Investors looking for dividend stocks should consider strategies such as the Dogs of the Dow. But make sure to check these stocks in our POWR Ratings system to find high yielding gems such as Verizon Communications (VZ), Pfizer (NYSE:PFE), and International Business Machines (NYSE:IBM).While high risk/reward investors focus on growth stocks, more conservative investors concentrate on less volatile stocks that pay dividends. Simply put, dividends are distribution payments a company makes to share profits with its stockholders.
When looking for dividend stocks, investors can choose from an array of dividend strategies, but one that isn't as well known to many investors is called the Dogs of the Dow. This strategy is based on selecting the highest dividend-paying stocks in the Dow Jones Industrial Average. The concept is to invest in the ten highest dividend-yielding, blue-chip stocks in the Dow at the beginning of each year.
This strategy has returned an average of 9.5% since 2000, outperforming the S&P 500's 7.5% average return. So I thought I would take this strategy further and filter out those ten based on our POWR Ratings system. This resulted in three stocks with Buy ratings. So not only do these three companies offer dividends but are also more likely to offer price gains in the months ahead. That's why I am highlighting Verizon Communications Inc. (NYSE:VZ), Pfizer, Inc. (PFE), and International Business Machines Corporation ( IBM ) below.