Healthy dividend stocks have the potential to:

  • Offer a plump income stream in both good times and bad times.
  • Provide much-needed diversification to growth-oriented portfolios.
  • Outperform the S&P 500 over the long haul.

Let’s take a look at three dividend stocks that Wall Street giant Morgan Stanley has given an overweight rating to.

Microsoft Corporation (MSFT)

Tech stocks aren’t exactly known for their dividends. But the ones with massive recurring cash flows and healthy balance sheets can still deliver solid cash payouts to shareholders.

Take Microsoft, for instance.

When the tech giant first started paying quarterly dividends in 2004, it was paying investors 8 cents U.S. per share. Today, Microsoft’s quarterly dividend rate stands at 62 cents per share, marking a total payout increase of 675%.

The stock currently offers a dividend yield of only 0.8%. But given Microsoft’s highly reliable dividend growth — management has raised the payout for 12 straight years — it remains an attractive choice for income investors.

Morgan Stanley recently reiterated an overweight rating on Microsoft and raised the price target on the stock to US$364, about 17% worth of upside from current levels.

Microsoft currently trades at around US$330 per share. But you can own a piece of the company using a popular stock trading app that allows you to buy fractions of shares with as much money as you are willing to spend.

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Procter & Gamble (PG)

Procter & Gamble belongs to a group of companies often referred to as the Dividend Kings: publicly traded businesses with at least 50 consecutive years of dividend increases.

In fact, P&G makes the list with ease.

In April, the board of directors announced a 10% increase to the quarterly payout, marking the company’s 65th consecutive annual dividend hike.

It’s not hard to see why the company is able to maintain such a streak.

P&G is a consumer staples giant with a portfolio of trusted brands like Bounty paper towels, Crest toothpaste, Gillette razor blades, and Tide detergent. These are products that households buy on a regular basis, regardless of what the economy is doing.

Thanks to the recession-proof nature of P&G’s business, it can deliver reliable dividends through thick and thin.

In January, Morgan Stanley raised its price target on the shares from US$161 to US$177, representing about 9% worth of upside from current levels.

The stock offers a dividend yield of 2.2%.

MPLX (MPLX)

MPLX isn’t a household name like Microsoft or P&G. But for the serious yield-hunters, it’s a stock that probably shouldn’t be ignored.

Headquartered in Findlay, Ohio, MPLX is a master limited partnership created by Marathon Petroleum to own, operate, develop and acquire midstream energy infrastructure assets.

The partnership pays quarterly cash distributions of 70.50 cents per unit. With the stock trading just above US$33, that translates into a chunky annual dividend yield of 8.6%.

Morgan Stanley raised its price target on MPLX to US$37 recently, about 12% worth of upside from where the stock sits today.

And if you're looking to hedge those stock market bets with something with a long record of strong returns, consider fine art.

One just for the rich, this market, which has virtually no correlation with stocks, is now available to everyday investors through a trading platform that lets you buy shares of blue-chip artworks.

Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, Jing was a research analyst and editor at one of the leading financial publishing companies in North America. Jing has covered numerous aspects of the financial markets, from blue chip dividend stocks to small cap tech stocks to precious metals and currency. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. In his spare time, Jing plays basketball, the violin and the ukulele.

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