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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.

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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 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 17% 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.

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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 $161 to $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 $33, that translates into a chunky annual dividend yield of 8.6%.

Morgan Stanley raised its price target on MPLX to $37 recently, about 12% 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.

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About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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