If you're looking for reliable dividend income, look beyond the stocks that are making headlines. Growth stocks tend to dominate the news. But when a company is in growth mode, it typically needs its excess cash to fuel its expansion, rather than to pay shareholders.
The following three stocks aren't the most exciting picks for your portfolio. But they're solid dividend stocks if you're looking for reliable investment income.
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1. STAG Industrial
STAG Industrial (STAG -1.86%) is a favorite of investors looking for monthly dividend income. It's a real estate investment trust, or REIT -- which means it's required to pay at least 90% of its taxable income in dividends -- that specializes in industrial property. STAG has an uninterrupted streak of monthly dividend payments since September 2013. Its latest dividend of $0.121 per share amounts to a 4.3% annual yield.
While commercial REITs had a tough year due to the pandemic, STAG has been somewhat of an outlier. During its most recent earnings call, management reported that 99.6% of billed rents were collected in 2020.
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It owns and operates triple-net lease single-tenant industrial properties, such as warehouses and distribution centers, which tend to be relatively stable. Demand for these types of properties is growing as e-commerce accelerates -- and STAG estimates that 40% of its tenants handle e-commerce activity. But it's also well-diversified. Its single largest tenant is Amazon (AMZN -1.64%), which only makes up 3.9% of its portfolio. Its top 10 tenants by annual base rent account for just 12.3% of its portfolio.
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2. AT&T
If you're looking for a stock that offers a combination of steady dividends and reliable growth potential, AT&T's (T 1.88%) rival Verizon Communications (VZ -0.53%) is probably your better pick. But if you're focused solely on maximizing dividend income, AT&T wins hands down. AT&T's $0.52 quarterly dividend payment amounts to a yield of nearly 7% vs. 4.5% for Verizon.
With 35 consecutive annual dividend hikes to its name, AT&T is a member of the elite Dividend Aristocrats. Though the telecom giant didn't raise its dividend in December 2020, it will hang on to its aristocrat status so long as it increases its payout by the end of 2021.
Some investors have worried about the safety of AT&T's dividend due to its debt, much of which stems from the monstrosity that was its $67 billion DIRECTV acquisition in 2014. AT&T just reached a deal to offload 30% of its DIRECTV stake, which will free up $16.25 billion in cash. Deal aside, AT&T still has plenty of cash to keep the generous dividends coming. Its free cash flow for 2020 was $27.5 billion, of which $15 billion went toward dividends.
CEO John Stankey recently affirmed AT&T's commitment to maintaining its dividend during an interview with CNBC. He estimated that dividend payments will account for less than 60% of AT&T's projected $26 billion in free cash flow for 2021, which amounts to a healthy payout ratio.
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3. Procter & Gamble
With a dividend yield of 2.5%, Procter & Gamble's (PG 0.68%) $0.791 per share quarterly dividend looks unimpressive compared to the other two stocks on this list. But it's hard to imagine a dividend that's safer than Procter & Gamble's. The consumer staples behemoth is a Dividend King, with 64 years of consecutive annual dividend increases and a 130-year record of dividend payments.
In fiscal 2020, Procter & Gamble grew its organic sales by 10% in the U.S. and 8% in China. It also made needed strides on the digital front, increasing e-commerce sales by 40%.
Still, no one is going to tell you that Procter & Gamble is a growth machine. But there's a pretty good chance you use its products in your day-to-day life. For example, Morningstar estimates Procter & Gamble has a market share of more than 60% for razors and blades and 25% for baby care, feminine hygiene products, and fabric care. Even during a recession, people don't typically consume less of these products.
In 2020, Procter & Gamble's cash flow from operating activities was $17.4 billion, and its dividend payout ratio was a sustainable 57.69%. Its stock isn't going to deliver eye-popping returns, but Procter & Gamble has plenty of cash to keep those dividend payments coming for the foreseeable future.
