Inflation hasn't been this high in decades, and for consumers who are earning the same amount of money they were last year, it means they have less disposable income. It underlines the importance of investing in dividend stocks and adding more to your income stream to help offset the impact of inflation.
Not only do stocks such as Cardinal Health (CAH 1.84%), Enbridge (ENB -1.26%), and Camping World Holdings (CWH -1.84%) pay you an above-average dividend, but they are also quality dividend growth stocks to own. In fact, investing a total of $78,000 across these companies can generate more than $4,000 in annual income for your portfolio.
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1. Cardinal Health
Cardinal Health distributes pharmaceuticals all over the world, providing millions of patients with access to tens of thousands of healthcare products. The company also says it serves close to 90% of U.S. hospitals, making it a great pick if you need a quality healthcare investment in your portfolio.
In its most recent results for the period ending Sept. 30, 2021, Cardinal Health reported sales of just under $44 billion, which grew 12.6% year over year. Its diluted per-share profit of $0.94 for the quarter is well above the $0.4908 that the company pays out in quarterly dividends (per share). And at that rate, investors are earning a yield of 3.7%. That's nearly three times the S&P 500 average of 1.3%.
A $26,000 investment here would generate roughly $960 annually. But because Cardinal Health is a Dividend Aristocrat, with a strong track record for increasing dividend payments, odds are you'll be collecting more from its payouts over the years if you just buy and hold.
2. Enbridge
Another Dividend Aristocrat is pipeline company, Enbridge. The stock's 6.5% yield is tops on this list by a decent margin. Some investors may be hesitant to invest in oil and gas stocks, in part due to climate change and the overall volatility in oil prices, but they might think twice once they see that Enbridge shares only rose 22% while the S&P 500 jumped by 27% in 2021. This is despite rising oil prices and a potential surge in demand for the commodity as consumers resume traveling. And while the stock underperforms the market, Enbridge may be an optimal buy. If its share price takes off, its impressive yield will shrink.
Income investors may be skeptical about the dividend, however, likely noting that the stock's payout ratio is more than 100% and might suggest that it is unsustainable. But the company bases its dividend policy on distributable cash flow (DCF) rather than net income. And based on that (DCF excludes items such as amortization, financing costs, and maintenance-related capital expenditures), it's within its target payout range of between 60% and 70%. Enbridge anticipates that its DCF will grow annually until 2024 by 5% to 7%, and so its dividend hikes will likely continue to increase during that time. Today, its streak of dividend increases sits at 27 straight years.
Enbridge has consistently generated a profit in each of the past four quarters and in the trailing 12 months, its net margin is a solid 13% of revenue. Investing $26,000 into this stock would earn you close to $1,700 in annual dividend income.
3. Camping World
Camping World isn't an Aristocrat, but it pays a generous dividend yield of 5.4%. And the company recently doubled its dividend, announcing in August 2021 that it would be paying a quarterly dividend of $0.50, up from its previous payment of $0.25. This is a company that isn't shy about distributing out its profits back to investors, and in 2020, it even paid a special dividend of $1 per share.
What's great about Camping World isn't just that it pays a dividend and has consistently reported a profit over the past four quarters, but that it's also a great investment to hold amid the uncertainly of the pandemic. For consumers who want to travel but may not want to worry about restrictions related to air travel, a road trip using one of the company's recreational vehicles can be a great way to strike a balance. Camping World also sells camping supplies and equipment.
For the period ending Sept. 30, 2021, its sales of $1.9 billion rose 14% year over year and profits of $79.7 million increased by an impressive 37%. On a per-share basis, its diluted profit of $1.72 for just one quarter easily covers the company's quarterly dividend payment, leaving the potential for many more rate hikes to come from Camping World in the future.
Today, a $26,000 investment in Camping World would generate more than $1,400 in dividend income for your portfolio.
