Procter & Gamble (PG 1.78%) is a high-quality stock holding to be sure. The 183-year-old, $326 billion company's leadership of the consumer staples market is solidly intact, and for patient investors, its shares persistently reflect this size and strength.
If dividend income -- and dividend growth -- is a priority, though, P&G isn't necessarily a top income pick. Income-minded investors are better served by building a portfolio around core positions like Stag Industrial (STAG 0.15%), JPMorgan Chase (JPM 1.41%), or American Electric Power (AEP 1.95%). Here's why these are three better dividend stocks than P&G.
1. Stag Industrial
Dividend yield: 4.7%
Dividend CAGR (5-year): 1.1%
You may not be familiar with the name, but you're likely familiar with Stag Industrial's customers. Stag owns the real estate being utilized by companies ranging from Amazon to Ford Motor to XPO Logistics, just to name a few. In fact, Amazon is its biggest tenant, and the federal government's General Services Administration is its second-biggest customer. These outfits aren't struggling to make rent payments despite the lethargic economy. That's why in its most recent quarterly report Stag said 96.9% of October's rent payments had been paid by Nov. 5, adding that 98.2% of its third-quarter rent payments had been collected.
Stag Industrial isn't just a landlord lucky enough to have a solid tenant base, though. It's also organized as a real estate investment trust, or REIT, which are tax-advantaged entities that pass along more income to shareholders than non-REIT companies are able to. And there's certainly plenty of it. Stag currently dishes out 4.7% of its stock's price in annualized cash payments, and has neither missed nor lowered a dividend payment since 2011.
Granted, its dividend growth leaves something to be desired. Dividend growth has been practically nil since 2015. Stag Industrial steadily adds properties to its portfolio, though, and is one of the best in the business when it comes to finding and improving real estate. Dividend investors should be patient. To this end, CEO Benjamin Butcher says the industrial real estate market has been restored to pre-pandemic levels, adding that Stag's potential acquisition pipeline now stands at more than $2.8 billion.
2. JPMorgan Chase
Dividend yield: 2.7%
Dividend CAGR (5-year): 15.4%
On the surface JPMorgan Chase looks like all the other big banks, and for good reason -- they all offer the same basic services to the same market. JPMorgan stands above the rest, however, in terms of resiliency.
Last quarter's results back this up. Even with the economic impact of a pandemic, revenue of $30.2 billion grew a respectable 3% year over year, easily topping estimates of $28.65 billion. Record-breaking net income of $12.1 billion was not only 42% higher than the year-earlier bottom line, but translated into earnings of $3.79 per share versus analyst expectations of $2.62.
Nearly $1.9 billion worth of that profit was the result of lowered loan-loss reserves; the economic slowdown won't lead to nearly as many loan defaults as previously expected. Regardless, the big bank is doing many things incredibly well despite the challenging environment. Its corporate and investment banking business grew at a double-digit pace last quarter, as did its wealth management arm. And, though its consumer loan portfolio shrank year over year, the average consumer deposit ended last year up 30%, while investment assets were higher by 17% year over year.
The stock price fell in response to the solid fourth-quarter report, with the bank warning there are still risks on the horizon. The company may be overselling these risks, though, particularly to investors interested in its dividend. JPMorgan easily covered its current quarterly payout of $0.90 per share. Assuming last year was as rough as things are going to get for a while, there's plenty of fiscal cushion here.
3. American Electric Power
Dividend yield: 3.6%
Dividend CAGR (5-year): 5.7%
Finally, add American Electric Power to your list of dividend stocks other than Procter & Gamble to consider.
On the surface it's just another utility name, passing along regular dividend payments to shareholders. American Electric's yield of 3.6% is a bit better than the industry average, although not by leaps and bounds. The company has also raised its dividend every year since 2004, but again, other utility names can make comparable claims.
American Electric Power brings a couple of competitive edges to the table, however.
One of those edges is payout growth. Its most recent quarterly dividend of $0.74 is 32% better than its quarterly payout from five years ago, translating into an inflation-beating annualized growth rate of 5.7%. That makes American Electric's dividend payout growth rate one of the stronger ones within the utilities sector.
The more compelling reason to choose American Electric Power over other utility names, though, is how well prepared this outfit is for the inevitable future. It is adjusting its business plan to the hard truth that more electricity generation will be coming through renewable sources going forward, and less from fossil fuels.
This industrywide paradigm shift was already under way. But with Democrats now in control of the Senate, the House, and the White House, governmental support for renewables is much more likely. American Electric currently generates 43% of its electricity using coal, while only 18% comes from green-friendly sources like wind and solar. Long-standing plans indicate the company will be generating 39% of its power from renewables by 2030, however, while only 24% of it will come from coal.
American Electric Power is already positioned for whatever green-energy mandates await.