PepsiCo (PEP +0.67%) is a great dividend stock. With a yield of 2.8%, the stock earns you well above the S&P 500 average of just 1.5%. And on a $25,000 investment, the stock could generate $700 in income for your portfolio on an annual basis. But as good of a yield as PepsiCo offers, you don't have to look too far to find even better payouts that you can secure today.
Patterson Companies (PDCO +0.00%), Enbridge (ENB +0.87%), and Kellogg (K +0.00%) can each provide you with higher dividend payments. Plus -- neither their payouts nor their businesses are going anywhere anytime soon.
Image source: Getty Images
1. Patterson Companies
Patterson stock yields 3.2%, so if you were to invest $25,000 in the healthcare company, you could expect to earn $100 more in dividends per year than you would from PepsiCo.
On top of that, its business thrives because of its diverse revenue streams. In the nine-month period ending Jan. 23, the company reported $4.4 billion in sales, up 3.5% year over year. Its animal health segment contributed $2.6 billion of that revenue, accounting for 60% of the top line. Dental-related sales totaled $1.7 billion and made up close to 40%. With more people buying pets amid the pandemic, it is not surprising that the animal health business grew at a faster rate (5.5%) than the dental segment (1.1%).
Although the company has a net loss over the trailing 12 months, putting its payout ratio into the negative, that is mainly due to non-operating expenses. And its per-share earnings have been above $0.50 in each of the past two quarters, which is close to double the $0.26 that its pays out in quarterly dividends.
At a forward price-to-earnings (P/E) multiple of 16, the stock is cheaper than the average holding in the Health Care Select Sector SPDR Fund, for which investors are paying more than 27 times earnings. With a decent valuation, a diverse business, and a solid dividend, Patterson makes for a great income stock to buy right now.
2. Enbridge
Pipeline company Enbridge pays a remarkable yield of 7%. On a $25,000 investment, that would bring in $1,750 in annual recurring dividend income -- roughly $1,000 more than what you would earn with PepsiCo stock. Although oil and gas seems like a shaky sector to invest in right now, given that travel is down and demand for oil isn't particularly strong, that will change as the economy recovers and people begin to travel again.
You might also be tempted to overlook this stock because its payout ratio is well over 100%. However, Enbridge has generated $9.8 billion Canadian dollars in cash from its day-to-day operating activities over the past 12 months. That is more than the CA$6.9 billion it paid out in dividends during that time frame. Its profit margin has also been above 17% in two of the past three quarters.
Enbridge's focus on long-term contracts provides it with much more stability than your average oil and gas stock. The company has also raised its payouts for 26 years in a row, putting it into the exclusive category of a Dividend Aristocrat. Its forward P/E of 18 is a bit higher than Patterson's, but it isn't expensive as that is in line with the multiple investors are paying for oil and gas giant ExxonMobil.
3. Kellogg
Rounding out the list is stalwart stock, Kellogg. The packaged goods company is known for its popular cereal products and other food brands, including Pringles and Rice Krispies. Although demand may taper off for its products once pandemic-induced buying is gone, this is still a company that delivers consistent, reliable results year after year. Sales of $13.8 billion in 2020 were only up 1.4% year over year. And over the past five years, its top line has stayed within a fairly narrow range of $12.9 billion to $13.8 billion.
You won't likely see significant year-over-year growth from the business, but it can make for an excellent income investment. The company has had no trouble posting profits even amid the pandemic. Its payout ratio of 63% sits at a reasonable percentage, and its $0.57 quarterly payment yields 3.6% annually. Here, a $25,000 investment could earn you roughly $900 every year. Like Enbridge, Kellogg has increased its dividend payments regularly. Although it isn't an Aristocrat, its increased dividend streak is now at 16 years.
Its forward P/E of 16 isn't expensive and is comparable to that of industry giant Kraft Heinz. Although Kellogg may seem like a boring investment, it could be music to the ears of risk-averse investors who just want to collect a stable dividend and not worry about anything else. Kellogg is a rock-solid income stock that you can buy and hold in your portfolio for decades.
