A stock dividend is whole or partial shares of a company given to investors instead of cash to share in the company’s profits. Top dividend stocks are any stock that yields a dividend higher than 4%. The reason it is 4% is that, for the past twenty-five years or so, the dividend yield has been below that in the U.S stock market. Today, a 4% dividend yield is almost twice that of the market’s dividend yield.

Dividend stocks generally offer a higher yield because of various reasons. One could be the mature status of the company. If avenues for growth are not many, the company returns more cash to its investors as dividends. Another reason could be the business structure followed by a company that requires it to give most of the cash to its shareholders as dividends.

According to Warren Buffet, the top 3 dividend stocks of all time include:

• General Motors (GM): General Motors has a dividend yield of 4.08%. It also has huge opportunities for growth in China and other foreign markets.
• Coco-Cola (KO): Coco-Cola has a dividend yield of 3.33%. Buffet has taken a liking to the company because of its brand power and a remarkable distribution system that is both effective and huge.
• Phillips 66 (PSX): This oil refining company has a dividend yield of 3.18%. It is known for its share buybacks done effectively, dividends that grow consistently, and capital spending that is nothing if not responsible. Whether oil prices increase or decrease, Phillips 66 will continue doing well because it has diverse businesses.
  Fortune, a multinational finance magazine published in the United States, considers the top 3 dividend stocks to include:
• Apple (AAPL): When interest rates rise, they adversely affect dividend-paying stocks. So, when the bond yields get bigger, they stop appealing to shareholders. However, companies that are known to consistently increase their dividend stocks showcase their potential for growth, thereby outperforming over time and losing less in market corrections. Apple is one such example of a company that has shown a steady increase in dividend stocks. Its cash reserves are at $250 billion and above, so one can expect the dividends to continue rising. However, it trades to the S&P 500 at a discount of 15%.
• Texas Instruments (TXN): Texas instruments has gained itself a reputation because it has increased its stock dividends steadily for the past 13 years. It makes semiconductors called Analog and occupies a coveted number one spot in the market for this product. It makes chips that are used in equipment such as biometric readers, 3D printers, and robotic apparatus. This, in turn, gives it a reliable income avenue.
• Home Depot (HD): Home Depot has brought back millions in shares, and its dividend stocks have grown by a noteworthy 22% over the past five years. It is considered one of the top dividend stocks and will continue to be thanks to a growing economy and real estate market, the two factors needed to make a company like Home Depot work.

According to Forbes, companies that have managed to grow their dividend stocks have outperformed everyone else on the market and have done so with less volatility. This is probably because dividends provide stability to the company in turns of one hundred% returns. They also provide protection against rising prices in the market. Based on Forbes’ DIVCON methodology, an analysis that predicts dividend growth in the future, the top 3 dividend stocks are considered to be:

• Southwest Airlines, Inc. (LUV): Southwest Airlines, Inc. has a score of 5 on DIVCON, which is considered the highest. Stocks show a massive potential for growth in terms of dividends. This should help increase the price growth potential too. By the end of 2016, the airline’s company grew in dividends by 28.4%. Its dividends first starting exhibiting growth in the year 2011 and since then has shown 100% growth in dividend change rates and 250% returns on stock prices. The airline company also shows a strong foundation in that it has a growth of 39.7% in earnings per share annually for five years now. The cash flow growth rate during this period has been 10%.
• Nike, Inc. (NKE): Nike has a score of 5 on DIVCON rankings, considered the highest on the scale. Nike has shown steady growth with a 14% annual earnings growth. It has also increased its dividend by 10% every year starting 2009. The price growth, except in the year 2016, has been the same. Starting 2012, Nike has shown a consistent growth in revenue, earnings per share and dividends per share.
• Cracker Barrel Old Country Store Inc. (CBRL): With a DIVCON ranking of 5, which is considered the highest, Cracker Barrel is positioned to increase its dividends over the next year. It has a dividend payout ratio of 55% and a five-year annualized growth rate of 12.5%, showcasing its potential for further growth.