From selecting US dividend stocks to long-term holding: a roadmap for stable income generation

US Dividend Stocks are a key goal for many global investors seeking steady cash flow. This is because investing in companies with consistent dividend-paying ability allows for regular income while mitigating stock price volatility. In this article, we will systematically explore the concept of dividend stocks, criteria for selecting investment targets, and practical methods to maximize returns.

Definition and Operating Principles of Dividend Stocks

Dividend stocks refer to shares that represent a portion of a company’s profits distributed to shareholders in cash. In the US market, dividends are typically paid quarterly or monthly, allowing investors to receive regular income based on their holdings.

The biggest advantage of this investment approach is predictable cash flow. Even if the market shows volatility, holding stocks of companies that continue to pay dividends can maintain a stable income base. Additionally, by reinvesting dividends to harness compound interest, assets can grow exponentially over time.

Defensive characteristics are also noteworthy. During bear markets when stock prices decline, dividend stocks tend to perform relatively stably, and receiving regular dividends can partially offset losses.

Profile of US Dividend Investors

Dividend stocks are particularly suitable for certain investor groups. They are ideal for retirees or conservative investors aiming for long-term asset management who require stable cash flow. Dividends can be used for living expenses after retirement and serve as a mechanism to generate additional income while preserving principal.

They differ from growth stocks or value stocks. Unlike high-growth growth stocks, US dividend stocks are mature companies that return value to shareholders based on stability. They tend to show resilience even during economic downturns because large, established companies primarily pay dividends. Companies with a long history of dividend increases are especially trusted.

US Stock Market Dividend Ecosystem

The US, the world’s largest stock market, offers countless opportunities for dividend investing. Most large corporations leading the global economy maintain stable dividend policies.

The biggest strengths of the US market are transparency and liquidity. Leading companies known as “Dividend Aristocrats” have a proven track record of increasing dividends for over 25 consecutive years.

US dividend stocks can be invested in not only individual stocks but also through various financial products. Investing in dividend-related funds such as ETFs( (Exchange-Traded Funds) or REITs) (Real Estate Investment Trusts) allows for automatic diversification, which is advantageous for risk management.

Dividend Stock Evaluation Framework: Criteria for Selecting Investment Targets

Smart selection of dividend stocks is fundamental to successful investing. The following key indicators should be comprehensively reviewed.

Dividend Yield: Represents the ratio of dividends to current stock price. A high yield is not always a good choice; it is essential to verify whether the company can sustain its dividend payments.

Dividend Growth: It is important to check whether dividends are regularly increasing. Companies that raise dividends annually demonstrate both long-term growth potential and stability. Such companies are increasingly attractive as long-term investments.

Financial Soundness: The ability to pay dividends directly relates to a company’s financial health. Companies with low debt ratios and strong cash flows are more likely to sustain dividends. Therefore, financial stability is an essential criterion for selecting dividend stocks.

Companies with Notable Dividend Performance in 2025

Various global and domestic companies are expected to maintain stable dividends in 2025. (This analysis is not investment advice and does not guarantee future returns.)

Coca-Cola(KO): A globally renowned US company with a diverse beverage portfolio. It boasts an impressive record of over 60 years of consecutive dividend increases. Its dividend yield exceeds 3%, and its brand power and global network enable stable performance.

Verizon(VZ): A major US telecom provider offering various communication services worldwide. It features a high dividend yield of around 6.8% and has over 20 years of consecutive dividend increases. Its position as a leader in 5G technology is also strong. However, increased capital expenditure due to intensified industry competition should be considered.

Realty Income(O): A leading US REIT specializing in commercial real estate, generating rental income. It pays monthly dividends with a dividend yield of 5.35% annually. It maintains stable operations and is diversifying its real estate portfolio across regions. Caution is advised regarding sensitivity to interest rate fluctuations and real estate market changes.

Lotte Holdings(004990): The holding company of the Lotte Group offers a dividend yield of about 7%. It is undergoing organizational innovation and management efficiency improvements, with expectations for better performance of subsidiaries. The improvement of liquidity risks at Lotte Construction is also a positive factor.

HD Hyundai Marine & Marine Solutions(443060): A specialized company in ship after-sales service, combining stable dividends with high growth potential. Its dividend yield is approximately 3.2%, and it plans to switch to quarterly dividends starting in 2025. Growth is expected from increasing ships and long-term service contracts.

E-Mart(139480): A major South Korean retail company. Despite long-term revenue stagnation, it maintains a stable dividend policy and has enhanced shareholder value through share buybacks. It has expressed a minimum dividend of 2000 KRW per share but recorded its first annual loss in 2024, which is a negative signal.

Investment Strategies to Maximize Dividend Income

Long-term holding and compound interest: The core strength of dividend stocks is the power of compound interest over time. Reinvested dividends increase the number of shares owned, leading to larger subsequent dividends—a virtuous cycle. This mechanism can exponentially grow assets over decades.

Selecting dividend growth companies: Prioritizing companies that continuously increase dividends over those offering high yields alone is crucial. Dividend growth indicates long-term growth potential and can also drive stock price appreciation.

Utilizing ex-dividend cycles: After dividends are paid, stock prices often dip temporarily. A short-term strategy involves buying just before the dividend season to receive dividends and then selling afterward. Precise market analysis is essential to offset the decline due to ex-dividend effects and generate excess returns.

By leveraging the pattern of rising stock prices before dividend receipt and temporary adjustments afterward, investors can pursue both dividend income and capital gains simultaneously.

Principles for Building a Dividend Portfolio

Combining stable dividend stocks across various industries can minimize portfolio risk. For example, investing in ETFs tracking US dividend indices provides automatic diversification across over 100 quality dividend stocks.

When constructing a portfolio, it is efficient to consider correlations among industries and balance cyclical and defensive stocks accordingly.

Essential Considerations When Investing in Dividend Stocks

Exchange rate risk: Investing in US dividend stocks exposes investors to fluctuations in the KRW-USD exchange rate. If the Korean won strengthens against the dollar, dividend amounts converted to KRW decrease.

Double taxation: Besides US withholding tax on dividends, additional taxes are levied domestically. Currently, in Korea, if overseas stock income exceeds 2.5 million KRW annually, a 22% capital gains tax applies, and dividend income is taxed at 15%. If total interest and dividends exceed 20 million KRW annually, it must be reported in the comprehensive income tax return by next May.

Pitfalls of high dividend yields: A high dividend yield does not always indicate a good investment opportunity. It could be a temporary spike caused by company financial deterioration or stock price drops. A comprehensive assessment of the company’s long-term financial health and growth prospects is necessary.

Macroeconomic conditions: During economic downturns or rising interest rate environments, companies may face pressure to maintain dividends. Especially in rising rate periods, the attractiveness of dividend stocks may diminish, requiring strategic adjustments aligned with market conditions.

Conclusion

US dividend stocks can be a reasonable choice for investors seeking stability. They provide long-term, predictable cash flows through quarterly or monthly dividends. However, like all investments, dividend stocks carry volatility and exchange rate risks.

Past dividend payment records do not guarantee future dividends. Careful research and analysis are essential before investing. Reviewing various stocks and constructing a dividend portfolio aligned with your investment profile and time horizon is a prudent approach.