upside over the next decade or two. 

Alphabet (GOOG)

One of my favorite stocks in the market overall (and now a dividend-paying stock as of 2024), Alphabet (NASDAQ:GOOG) stands tall as one of the best all-around stocks in the market, in my view. At a forward price-earnings multiple of just 16-times, there’s certainly an argument to be made that this Magnificent 7 stock is a value stock in its own right. Indeed, the company’s 0.5% dividend yield is nominal given the company’s capital appreciation potential, but it’s meaningful for a few reasons.

For one, the fact that Alphabet is now returning capital to shareholders means that a much broader investor base will be welcome to invest in the company. A number of top institutional money managers have various dividend stipulations they need to abide by, and based on these mandates, aren’t allowed to invest in high-quality companies like Alphabet. However, with a newly-instated dividend, Alphabet can be brought into the fold and be bought up by an even larger number of investors.

Secondly, it’s clear that Alphabet has a tremendous amount of room to raise its dividend over time. With a payout ratio under 9% and a world-class cash flow growth profile I expect to continue long-term, this is a stock that checks all the boxes for me personally. For those looking for a mix of value, dividend income, and growth, this is a top pick in my books. 

Fortis (FTS)

Another company I continue to pound the table on (and will likely continue to do so, until something changes) is Canada-based utility company Fortis (NYSE:FTS). Fortis is more of what I’d consider to be a pure play dividend stock worth buying for its dividend growth track record. That’s saying nothing of the company’s still-impressive and meaningful 3.6% dividend yield.

As a so-called Dividend King, Fortis breathes rarified air as one of a small number of companies that have raised their dividend distribution each and every year for more than 50 consecutive years. The company’s rock-solid business as the leading utility provider in certain Canadian provinces, as well as parts of the U.S. and other Caribbean nations, positions the company well for continued cash flow growth over time.

There’s a reason why a number of top utility players have seen significant upside in recent years. Beyond the defensive profile these companies provide (residential and commercial customers have to keep the lights and heat on), there’s some serious growth upside with the rise of artificial intelligence and what that will mean for future electricity demand. Thus, for investors looking to play these very long-tailed secular trends, companies like Fortis would be preferable ways to play this space. And given the stock is a Canada-based one, this is a particular name I think flies under the radar, to a large extent. 

Restaurant Brands

Another top Canada-based company I’m bullish on from a dividend perspective is quick service restaurant giant Restaurant Brands (NYSE:QSR). The parent company of Burger King, Popeye’s Louisiana Kitchen, Firehouse Subs and Tim Horton’s, Restaurant Brands is another name I’d group with Fortis as being relatively overlooked despite its high-quality portfolio of fast food banners.

Like Fortis, there’s a real defensive tilt to owning a dividend stock like Restaurant Brands. As the parent company of such notable fast food franchises, the company earns incredibly steady cash flows (which tend to grow at a consistent pace over time), passing on a significant amount of the company’s earnings to shareholders each quarter in the form of a 3.7% dividend yield.

This yield is attractive relative to a number of fixed income options due to the earnings growth (and dividend growth) upside Restaurant Brands provides, as well as its long-term capital appreciation profile. As the chart above shows, this is a stock that’s been a long-term winner. But I do think that more defensive dividend stocks could actually carry more upside in this environment. That’s why I’m tilting my research more toward companies I think will not only survive, but thrive, over the next decade or two. 

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