There are hundreds of dividend-paying stocks in the S&P 500. They come in all shapes and sizes. Some pay out high dividend yields, while others have long histories of steadily increasing their payouts. However, a handful of companies offer the best of both worlds.
Four dividend stocks that stand out for their combination of yield and dividend growth track record are Chevron (CVX -2.35%), Consolidated Edison (ED -1.59%), Federal Realty Investment Trust (FRT), and Realty Income (O -0.22%).
A big oil dividend
Chevron has increased its dividend for a remarkable 34 straight years, qualifying it as a Dividend Aristocrat. The oil company has been able to weather that sector's volatility to deliver consistent dividend growth. Among the keys to its success are its integrated operations and strong balance sheet. Chevron produces oil and natural gas, manufactures transportation fuels, lubricants, and petrochemicals, and operates other energy assets. This diversification helps it generate steadier cash flow to support its dividend, which currently yields 4.6%. That's well above the S&P 500's roughly 1.3% average.
Chevron's oil business faces uncertainty as the global economy sets its sights on reducing carbon emissions. That's leading Chevron to accelerate its investment in lower carbon opportunities by tripling its spending plan to $10 billion through 2028 on things like renewable fuels, hydrogen, and carbon capture. It believes that these investments will pay dividends down the road. They will help the company lower its carbon intensity and be part of the global solution to climate change while continuing to supply the economy with the energy it so desperately needs.
A powerful dividend
Consolidated Edison has been an exceptional dividend stock over the years. The New York City-focused utility has increased its payout for 47 straight years. It currently yields 4%, an attractive level in today's low rate environment.
The company is a leader in clean energy. It's the second-largest solar energy producer in North America and has a large-scale wind business. Meanwhile, it's investing heavily to improve the long-term sustainability of its operations. It expects to invest $12.7 billion through 2023, with a third of that money going toward green projects and the rest to improve the safety and reliability of its assets. Those investments should enable Consolidated Edison to continue growing its cash flow, which should support future dividend increases.
The king of the hill
Federal Realty has treated its investors like royalty over the years. The real estate investment trust (REIT) has increased its payout for 53 consecutive years. That's the longest streak in the REIT sector and qualifies it as a Dividend King. Federal Realty's payout currently yields 3.4%.
The retail REIT has steadily grown its dividend over the years by focusing on increasing its cash flow per share. One way it has done that is by concentrating on owning high-quality retail-based properties in major coastal markets. They tend to benefit from long-term population growth and steady demand by retailers. It will also selectively acquire properties and invest in development and redevelopment projects, including adding new asset types to its locations like apartments. These investments have enabled the REIT to steadily grow its cash flow to support consistent dividend increases.
A dependable dividend
Realty Income lives up to its name. The REIT, which pays a monthly dividend, has increased its payout 113 times since listing on the New York Stock Exchange in 1994, including in each of the last 96 consecutive quarters. Overall, it has given investors a raise for 26 straight years, qualifying it as a Dividend Aristocrat. The retail REIT currently yields 4%.
Realty Income has grown its payout over the years by steadily acquiring freestanding properties net leased to high-quality tenants. Those leases require the tenant to pay building insurance, real estate taxes, and cover maintenance, enabling it to generate steady cash flow. Meanwhile, it focuses on leasing to investment-grade tenants in durable industries, like convenience stores, grocery stores, home improvement stores, and pharmacies. It also has a growing portfolio of industrial real estate. Realty Income compliments all that with a top-notch financial profile, giving it the flexibility to continue growing its portfolio, cash flow, and dividend.
Top-quality dividend stocks
While hundreds of companies in the S&P 500 pay dividends, Chevron, Consolidated Edison, Federal Realty, and Realty Income stand out for their combination of yield and growth track record. All four appear to have the means to continue growing their attractive dividends in the future. That makes them rise to the top of the crowded field of S&P 500 dividend stocks.