During times of market volatility, it is nice to have good dividend stocks in your portfolio that you can rely on for consistent distributions throughout the year. That way, even if the stock price is down on some of your investments, that dividend payout can be used to reinvest in the stock or provide income to pay off bills, save, or invest elsewhere.
Not all publicly traded companies pay dividends, but generally speaking, the larger, well-established ones do. And not all of them pay out great (or consistent) dividends, as economic or market conditions can affect their ability to do so.
But there are also some companies out there that you may not be that familiar with that do pay ridiculously great dividends (and pay them with some consistency). Here are three relatively unknown dividend stocks to consider.
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1. BlackRock: huge quarterly payout
BlackRock (BLK -0.50%) is not exactly an unknown company. It is the largest asset management firm in the country with $7.3 trillion in assets under management as of June 30. But what you may not know is just how good a dividend the company pays to shareholders. For the third quarter, the company declared a $3.63 quarterly dividend per share. Extrapolate that out over four quarters and you see BlackRock is paying shareholders $14.52 per share in dividends. Someone owning just 50 shares of BlackRock would get back $726 each year to use as he or she pleases. That payout rate puts it among the very highest dividend payouts on the market.
When looking at dividends, it's always critical to examine other metrics to make sure that the payout is sustainable. One is the dividend history and a consistently growing dividend. BlackRock has increased its dividend every year since 2003, and over the past five years it has bumped up its payout by 66%.
Another metric to look at is the dividend yield. In BlackRock's case, it's 2.47%. That means the annual per-share dividend is equal to 2.47% of the company's current share price, which is an above-average payout for large companies. Further, the dividend payout ratio -- the percentage of a company's annual earnings that goes toward the dividend -- is a healthy 20.8%. When the ratio starts to climb above 70%, concerns can arise about whether the company is directing too much of its earnings toward dividends at the expense of other things. Aside from its dividend, BlackRock is coming off a good second quarter as revenue was up 4% year over year and earnings per share was up 22%. Year-to-date, BlackRock's stock price is up 17.7%, outperforming the S&P 500 and the financial sector. With its dividend and earnings power, this stock is a good buy all around.
2. PNC Financial: high yield ahead
PNC Financial (PNC 0.29%) is a large regional bank (seventh-largest in the U.S.) with $458 billion in assets. Like most financial institutions, the bank has been hurt by the coronavirus-induced recession, but it maintains a solid capital position, buoyed by the sale of its 22.4% stake in the aforementioned BlackRock in the second quarter. This gave PNC $14.2 billion in additional liquidity. The company has also worked to control expenses, reducing them by 4% in the second quarter compared to the second quarter of 2019. It has a common equity tier 1 ratio of 11.3%, which is up from 9.4% in the first quarter and far exceeds the regulatory minimum of 7%. This is all a way of saying that PNC, despite the recession, has plenty of liquidity to maintain its high dividend payout.
Speaking of dividends, in the third quarter PNC approved a $1.15 per share dividend, which is among the highest on the sector. For the year, that calculates to $4.60 per share. The bank has been very consistent, increased its dividend for nine straight years leading up to 2020, and over the past five years has raised its dividend by 125%. It has not yet had an increase in 2020, but the fact that it has maintained its high dividend through a recession is impressive. In terms of other metrics, the bank has a dividend yield of about 4%, which is excellent, and a low payout ratio of just 6.79%, which means it has plenty of earnings available to help maintain its payout.
3. Cincinnati Financial: dividend royalty
Cincinnati Financial (CINF -0.75%) is largely unknown to many investors, but when it comes to its dividend, it stands out. The property and casualty insurance company, founded in 1950, has raised its dividend every year for the past 37 straight years. That qualifies it as a "Dividend Aristocrat," which refers to stocks that have had more than 25 consecutive years of dividend hikes. By the S&P Dow Jones Indices' count, there were only 66 Dividend Aristocrats trading on the market in July (it could be fewer now thanks to the coronavirus).
The company recently approved a $0.60 quarterly dividend for the third quarter, which comes out to $2.40 per year per share. It has a dividend yield of 3% and a payout ratio of around 23%. Over the past five years, the dividend has increased by 30%. The payout is not as high as the others, but if you are looking for consistency, it's hard to do any better than Cincinnati Financial.
