7 Best Dividend Stocks to Buy for BOTH Cash Flow and Growth

Pro tips on finding the best high growth dividend stocks for higher returns!

High dividend yields and higher stock prices. It’s like the Holy Grail of investing. Like having your cake and eating it too. Like making all the way through Willy Wonka’s chocolate factory without getting eaten by the Oompa Loompas.

Oh, yeah. You know they ate those kids.

But there is a way to have both…maybe not in the way you expect but definitely a way to get a high yield and higher returns. In this video, I’ll show you exactly what to look for in high growth dividend stocks, how to avoid the oldest trap in investing and how to get both yield and returns. We’re talking the best dividend stocks to buy, today on Let’s Talk Money!

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Nation, I recently asked in our Facebook group for the stocks or themes you’re watching for the rest of the year…which stocks did you want me to look into. We got some great responses but one in particular, from David Santos, gave me the idea for this video.

David said he wanted to see dividend stocks with 10% and higher yields and with high growth potential, AND high stability even if the market falls apart…so basically 10%-plus dividend yield, high price return and safety.

Now I don’t remember EXACTLY how I responded but it was something about wish for all that in one hand and evacuating your morning Cheerios in the other and seeing which gets filled up first…because, well first because I’m an ass and second because the high yield, high return trap is one of the oldest in investing.

But David isn’t alone and anytime I ask if you want to see videos on either dividend stocks or growth stocks, the most common answer is always both.

And don’t think my old man cynicism is from any great wisdom, it’s just that I’ve learned it the hard way too many times. Let me take you back, way back to 20011. The mortgage market was healing, shares of mortgage REIT AGNC had recovered 81% over the two years to May 2011 and were paying an astounding 18% dividend yield.

Nation, over the next three years, I watched the shares tumble 31 percent. Yeah, I collected $14.25 in dividends but that was just about enough to cover my heart meds while watching the dividend get cut four times and the stock plunge. I ended up making just 5% a year on the investment, not as bad as it could have been but not the double-digit cash machine I was expecting!

And it was because I wasn’t watching both the dividend yield and the business, making sure that the company could keep producing both consistent cash flow to investors and growing the business.

What to Look for to Find the Best High Growth Dividend Stocks

In this video, I’ll show you what to look for to find the dividend stocks that can produce that high yield and still grow the stock price. We’ll look at five criteria to find the best dividend stocks to buy and reveal seven dividend stocks to watch for yield and growth. Stick around because towards the end of the video, I’ll also reveal a strategy to turn any stock into a dividend paying company.

I want to get started on the first dividend stock in our list and I’ll show you how to screen for these next.

Our first dividend growth stock here, AllianceBernstein, ticker AB, isn’t the largest wealth manager at just $105 billion in assets but it is one of the best managed.

Shares pay a 7% dividend yield with that payout growing by 14% a year over the last five. Now one thing to understand about Bernstein though, it pays out 100% of its adjusted earnings so that dividend tends to be pretty volatile up and down.

Still though, the company has a history of growing revenue with 9.7% sales growth over the last three years on a shift to higher fee alternative investment management. Clients stick around here with an average client tenure of 12 years.

The shares have produced a 28% annual return over the past five years, so even though the average analyst target price right now is for a 5% loss to $47 a share, I think you get that 7% dividend plus a few points higher for a double-digit return.

We’ll get back to our dividend stock list but I want to show you how I found these, what to look for in creating your own list of high-yield, high-growth dividend stocks. 

How to Find High Growth Dividend Stocks

First, I screened for companies paying a 4% dividend or higher, and I know that maybe doesn’t trip your trigger for a high dividend yield but it’s more than twice the market average and still a solid payout.

More importantly though, it’s still going to leave room for most companies to reinvest for growth. You see Nation, those companies paying out the eight- or ten-percent and higher yields…they pay out almost all their earnings. In fact, most are a special structure like a REIT or MLP where they HAVE to pay out 90% or more of their earnings. And that’s great for cash return but just does not leave much back to grow the share price. 

We’re also going to be looking for companies that have grown the dividend by at least 5% annually over the last five years. 

I like this one because a company can’t grow the dividend without growing earnings so not only are you collecting progressively more money on your shares, but that earnings growth will usually take the shares higher as well.

Third criteria for our dividend stock list here is for trailing returns of at least 7% over the past three years. Followed by sales growth of at least 5% annually over the last three years.

So a pretty simple stock screen, and you can find these on most screeners, but not only is it filtering for companies that have produced at least an 11% total return from the dividend and share price but it’s based on fundamentals to find growing companies. To that, we’ll add a little of our own research to narrow our list to the best dividend stocks.

Next up on our dividends list is real estate lender Arbor Realty Trust, ticker ABR, with its 7.7% dividend yield.

Arbor is a direct lender to multi-family, senior housing, healthcare and other commercial real estate properties. Multi-family projects make up about 83% of the portfolio so that’s a little on the high side but these are agency-backed loans so definitely on the safe side.

Arbor has grown that dividend by 16% annually over the last five years and on sales growth of 20% a year. With the rise in residential prices, rents on multi-family should be rising as well and loan growth should continue higher.

The shares have produced a 30% annual return over the last five years and analysts have an average target of almost $20 a share for another 10% on top of that dividend.

Our next dividend stock is an interesting idea, Easterly Government Properties, ticker DEA, is a real estate company leasing to the federal and local government.

The company acquires and develops properties for lease to the government and has an outstanding 99% lease rate on 7.6 million square feet with an average lease term left of 8.7 years.

So not only is Easterly in one of my favorite sectors but those government leases make it safer cash flow than most. With the federal budget proposed at an eye-popping $3.5 trillion for this year alone…that means more bureaucracy and more office space…and more opportunity for Easterly.

The shares pay a 4.7% yield and while it’s only grown at 2.5% annually over the last five years, the payout is now just 82% of funds from operations so I’d expect it to grow faster in the near future. Revenue has grown at a 23% pace over the past three years and shares have produced an 8.5% annual return over the last five.

The average analyst target for Easterly is $24.50 a share which puts it about 8.5% higher plus that dividend for a solid double-digit return.

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We’ve still got four more dividend stocks to highlight and that strategy to turn any stock into a dividend paying company, but I want to take a minute to personally invite you to get the Daily Bow-Tie, our daily market newsletter with all the news, trends and investing strategies you need to know about. It goes out every night before the market opens to give you time to plan your investing day so I’ll leave a link to that in the video description below.

Another real estate company in our dividend list, CareTrust REIT, ticker CTRE, a healthcare REIT paying a 4.5% dividend yield.

CareTrust specializes in senior housing and skilled nursing with 223 properties in 28 states. Now this part of the market got hit hard during the pandemic with occupancy falling for nearly a year to 67% in January but has since started to recover and is now at 69% occupancy.

The dividend has grown by 9.3% annually on 10% sales growth over the last five years and debt leverage for CareTrust is the lowest among healthcare REITs at just 3.2-times EBITDA so I actually think they could lever up the portfolio a little more for faster growth.

Shares have produced an annualized 15.7% return over the last five years and the average analyst target of $26.50 a share puts it 11.6% higher on top of the dividend.

Our next high growth dividend stock is an investor favorite, pharmaceutical giant AbbVie, ticker ABBV, with its 4.5% dividend yield.

AbbVie is a best-in-class immunology drug company but with a strong pipeline in oncology and eye care as well. In fact, most drug pipelines are easy to read on a timeline…but not AbbVie. The company has 32 indications in Phase 3 alone with sales from Rinvoq and Skyrizi alone expected to reach $15 billion through 2025.

That dividend has grown by 18% a year on 17% revenue growth over the last five years. All told, the shares have produced an 18% annual return over five years and the average analyst target of $127 puts them at 9.4% higher plus the 4%-plus dividend.

Still two more dividend stocks to go but I want to revisit the criteria because there’s a hole that might be limiting our stock picks. Now I like the dividend yield minimum, so screening for stocks paying at least a 4% yield, but you might want to play around with the others.

For example, the pandemic played hell with dividend growth and sales growth, so using these criteria could be screening out some great companies that were just playing it safe last year. So if you’re using dividend criteria like these, maybe drop the dividend growth or sales growth and see what you find. You can look through the financials to make sure that the companies lived up to the dividend growth and sales criteria before last year, so would otherwise be good picks.

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Our next dividend stock, property insurer Progressive Corporation, ticker PGR, and even though it says 0.4% dividend yield it’s actually a 5% yield.

Progressive is the third largest auto insurance company in the U.S. and has more than 20 million policies across auto, home and commercial. The company pays out a special dividend each January that accounts for the majority of cash return. The annual dividend has grown by 32% annualized since 2019 on sales growth of 16% a year.

Shares have produced a total return of 29% annually over five years so while the average analyst target of $102 per share is only about 6% higher, this is one of the safest and most stable dividend stocks on the list.

Fortress Transportation and Infrastructure Investors, ticker FTAI, is different from the rest but an opportunity I wanted to highlight.

The company owns $2.8 billion in infrastructure and equipment assets like ports and terminals and aircraft. Just over a third of the portfolio is in infrastructure assets, mostly in oil & gas and rail. The other two-thirds is in its aviation segment with over 80 commercial aircraft and 199 jet engines leased out with no debt on the portfolio.

So this is a very asset heavy, cash flow business that has grown revenue by 25% over the past five years and pays out a 4.8% dividend yield.

The shares have produced a 25% annual return over the last five years and the average analyst target of $37.67 per share is 40% higher than the current price!

Now that’s a great list of dividend stocks but sometimes the company you really like just isn’t returning cash to shareholders. So now I want to show you how to turn any stock into a dividend paying, cash machine!

How to Turn a Stock Into a Dividend Paying Company

And we’ll use Tesla here as an example because there’s no better example of a growth stock that investors love but doesn’t pay dividends. We’ll be using what’s called the covered call strategy for this, a strategy that actually lowers your risk in a stock but is also a great way to cash flow an investment.

With covered calls, you own the stock and then sell call options against it. That means you give another investor the right to buy those shares from you at a certain price over a period of time and for that right, you collect a cash payout now.

I’ll show you how this works as an example but I’ve also got a video I’ll link to in the video description that goes into more detail and reveals my five favorite options investing strategies so make sure you check that out.

After clicking on the Options tab or going to the options available on your investing platform, you’ll first need to select a date out to which you’ll sell the call options. Most stocks will have options available for each month and even a few weeklies. 

Now a few things to think about here, you’ll receive more cash for selling longer-dated options but then that locks up the shares for longer, so it’s a trade-off. I like to use the January options, so selling call options each January to cash flow a stock for the year but look through some of the monthlies to see which you prefer.

Once you pick the date, you’ll next decide on a strike price. This is the price at which you’re agreeing to sell the stock to someone else from now until that expiration date…so obviously this is hugely important. 

how to find the best high growth dividend stocks for cash flow and groth

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Now you’ll notice that you get more money for the lower strike prices but you’re also agreeing to sell your shares for a lower price…it’s that tradeoff again.

I like to pick a strike price high enough that even if the stock jumped to that point, I would be happy with the return. For example, if shares of Tesla jumped past this strike price of $930 each in the five months to January…I would make 31% on the stock. 

No matter what the shares do though, I’ll keep this $36.65 per share if I sell the call option to another investor and on the current price of $709 each, that amounts to a 5.1% cash payout in less than half a year. I’ve just turned Tesla into a stock paying a 12% annual dividend yield AND with an upside return potential of 31% on the shares!

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