The average tax return this season is looking to be higher than it was a year ago. Although the official numbers may change, the average refund as of Feb. 25 is $3,473 -- 23% more than last year's average of $2,815.
If you've got sufficient savings where you can justify investing your tax refund, a good option to consider is putting it into dividend stocks. They can generate recurring cash flow for you that may even grow over time. Three top dividend stocks that pay high yields and have been raising their dividend payments in recent years include Walgreens Boots Alliance (WBA -1.33%), Enbridge (ENB 0.68%), and Western Union (WU 1.42%).
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1. Walgreens
Walgreens is an excellent stock for income investors to consider. At 4%, the pharmacy retailer pays nearly three times the S&P 500 average yield of 1.4%. On a $3,000 investment, you would be earning $120 per year in dividends from Walgreens vs. just $42 from the average stock on the broad index.
Plus, the longer you hold Walgreens stock, the more you'll make on that investment. For 46 years in a row, the company has raised its dividend payments. Four more annual increases will make it a Dividend King -- the most exclusive class of dividend growth stocks. Last year, the company raised its quarterly payouts by 2.1% to $0.4775.
Walgreens has proven to be a resilient company over the years, consistently posting a profit. And while its net margins are typically low at no more than 5% of revenue, given that the business generates more than $130 billion in sales, that can still translate into several billion dollars in profit. This is a safe healthcare stock to buy and hold, not only for its stability, but also the stock's growing dividend.
2. Enbridge
Pipeline operator Enbridge isn't anywhere near Walgreens' streak, but at 27 consecutive years of dividend increases, it has firmly established itself as a Dividend Aristocrat. And Enbridge pays a higher yield than Walgreens today at just over 6%.
This is an especially attractive stock right now given the surge in oil prices this year. That could lead to more activity and throughput on Enbridge's pipelines, not to mention bullishness surrounding oil and gas stocks in general. Year to date, as the S&P 500 has declined by 9%, shares of Enbridge have risen more than 15%. And that's still modest compared to other oil and gas stocks, including ExxonMobil, which is up around 40%.
On a $3,000 investment, Enbridge could be delivering $180 per year in dividend income based on its current payout. And with the company previously expecting to grow distributable cash flow (a key metric it focuses on when determining its payouts) at a rate of at least 5% through to 2024, this looks to be an incredibly solid, promising dividend stock to be holding today.
3. Western Union
At 5.3%, Western Union's dividend yield is also well above average. It's the only stock on this list that isn't an Aristocrat; the company's current dividend-increasing streak only goes back to 2015. The company increased its payout by 4.4% last year to a quarterly payment of $0.235.
Western Union also rewards its shareholders through share repurchases, which help boost the stock's price and can strengthen overall returns. The company made $175 million worth of repurchases in the last three months of 2021, and there could be more of that on the way; in February, it announced its board had approved a $1 billion share repurchase authorization that is good up until the end of 2024.
With 150 million customers around the world, Western Union is a global company that should do well as economies get back to normal and recover from COVID-19. And that makes it an incredibly attractive financial stock to hold for the long haul.
