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How to invest in dividend stocks

Learn how to invest in dividend stocks, and compare the 10 highest dividend stocks in the S&P 500.

Investing in dividend stocks can be a solid investment strategy. These stocks not only allow shareholders to profit from a potential rise in the stock’s share price but also provide a relatively low-risk source of investment income.

How to invest in dividend stocks

  1. Choose a broker. Compare stock trading platforms by fees, tradable assets and customer reviews. Some brokers don’t allow you to choose individual stocks, while others don’t provide access to mutual funds. You can check out our top picks below.
  2. Open and fund an account. Complete an application with your desired broker. After establishing your account, add funds to it so you can place a trade on a dividend stock.
  3. Research and choose a dividend stock. You can start with our list of 10 high-dividend stocks and dive deeper until you’re familiar enough with a stock to feel comfortable investing.
  4. Place a trade. Purchase the number of shares you want to add to your portfolio.

Our top picks for dividend stock brokers

Best all-in-one platform

Finder Award

SoFi Invest

  • Trade stocks for $0 and no annual fee
  • Start trading with a $0 minimum deposit
  • Get up to $1,000 in stock when you fund a new account within 30 days

Best for social investing

Finder Award


  • Easy to use platform with $0 stock trading & no annual fees
  • Social trading allows you to copy popular portfolios
  • FINDER EXCLUSIVE: Guaranteed $15 bonus when you sign up and deposit $100

Best for options trading


  • $0 commissions on stocks and ETFs
  • $0 closing commissions on stock and ETF options
  • Get $100 - $2,000 when you open and fund an account with $5,000 to $100,000+

What are dividend stocks?

Dividend stocks are stocks from publicly traded companies that regularly share profits with their shareholders. These shared profits are called dividends. Dividend stocks typically come from well-established companies that are in a financial position to distribute a portion of their retained earnings to shareholders instead of reinvesting everything back into the business.
Dividend payments are typically paid per share and in cash every quarter. However, a company may also pay dividends in additional shares rather than cash — or monthly instead of quarterly.

Why do companies pay dividends?

A company may pay a dividend simply to reward investors and entice shareholders to stick around. Many dividend stocks are from under-the-radar companies or may be household names but not popular, high-flying stocks that draw the attention of the masses. Paying a dividend allows these companies to demonstrate value and give back to shareholders, in addition to any gains they may see in the price of their shares.
Dividend stocks actually play an important role in the market’s overall return. Since 1960, 84% of the S&P 500’s total return can be attributed to reinvested dividends. They’re also less volatile year-to-year compared to non-dividend paying stocks and outperform them over time too. Proponents see dividends as a sign of strength and financial stability.

2 ways to invest in dividend stocks

There are two main ways to invest in dividend stocks: by purchasing individual dividend stocks or through dividend funds — such as exchange-traded funds (ETFs) or mutual funds.

1. Dividend funds

Dividend ETFs or mutual funds are designed to invest in a basket of dividend-paying stocks. While you won’t own the underlying company shares in the fund — you own the ETF shares — you can still enjoy regular dividend payments that are passed along from each company within the fund, as well as any appreciation in the fund’s value itself.
Dividend funds are a great way to diversify your portfolio since they invest in a broad range of stocks. Some funds may only hold dividend-paying stocks of specific sectors or industries, while others may focus on stocks of companies characterized solely by high dividend yields.
But they sometimes have ongoing management fees that eat into the net yield of any dividend you receive. That said, there are plenty of low-cost funds out there, so just take the time to shop around.

2. Dividend stocks

You may also choose to invest directly in the individual dividend stocks themselves. Compared to an ETF or mutual fund, this gives you direct ownership in the company, which has its benefits and drawbacks as well.
Owning individual dividend stocks gives investors the potential for higher returns than an ETF or mutual fund, where you receive the weighted average performance of the fund’s holdings. When investing in individual dividend stocks, you also have voting rights and don’t have to worry about management fees.
But buying individual stocks comes with increased risk, as it’s harder to achieve the same level of diversification than buying an ETF or mutual fund, especially the less money you have to invest.

10 high-yield dividend stocks

CompanyDividend yieldSector
Pioneer Natural Resources (PXD)10.59%Energy
Lumen Technologies (LUMN)9.93%Communication Services
Vornado Realty Trust (VNO)8.27%Real Estate
Altria Group (MO)M7.93%Consumer Staples
Simon Property Group (SPG)6.91%Real Estate
Devon Energy (DVN)6.84%Energy
AT&T (T)6.08%Communication Services
ONEOK (OKE)6.12%Communication Services
Verizon Communications (VZ)Through MT5Through MT5
Kinder Morgan (KMI)6.11%Energy

Data as of September, 2022

How to evaluate dividend stocks

The dividend amount may be the first thing you look for when choosing a dividend stock, but it’s not the only thing you should consider.

  • Dividend yield. This financial ratio tells you the percentage of a company’s share price paid out in dividends each year. It shows the percentage of dividends you can expect for every dollar you invest.
  • Dividend payout ratio. This financial ratio measures the percentage of net income paid to shareholders as dividends. Generally, a high dividend payout ratio means a company is paying out more of its earnings as dividends and reinvesting less into its business. Too high a dividend payout ratio may not be a good thing, though, as the company could struggle to maintain its dividend payout over time.
  • Dividend growth rate. This shows the dividend growth rate over a period and is often used to measure a company’s long-term profitability.

If you’re investing in dividend stocks through an ETF or mutual, take particular account of the fund’s expense ratio. This is the cost of owning an ETF or mutual fund and includes management and administrative fees. The lower the cost of owning a dividend fund, the higher the net yield of the dividend payment.

Pros and cons of dividend stocks


  • Dividend stocks provide a reliable income stream.
  • Dividend stocks are typically established companies and have less volatility year-to-year than non-dividend-paying stocks.
  • Investors can benefit from both a stream of income and a potential rise in the stock’s share price.


  • Dividend amount can fluctuate and are not guaranteed.
  • Dividend stocks may not see the same level of growth as other stock types.
  • While more and more tech stocks are adopting dividends, most dividend-paying companies are limited to certain sectors.

Compare more stock trading platforms

Compare the platforms below to find the right one for you and begin trading dividend stocks today.

1 - 6 of 6
Name Product Ratings Available asset types Minimum deposit Signup bonus
SoFi Invest
Finder Rating: 4.6 / 5: ★★★★★

Finder Award
SoFi Invest
Stocks, Options, ETFs, Cryptocurrency
Get up to $1,000 in stock
when you fund a new account within 30 days.
Winner of Finder’s Best Low-Cost Broker award.
Finder Rating: 4.2 / 5: ★★★★★

Finder Award
Stocks, Options, ETFs, Cryptocurrency
FINDER EXCLUSIVE: Get a guaranteed $15 bonus
when you sign up and deposit $100
Winner of Finder’s Best Broker for Beginners award. Not available in NY, NV, MN, TN, and HI.
Finder Rating: 4.1 / 5: ★★★★★
Stocks, Options, ETFs, Cryptocurrency, Futures
Get $100 - $2,000
when you you open and fund an account with $5,000 to $100,000+
Highly commended for Best Derivatives Trading Platform award.
Finder Rating: 4 / 5: ★★★★★
Stocks, ETFs, Cryptocurrency, Art, Treasury Bills, Collectibles
Get up to $300 in either stocks or crypto
when you use code FINDERUS to sign up and fund a new account.
2.5% fee applies to all alternative asset transactions.
Finder Rating: 4.2 / 5: ★★★★★
Stocks, Options, ETFs, Cryptocurrency
Get a free stock
when you successfully sign up and link your bank account.
Make unlimited commission-free trades, plus earn 4.9% interest on uninvested cash in your account with Robinhood Gold.
Finder Rating: 4 / 5: ★★★★★
Stocks, ETFs
Wealthfront builds a free financial plan for the life you want and automate your investments at a low cost.

Bottom line

  • Dividend stocks provide a source of passive income and can be purchased through most brokers.
  • You can invest in dividend funds or individual dividend stocks.
  • Most high-dividend stocks are limited to certain sectors.


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