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Best Dividend Stocks of 2014: My Top 5 Picks

As I have been writing about dividend stocks a lot lately, I wanted to provide a few more recommendations by discussing the top dividend stocks of 2014. These stocks are good to purchase now, hold over time, and slowly add to as you save more money.

As mentioned in my investing in dividend stocks post, be sure to sign up for a Dividend Reinvestment Program (DRIP). This will automatically reinvest your dividend payments back into more shares of the stock without any additional fees (at least at the typical discount broker like eTrade).

With that said, here are my top 5 dividend stocks for 2014:

Apple (AAPL)

If you follow this blog, it should be no surprise to see Apple (AAPL) on this list. A lot of investors forget that AAPL is now a dividend stock, but the dividend is currently over 2% (even after the recent stock run) and is likely to be hiked by another 10% or so in the spring.

In addition to the dividend, I am very bullish on AAPL long and believe that this stock has a lot of room to run from a growth perspective, particularly if iPad sales exceed expectations. With the recent deal with China Mobile, the number of iPhone sales may see a sudden spike as well, further driving revenue increases.

PepsiCo (PEP)

PepsiCo (PEP) is a food and drink conglomerate that pays a solid dividend. Most people think of PepsiCo as the makers of Pepsi and its related line of soft drinks, but the truth is Pepsi only derives about one-fourth of its income from soda sales. Soda is on the decline, so PepsiCo’s diversification into areas like chips, snacks, and bottled water help protect it from further declines in the soda industry.

PepsiCo is currently paying about a .68% dividend quarterly, which is not bad given that the company’s share price is growing at a decent rate.

Johnson & Johnson (JNJ)

Johnson & Johnson is a favorite dividend stock of mine as it produces a number of top of the line consumer home goods that still sell well even in recessions. With lines like Band-Aid and Tylenol, consumers line up to buy these products even when times are tight. This makes JNJ the perfect stock to invest in for the long haul – a true “set it and forget it” investment.

The only downside to this stock is that it is currently running very high compared to historical values; be prepared to buy more over the next few years should the price pull back a bit to lower your average purchase price.

Procteor & Gamble (PG)

Procter & Gamble is a very similar company to Johnson & Johnson with a similar line of products. Both are great dividend stocks to invest in; you can help mitigate risk by investing in both rather than just one or the other (i.e. loss due to faulty accounting practices).

PG pays a solid quarterly dividend and owns a huge line of consumer brands, including Pampers, Dawn, and Oral-B.

AT&T (T)

AT&T derives most of its revenue from the lucrative mobile service niche, a sector that is growing rapidly as smartphones and tablets proliferate. Unlike their main competitor Verizon which is weighed down by a cable business, AT&T is a pure mobile play.

AT&T also happens to pay a massive dividend (over 5%). AT&T is largely profitable except for during the fourth quarter, where subsidized smartphone purchases used as Christmas gifts put the company in the red.

While this has plagued AT&T in the past, things may be changing. New payment plans including AT&T Next (giving consumers free iPhones for a higher monthly fee) and discount monthly plans for paid-in-full smartphones may help reduce the iPhone burden on AT&T.

The popularity of the iPad also is boosting AT&T’s revenues. Many iPhone users will add on iPads to their AT&T account. These data plans are among the most lucrative for AT&T since they add on an extra $15-$30 a month to a user’s cell phone bill without T having to spend a penny on the iPad. AT&T actually can profit off sales of iPads by selling them at full price to consumers in its wireless stores.

Best Dividend Stocks of 2014: Conclusion

All five of these stocks make great investment plays for 2014 and beyond. A portfolio consisting of these five stocks would treat the long term investor well. Be sure to enroll in a DRIP for each stock and to continue to add money to each position as you save it in order to get the most out of these investments.

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