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.

One could turn out to be a profitable income play, especially if you’re investing for free.

Microsoft Corporation (MSFT)

Microsoft sign at the headquarters for the cloud computer and software company.
VDB Photos/Shutterstock

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 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 $364, about 12% worth of upside from current levels.

Microsoft currently trades at around $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.

Procter & Gamble (PG)

Bottles of Procter & Gamble's Tide detergent in a supermarket in New York
rblfmr/Shutterstock

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.

Morgan Stanley raised its price target on the shares to $161 in September, representing about 8% worth of upside from current levels.

The stock offers a dividend yield of 2.4%.

MPLX (MPLX)

pipeline construction in the Permian Basin
G B Hart/Shutterstock

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 $29, that translates into a chunky annual dividend yield of 9.8%.

Morgan Stanley raised its price target on MPLX to $37 last month, about 26% worth of upside from where the stock sits today.

To be sure, investing in the energy sector can be particularly volatile. So if you’d like to take a more conservative approach, consider building a portfolio of blue-chip stocks and bonds just by using your leftover pennies.

A less volatile approach

Gold Wheat flied panorama with tree at sunset, rural countryside
TTstudio/Shutterstock

Remember, even the most conservative blue-chip stocks aren’t immune to market downturns.

If you want an asset that provides passive income without the volatile ups and downs of the stock market, consider U.S. farmland.

No matter what the S&P 500 does, people will still need to eat.

And over the years, agriculture has been shown to offer higher risk-adjusted returns than both stocks and real estate.

New platforms allow you to invest in U.S. farmland by taking a stake in a farm of your choice.

You’ll earn cash income from the leasing fees and crop sales. And of course, you’ll benefit from any long-term appreciation on top of that.

About the Author

Jing Pan

Jing Pan

Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

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