These dividend-paying stocks could help boost your portfolio, according to investor Kevin Simpson

Published Wed, Apr 10 20242:39 PM EDTUpdated Wed, Apr 10 20243:58 PM EDT

Stock market volatility may have some investors looking for dividend stocks to provide some cushioning. On Wednesday , the Dow Jones Industrial Average sank nearly 500 points, or 1.2%, after inflation data came in hotter than expected and likely pushed back Federal Reserve rate cuts. Both the S & P 500 and Nasdaq Composite slipped 1%. For Kevin Simpson, founder and chief investment officer of Capital Wealth Planning, dividend investing has long been part of his firm's strategy. Yet he doesn't just look for those with high payouts or have consistently raised their dividends for decades, like the ' dividend aristocrats .' Instead, he focuses on a five-year time horizon to see how dividend growth is trending and pays attention to valuations. "You don't want to overpay for something just because it has an attractive history of increasing its dividend," Simpson said in an interview with CNBC. He also stays diversified throughout sectors and watches earnings and earning growth closely. "The most important part is the dividend is increasing because the company has the earnings to support the dividend growth," Simpson noted. "You don't want a company to increase their dividend through leverage or borrowing." If they don't have the earnings growth to support the dividend, the share price will suffer, he said. "The total return is far more important than the cash flow alone," Simpson added. His dividend portfolio earns about 2% to 3% and aims to increase its dividend by 10% each year — although it doesn't always reach that "lofty goal," he said. "There is no better hedge against inflation than getting a 10% raise each year," he said. Here are four of the names Simpson likes across different sectors and owns in his portfolios. JPMorgan Chase has a five-year compound annual dividend growth rate of 10.3%, Simpson said. It also has a forward price-earnings ratio of 12, he said. The financial giant, which has a dividend yield of 2.4%, is set to report quarterly earnings on Friday and Simpson expects the numbers to be good. The bank generated nearly $50 billion of profit in 2023, up about 38% from the previous year. Shares are up more than 14% year to date. JPM YTD mountain JPM year to date Marathon Petroleum has a 5% five-year compound annual dividend growth rate and has "tremendous cash flow," said Simpson. It currently yields 1.6%. "It is very, very solid from a valuation standpoint," he said. Shares trade at a forward multiple of 11.3. The oil refiner will also continue to benefit until electric vehicles completely take over the auto fleets, he said. The stock has rallied about 40% this year. The last two names on his list have dividend yields under 1%, which means some investors may overlook them as dividend payers. However, Visa — which currently yields 0.8% — has been increasing its dividend over the past five years at a rate of about 17%, Simpson said. "That strong dividend growth is very, very powerful," he said. "It is an incredibly strong global brand." While it has a forward P/E of 26, that is lower than rival Mastercard — which sits at 31 — he pointed out. The stock is up about 5% year to date. Rounding out the list, Microsoft has a five-year compound annual dividend growth rate of 10.5%. It currently yields 0.7% and has a forward P/E of 36. "It is not cheap by any metric, but it is an artificial intelligence-themed company," he said. "It does have an incredible story behind it and very powerful earnings growth." Shares have gained 12% in 2024.