Six Picks for a High Profit 2026
High dividend, top quality stocks are this year's AI.
Editor’s Note: Happy New Year! And thank you for reading the January Dividends Premium.
2025 was the year when dividends and value stocks finally broke out. The average gain for portfolio stocks was almost 36 percent. And as a result, this income and growth portfolio closed the year at a new high-water mark at 84.02 percent.
My primary objective in Dividends Premium is to generate a high and rising stream of income. And despite softer commodity prices reducing the dividends paid by two of my picks—which should reverse this year—the portfolio still managed an average dividend increase that topped inflation for a yield of around 5 percent.
This month’s theme is cheap, high quality dividend paying companies that didn’t catch fire in 2025. They’re our best chance to post another year of great returns. And they carry less risk than the rest of the stock market as well.
January’s top fresh money buys are both in that category as are the six stocks featured in this report. One is a bet on continuing strong growth in China and a resurgent Hong Kong, markets with resilience to weather a downturn in the US. The second is a best-in-class residential REIT that was battered in 2025 by concerns about oversupply of apartments in its key markets—but is already reporting signs of an emerging shortage that should take shares back to the 180s.
Have a question? Then join the conversation in the Dividends Roundtable forum I host 24-7 on the Discord application. To your wealth!--RC
Six Top Picks for Another Big Year
Artificial intelligence excitement drove the S&P 500 to new heights in 2025, with a roughly 17 percent return. But our high quality, dividend paying stocks nonetheless left the premier blue chip index in the dust.
Our average gain of 35.8 percent is by far the biggest one-year return in this portfolio’s history. And despite spending most of the year with a cash balance north of 20 percent, we ended 2025 at a new high-water mark of 84.02 percent, assuming harvesting rather than reinvesting dividends.
Can we possibly expect a repeat performance in 2026? I truly believe the answer is yes. But stock selection will be more important than ever. And we’re going to have to do some selling from time to time.
We can’t count on the big market averages to match their gains in 2025. The Big 7 Tech stocks that have driven the S&P 500 higher—and therefore most Americans’ portfolios—start out 2026 both extremely expensive and historically over-weighted at almost 38 percent of the index.
Big Tech has been expensive and overweighted for some time. And so long as investors are willing to keep paying high prices, these stocks will get even more expensive and over-weighted.
But such a lofty level of market concentration has never ended well for those who stayed too long at the party. And no matter how important these seven companies are to the economy and the future, eventually investor expectations will reach a level they can’t possibly live up to.
So while I’m not predicting or even betting on a repeat of the 2000-02 Tech Wreck, I want to be protected against the possibility of one. And that means focusing on the stocks most likely to weather a Big 7 crash—top quality companies that are selling cheaply relatively to the underlying value of their businesses.
The flip side of our big average gain last year is there are fewer such values to start 2026. But bargains are still available, even in the portfolio.
When a stock lags the broad market—and especially its sector—there’s always a reason. The question is always whether there are catalysts for a recovery.
Mainly, can the company overcome the challenges that have depressed its stock price? If not, I don’t care how low the P/E or how high the dividend yield is. The probability is it’s going even lower. The potential reward is outweighed by the risk.
But if a company can overcome its challenges, then it’s only a matter of time before its stock will recover. And if you buy when market sentiment is gloomiest, chances are very good you’ll reap a windfall, provided you buy low and hold patiently.
Last year, for example, our biggest gains were in two stocks that lagged badly in 2024: Gold and copper miner Newmont Mining (NYSE: NEM) and integrated healthcare company CVS Health (NYSE: CVS). It’s hard to believe now that both stocks were so unpopular back then. But both did face challenges. And it was by overcoming them—and the accompanying investor skepticism—that they wound up producing such monster gains last year.
Seeking The Next CVS
What will be the next CVS or Newmont? Right now, I see six good candidates already in the portfolio:
