Editors' Pick: Originally published Feb. 23.
Editors' note: Since readers are so interested in quality dividend stock picks, we've done additional work digging into some of the stocks listed below, bringing in more analysis:
The information in the story below has not been updated to reflect current stock prices and dividend yields.
The S&P 500 is down about 10% from its 52-week high, and investors are growing more fearful by the day.
They are wondering if the next recession is right around the corner and whether they should sell some of their stocks now.
Trying to time the market is one of the surest ways to lose a lot of money and sleep. Instead of frantically trading in and out of stocks and worrying about their everyday price moves, investors should focus on companies that have ever-increasing dividend payments, regardless of what the broader stock market is doing.
These types of blue-chip dividend stocks share a handful of qualities. They generate consistent free cash flow, operate in slow-changing industries, maintain healthy balance sheets and have demonstrated an outstanding commitment to shareholders over the years.
Some of the high-yield dividend stocks below are even Dividend Aristocrats, companies in the S&P 500 that have increased their dividends for at least 25 consecutive years.
Although nothing in life is guaranteed aside from death and taxes, the seven high-yield stocks below have extremely safe dividend payments and recently increased their dividend payouts, a sign of financial strength and a welcome event for investors' wallets.
We even happen to own two of these high-quality dividend stocks in our Conservative Retirees Dividend Portfolio.
Let's take a closer look at these income machines that have recently rewarded shareholders with dividend increases.
1. Archer Daniels Midland (ADM)
Archer Daniels Midland is a key player in the agricultural market. It processes commodities such as corn, oil seeds and wheat into a variety of products for food, beverage, animal feed, chemical and energy uses.
Some of the company's products include vegetable oil, protein meal, corn sweeteners, flour, starch, ethanol and a number of other food ingredients.
Archer Daniels Midland has been in operation for more than 100 years, which is often a sign of a persisting competitive advantage. The company owns the largest grain terminal and shipping network in North America and has extremely capital intensive operations, which limits its competition.
With hundreds of plants and storage facilities strategically placed around the world and meaningful economies of scale, Archer Daniels Midland can be the cheapest and quickest provider of its products to most customers.
Despite its competitive advantages, the selling prices of most of Archer Daniels Midland's products are sensitive to commodity prices, which have hurt the business over the past year. The company's fourth-quarter earnings showed macro headwinds persisting as adjusted operating profit fell by 47% from a year earlier.
The company is working hard to take costs out of the business, but there is little else it can do until oil and crop prices rebound.
Archer Daniels Midland increased its dividend by 7% on Feb. 2 and has raised its dividend for more than 25 consecutive years. The company has plenty of room for future dividend growth as well because its earnings payout ratio is just 47% over the past 12 months.
Archer Daniels Midland has also increased its dividend at a 13% compound annual growth rate over the past 10 years, and we expect at least mid- to high-single digit annual dividend growth to continue.
The stock trades at 12.7 times forward earnings estimates and has a dividend yield of 3.6%, which is significantly higher than its five-year average dividend yield of 2.1%. The stock looks cheap relative to history and could see meaningful upside if macro factors start to go its way again.