2 Top Dividend Stocks to Buy and Hold Forever

In the ever-changing landscape of the stock market, finding reliable income sources can be a daunting task. With the traditional methods of retirement planning becoming less effective, investors are increasingly turning to dividend-paying stocks as a means to secure their financial future. In this article, we will delve into two top dividend stocks that are well-suited for a long-term buy-and-hold strategy: Amgen (AMGN) and United Community Banks (UCB).

Why Dividend Stocks?

Dividend stocks are an excellent way to generate steady income, especially for retirees who are concerned about outliving their wealth. Unlike bonds, which have seen a significant decline in yields over the past few decades, dividend-paying stocks offer a reliable income stream that can grow over time. This is particularly important in today's low-interest-rate environment, where traditional fixed-income investments may not provide sufficient returns to cover retirement expenses.

Screening Criteria

When evaluating dividend stocks for a long-term buy-and-hold strategy, it is essential to consider several key metrics:

1. Dividend Yield: The annual dividend payment expressed as a percentage of the stock's price. A higher yield indicates a more attractive income stream.
2. Dividend Growth: The rate at which the dividend has increased over time. Consistent dividend growth is a sign of a company's financial health and commitment to shareholders.
3. Payout Ratio: The percentage of earnings paid out as dividends. A lower payout ratio indicates that the company has room to increase its dividend in the future.
4. Debt Levels: A company's debt-to-equity ratio can provide insights into its financial stability. Lower debt levels are generally preferable for dividend-paying stocks.

Case Study: Amgen (AMGN)

Amgen is a leading biotechnology company that has consistently increased its dividends over the years. With a current dividend yield of 3.1%, Amgen offers a higher income stream compared to the S&P 500's yield of 1.57%. The company's annualized dividend growth rate of 5.63% over the past year is a testament to its commitment to returning value to shareholders.

Amgen's strong financial position is evident from its ability to maintain and increase its dividends even during economic downturns. The company's dividend history shows that it has not cut its dividends even during recessions, which is a testament to its financial strength and stability. Amgen operates in the Medical - Biomedical and Genetics industry, which is known for its stability and growth potential. The healthcare sector is relatively resilient to economic cycles, making Amgen a suitable long-term investment.

Case Study: United Community Banks (UCB)

United Community Banks is a regional bank that has consistently paid dividends to its shareholders. With a current dividend yield of 3.35%, UCB offers a higher income stream compared to the Banks - Southeast industry's yield of 2.19%. The company's annualized dividend growth rate of 4.35% over the past year is a sign of its financial stability and commitment to shareholders.

United Community Banks' financial position is robust, as indicated by its consistent dividend payments and growth. The bank's ability to maintain a higher dividend yield compared to its industry average suggests that it has a strong balance sheet and is well-positioned to weather economic challenges. United Community Banks operates in the banking sector, which is a stable and essential part of the economy. The bank's focus on the Southeast region, which has a growing economy, further enhances its suitability for a long-term buy-and-hold strategy.

Portfolio Fit

Both Amgen and United Community Banks exemplify the key characteristics of dividend stocks suitable for a long-term buy-and-hold strategy. Their consistent and increasing dividends, strong financial positions, and stable or growing industries make them attractive options for investors looking for reliable income and capital appreciation over the long term.

Risk Mitigation

While dividend stocks can provide a steady income stream, it is essential to be aware of the potential risks. Companies can choose not to declare dividends, which can negate the benefit of diversifying a retirement portfolio with dividends. Additionally, dividends are taxed at a qualified dividends tax rate, which depends on the income bracket that the investor falls into. Paying higher taxes can have a detrimental effect when the time comes to take income in retirement.

Conclusion

In conclusion, Amgen and United Community Banks are two top dividend stocks that are well-suited for a long-term buy-and-hold strategy. Their consistent and increasing dividends, strong financial positions, and stable or growing industries make them attractive options for investors looking for reliable income and capital appreciation over the long term. By incorporating these stocks into your portfolio, you can secure a steady income stream that can help you achieve your financial goals.