Investing in dividend stocks can be a great way for investors to accelerate the growth of their portfolios. While the average dividend yield on the S&P 500 is 2%, investors can do a lot better; there are many quality stocks available on the markets that will provide much better payouts. Here are three stocks, all with market caps of more than $10 billion, that pay better than the S&P 500.
1. Medical Properties Trust
Medical Properties Trust (MPW 5.99%) is a real estate investment trust (REIT) with 359 medical facilities, including office buildings and surgical centers, in its portfolio. And with more than one-third of its properties outside the U.S., it gives investors a terrific way to diversify and invest in the global healthcare market.
The company released its year-end results on Jan. 30, announcing it generated $854.2 million in revenue in 2019, an increase of 8.9% from the prior year. Medical Properties also showed strong growth in its funds from operations (FFO), which rose from $485.3 million in 2018 to $535.8 million this past year. FFO can often be a better measure of how an REIT is doing than just net income, as it removes non-cash items like depreciation from its calculation.
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The company announced on Feb. 14 that it would be increasing its quarterly dividend by 4%. Investors will now earn $0.27 every quarter, which will produce an annual dividend yield of 4.7%. Medical Properties' dividend is up 23% from the quarterly payments of $0.22 the company was paying shareholders five years ago.
2. Home Depot
Home Depot (HD 0.51%) is another company that recently announced a dividend increase. The company released its year-end results on Feb. 25, which soundly beat analyst expectations. Home Depot recorded earnings per share (EPS) of $2.28 for the quarter, well above Wall Street projections of $2.10. Although revenue of $25.76 billion fell shy of analyst expectations of $25.78 billion , the company's same-store sales were up 5.2%, and that was higher than Wall Street estimates of 4.8%.
The home improvement company has shown that despite the challenges in the retail industry and the popularity of online shopping, hardware stores remain in demand. And as a result of the strong performance and good holiday sales, the company rewarded its shareholders with a dividend increase of 10%. Quarterly dividend payments will rise to $1.50 from $1.36, with the stock now paying investors a yield of 2.6%. In five years, Home Depot's dividend has nearly tripled from the quarterly payments of $0.59 investors were receiving back in 2015.
3. Bank of Montreal
Bank of Montreal (BMO -0.75%) represents yet another opportunity for investors to collect a strong dividend and diversify their portfolio. The company released its first-quarter results of fiscal 2020 on Feb. 25, reporting net income of CAD$1.6 billion, an increase of 5.4% from the prior-year quarter. Revenue of CAD$6.7 billion also grew by 3.5% from a year ago.
Despite interest rates remaining low and concerns that the economy may be heading for some tougher times, CEO Darryl White was upbeat about the results and where the company is today.
"We have significant momentum, with businesses increasing market share," he said in the earnings release. "Our segments are winning on the strength of our customer value proposition and our ability to compete effectively."
Although it didn't announce an increase this time, the bank typically increases its dividend payments twice per year. Currently, the big-five Canadian bank pays investors CAD$1.06 every quarter, producing an annual dividend yield of 4.4%. Over a span of five years, Bank of Montreal's dividend has grown by 32.5% from the CAD$0.80 that the bank was paying its shareholders in 2015. Since 2012, the company has consistently increased its dividend payments at least once per year.
Which is the best stock to buy today?
Over the past year, only Bank of Montreal has failed to outperform the S&P 500.
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When looking at the long term, all three stocks can be solid investments today. However, given the near-term concerns around a slowing economy, there's a bit more risk involving financial stocks these days. Medical Properties offers investors the best balance of dividends and stability, making it the optimal dividend stock of the three listed here. It operates in a relatively stable industry compared with the other two stocks, and its dividend yield also tops this list.
