Dividend Investing Ideas Center
For some investors, stock picking can be tough. One way to determine what might be a good investment is to choose a sector first and then focus on stocks in that sector. Below is an overview of the eight major sectors of the market.
Comparing Sectors
Depending on your investing objective, you may be seeking an industry with a significant amount of growth potential, or you may have only dividend income in mind. Below is a chart that compares average dividend yields across the major sectors.
The Financial Sector
The financial sector is one of the highest yielding sectors on average. This may be surprising to an investor that is not familiar with real estate investment trusts (REITs). REITs, along with another real estate-related industries, inflate the average yield of the financial sector while other industries, including banks and insurance companies, typically have low yields.
For more information on REITs be sure to check out The Definitive Guide to REITs and The Complete Guide to REIT Taxes.
| Financial Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | Annaly Capital (NLY ) |
| Largest Company | Wells Fargo (WFC ) |
| Highest Dividend Yield (large cap) | Annaly Capital (NLY ) |
The Utility Sector
The utility sector is a favorite among dividend investors. The sector includes stocks in the foreign, diversified, electric, gas and water industries. All of these industries offer dividend investors great yields on average, but have seen only modest price growth in the last five years. Despite the weak growth, stocks in this sector are great defensive stocks since their revenue is not impacted by the state of the economy.
| Utility Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | Southern Company (SO ) |
| Largest Company | Duke Energy (DUK ) |
| Highest Dividend Yield (large cap) | Southern Company (SO ) |
The Basic Materials Sector
The basic materials sector offers a high overall dividend yield, which is primarily driven by the Oil and Gas Drilling & Exploration and Industrial Metals & Mining industries. On the flipside, the sector does have a few industries including Aluminum, Silver and Specialty Chemicals that offer dividend yields under 2%.
| Basic Material Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | Exxon (XOM ) |
| Largest Company | Exxon (XOM ) |
| Highest Dividend Yield (large cap) | Williams Partners L.P. (WPZ) |
The Consumer Goods Sector
The consumer goods sector is headed by the cigarette and tobacco product industries, which are known for their high yields. (See: Why Tobacco Stocks Can Make Good Dividend Investments). This sector is compiled of stocks from 32 different industries (most of which have low dividend yields). Despite the low yields, there are still some great picks in this sector.
| Consumer Goods Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | Coca-Cola (KO ) |
| Largest Company | Procter & Gamble (PG ) |
| Highest Dividend Yield (large cap) | Phillip Morris International (PM ) |
The Services Sector
The services sector is the largest sector as far as number of industries. The sector includes stocks from 60 industries from gaming activities to shipping. As an industry, the average dividend yield tends to be higher than the overall market.
| Services Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | Disney (DIS ) |
| Largest Company | Wal-Mart (WMT ) |
| Highest Dividend Yield (large cap) | Rogers Communications (RCI ) |
The Technology Sector
The technology sector is compiled of 32 industries and is led by the domestic telecom industry, which is known for its high yield stocks. As a whole, the tech industry is not known for paying attractive dividends (if any dividend at all). Many tech companies prefer to invest cash in innovations rather than dividend payouts.
Be sure to to also check out the Top 10 Tech Stocks That Pay a Dividend.
| Technology Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | AT&T (T ) |
| Largest Company | Apple (AAPL ) |
| Highest Dividend Yield (large cap) | AT&T (T ) |
The Healthcare Sector
The healthcare sector is a varied sector when it comes to dividend yield. The best dividend yields can often be found in the drug manufacturer industries. Despite the variation in yields, the overall sector offers an average yield that is in-line with the overall market.
| Heathcare Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | Pfizer (PFE ) |
| Largest Company | Johnson & Johnson (JNJ ) |
| Highest Dividend Yield (large cap) | GlaxoSmithKline (GSK ) |
The Industrial Goods Sector
Overall, the industrial goods sector tends to offer the lowest dividend yields on average to investors. Despite the low yield as a sector, dividend investors should still be able to find stocks with decent payouts.
| Industrial Good Sector | Company |
|---|---|
| Most Popular Among Readers (most searched company) | Caterpillar (CAT ) |
| Largest Company | Boeing (BA) |
| Highest Dividend Yield (large cap) | ABB Limitedn (ABB ) |
The Bottom Line
Although analyzing a sector is just a portion of the stock-picking process for most investors, it is a good place to start in many cases. Finding the balance between growth potential and average dividend yield is a great way for investors to find investments that work well for them.
