The world of investing can seem daunting, but understanding the concept of dividends and the benefits they offer can make it far more accessible. With dividends, companies share a portion of their profits with shareholders, providing a steady source of income to investors. This approach, termed ‘dividend investing’, allows investors to reap the rewards of their investments over time. What’s more, reinvesting your “after tax dividend income,” can dramatically increase your returns due to the power of compounding. To further illustrate this, reinvested dividends have accounted for approximately 40% of long-term US equity returns.

One platform that makes investing in dividend stocks accessible is eToro, an online brokerage platform that lets you trade and invest in stocks, commodities, forex, and more. eToro allows you to buy and sell stocks, track your portfolio in real time, and follow other traders to learn from their strategies. But the primary focus of this article will be on how to invest in dividend stocks using eToro, using 5 top dividend stocks across major sectors as examples.

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Chevron (CVX)

Chevron is an integrated energy company with global operations in exploration, production, and refining. As the second-largest US oil company, it offers a stable and increasing dividend, making it a good pick for dividend investors.

Based on the last four quarterly dividend payments of $1.42 per share and its current stock price, the dividend yield stands at 3.29%, almost double the S&P 500 Index’s dividend yield of 1.7%. Chevron has consistently increased its dividend since 2004, a strong indicator of its commitment to returning profits to shareholders.

The company’s payout ratio is 32.12%, suggesting it has ample room to continue raising its dividend in the future. While consensus analyst expectations predict a fall in earnings by 16% in 2023 due to lower oil prices, they also forecast a 5% rise in dividend payments, thanks to the low payout ratio.

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Coca-Cola (KO)

Coca-Cola, the world’s largest non-alcoholic beverage company, is renowned for its consistent dividend payments. The company has a portfolio of 200 brands spanning key categories like carbonated soft drinks, water, sports, energy drinks, juice, and coffee.

Coca-Cola has a long history of increasing its dividends. It currently yields 2.8%, above the 1.7% yield for the S&P 500 Index. With a payout ratio of 76.86%, Coca-Cola has demonstrated its ability to consistently return profits to shareholders.

Analysts expect earnings to rise 14% in 2023 due to the company’s robust pricing power and predict a dividend increase of over 4%. This prediction aligns with Coca-Cola’s track record, as the company has rarely cut its dividend since it started distributing them in 1964.

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AbbVie (ABBV)

AbbVie, a pharmaceutical company spun off from Abbott in 2013, operates in 70 countries, focusing on immunology and oncology. With a dividend yield of 3.59%, it offers an attractive opportunity for income investors.

AbbVie has steadily increased its dividends since its inception, signaling its commitment to rewarding shareholders. With a payout ratio of 75.30%, the company has demonstrated a solid balance between reinvestment in the business and rewarding shareholders with dividends.

While AbbVie’s earnings are expected to fall by 14% in 2023 due to the expiry of its best-selling drug Humira’s patent, analysts predict a 5% rise in dividend payments. This forecast aligns with AbbVie’s consistent history of dividend growth since its spin-off from Abbott Laboratories in 2013.

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Broadcom (AVGO)

Broadcom is a leading manufacturer of various semiconductor devices, focusing on digital and mixed signal complementary metal oxide semiconductor (CMOS) devices and analog III-V based products. With a dividend yield of 3.46%, Broadcom offers an attractive income opportunity.

Broadcom has consistently increased its dividends since 2010, reflecting its commitment to returning profits to shareholders. With a payout ratio of 61.89%, Broadcom balances its business reinvestment and dividend payments efficiently.

Analysts predict a 14% earnings rise in 2023, thanks to Broadcom’s successful navigation of the semiconductor industry slowdown, and a 10% increase in dividend payments. Broadcom has never reduced its dividend since it started paying them in 2010.

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Cisco Systems (CSCO)

Cisco Systems, the world’s largest provider of networking equipment, also offers networking hardware and software as well as cybersecurity solutions. With a dividend yield of 3.15%, Cisco presents an attractive income opportunity for investors.

Cisco has consistently increased its dividend since 2011, demonstrating its dedication to shareholder returns. With a payout ratio of 54.51%, Cisco balances its need to reinvest in the business with its commitment to returning profits to shareholders.

Analysts forecast a 4% rise in earnings in 2023, aided by easing supply chain issues, and a 3% increase in dividend payments.

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Conclusion

Investing in dividend stocks offers a unique opportunity to earn steady income while also benefiting from potential stock price appreciation. Platforms like eToro make this process straightforward and accessible to everyone.

Choosing the right dividend stocks involves considering factors such as the company’s track record of dividend payments, the stability of its income streams, and the overall quality of its business. The stocks highlighted here — Chevron, Coca-Cola, AbbVie, Broadcom, and Cisco Systems — all demonstrate these qualities, making them worthy of consideration for any dividend-focused investment strategy.

As always, be sure to do your own research and consider your own financial situation and risk tolerance before making investment decisions. Investing in the stock market, while potentially profitable, also carries risk. It’s important to invest wisely and seek professional advice if needed.

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