When building a dividend-focused portfolio, it’s crucial to rely on respected financial analysts and proven research. Based on comprehensive analysis from Morningstar, CNBC, and other trusted sources, here are the top 10 dividend-paying stocks ranked from best to worst according to professional analysts and their track records.
How These Rankings Were Determined
This ranking combines multiple factors from respected financial institutions:
- Morningstar ratings (4-5 star companies only)
- Analyst consensus from Wall Street professionals
- Economic moat ratings (competitive advantages)
- Valuation metrics (undervalued vs. fair value)
- Dividend sustainability and growth history
The Top 10 Dividend Stocks (Best to Worst)
1. Schlumberger (SLB) – 5-Star Rating
- Dividend Yield: 3.09%
- Why #1: The only 5-star Morningstar rated stock on this list. As the world’s premier oilfield services company, Schlumberger has carved out a narrow economic moat through cost advantages and intangible assets. Trading 29% below fair value at $51, it offers the best risk-adjusted returns.
2. PepsiCo (PEP) – Strong Fundamentals
- Dividend Yield: 4.19%
- Why #2: This dividend aristocrat (52+ years of increases) combines a wide economic moat with attractive valuation. Trading 19% below Morningstar’s $162 fair value estimate, PEP offers both income and growth potential in the consumer staples sector.
3. ExxonMobil (XOM) – Energy Leader
- Dividend Yield: 3.50%
- Why #3: Another dividend aristocrat with a clear strategic focus on oil and gas (versus peers diversifying into renewables). Morningstar analysts believe this focused approach reduces risk while maintaining competitive advantages.
4. Oneok (OKE) – Highest Yield
- Dividend Yield: 4.82%
- Why #4: The highest-yielding stock on Morningstar’s top list, this midstream energy company benefits from recent acquisitions and is positioned for 4-6% annual dividend growth. Trading 16% below fair value.
5. Johnson & Johnson (JNJ) – Healthcare Giant
- Dividend Yield: 3.20%
- Why #5: With a wide economic moat and 62 years of consecutive dividend increases, J&J represents stability in healthcare. Diverse revenue base and strong pipeline support continued dividend growth.
6. Merck (MRK) – Pharmaceutical Strength
- Dividend Yield: 3.87%
- Why #6: Trading 26% below fair value, Merck offers significant upside potential. Wide moat rating supported by strong drug pipeline and sound balance sheet with sustainable 50% payout ratio.
7. ConocoPhillips (COP) – Returns-Focused Energy
- Dividend Yield: 3.22%
- Why #7: Analysts praise COP’s commitment to returning 30% of operating cash flow to shareholders. Strong balance sheet and capital discipline make it a compelling energy sector choice.
8. Medtronic (MDT) – Medical Device Leader
- Dividend Yield: 3.21%
- Why #8: The largest pure-play medical device company with 46 years of consecutive dividend increases. Diversified portfolio serving chronic disease markets provides stability.
9. Lockheed Martin (LMT) – Defense Contractor
- Dividend Yield: 2.68%
- Why #9: Wide economic moat from multi-decade defense contracts provides predictable revenue streams. Conservative balance sheet and consistent capital returns to shareholders.
10. Mondelez International (MDLZ) – Consumer Staples
- Dividend Yield: 2.54%
- Why #10: Global snacking company with recognizable brands. While offering the lowest yield on this list, it provides consumer staples stability and international diversification.
Key Investment Considerations
Dividend Aristocrats Dominate: Six of these ten companies are dividend aristocrats (25+ years of increases), providing historical proof of dividend sustainability.
Sector Diversification: The list spans energy (4 companies), healthcare (2), industrials (2), consumer staples (2), offering built-in diversification.
Valuation Opportunity: Most stocks trade below analyst fair value estimates, potentially offering both income and capital appreciation.
Final Thoughts
These rankings reflect professional analyst opinions from respected sources like Morningstar, whose research methodology has proven reliable over decades. While dividend yields vary from 2.54% to 4.82%, each company demonstrates the financial strength and management commitment necessary to sustain and grow dividends over time.
Remember that dividend investing should align with your risk tolerance and investment timeline. Consider building a diversified portfolio across these sectors rather than concentrating in any single stock or industry.
Thank you for reading!