10 Best Dividend Stocks for the Market’s 10 Sectors

The following is an excerpt from 10 Best Dividend Stocks for the Market’s 10 Sectors.

I’ve been a big believer in piling money into the best dividend stocks, then staying there for a long time. Perhaps because the start of my career coincided with the nasty 2000-02 bear market, I’ve always taken the view that capital gains can be ephemeral. But a regular dividend represents realized profit I could hang my hat on.

Or so I thought.

I learned a nasty lesson back in 2008, and it’s one I’ll never forget. I was invested fairly heavily in the iShares Select Dividend ETF (DVY) and feeling smug about it. Sure, the market could take a tumble, but my high-dividend stocks would weather the storm better than most, right?

Wrong. During the 2008 meltdown, DVY actually lost more than the S&P 500 despite, in theory, being a “safe” dividend-focused fund.

So, what happened?

It came down to diversification, or rather the lack of it. DVY allocated to the highest-yielding dividend stocks that met its criteria … which meant it was massively overweighted to the financial sector. You can imagine how that worked out for me.

Today, we’re going to approach dividend investing a little differently, picking a solid dividend stock from each of the S&P 500’s 10 industrial sectors. And while 10 stocks isn’t what I’d consider a fully diversified portfolio, this will give you a good head start.

You could toss a dart at the stock page of the Wall Street Journal and have a good chance of hitting a very good dividend stock in the real estate sector. Real estate investment trusts (REITs) are some of the most reliable dividend payers out there, and many are on sale at the moment.

The inexorable rise of Amazon.com, Inc. (AMZN) has made investors rightly wary of the retail sector… and of the landlords that serve them. But not all real estate is at risk of being made irrelevant by Jeff Bezos.

As an example, consider Realty Income Corp (O), the “monthly dividend company.” Realty Income owns properties that, if not “Amazon-proof,” are at least “Amazon-resistant.” It tends to own pharmacies, gyms, movie theaters and other high-traffic properties.

Realty Income yields 4.5% and has raised its dividend for 78 consecutive quarters. That’s not too shabby.

To read the full article, see 10 Best Dividend Stocks for the Market’s 10 Sectors.

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