One of the great things about dividend stocks is that they deliver income to investors on a recurring basis. But given that most of them make those payments quarterly, your income stream can get a bit lumpy. One strategy investors can deploy to fix that is to buy stocks that distribute their payouts on different schedules. Do it right and you can have dividend income rolling in every month of the year.
Three high-yielding stocks that you can invest in to accomplish this are Walgreens Boots Alliance (WBA 3.69%), TC Energy (TRP 1.16%), and AT&T (T 1.10%). Divide up an investment of about $95,000 among them, and you would bring in at least $400 in dividends each month.
1. Walgreens
At its current share price, retail pharmacy giant Walgreens pays investors a dividend that yields 4.6%. That's fairly high when you consider the average stock in the S&P 500 averages around 1.4% today. To collect $400 every time Walgreens distributes a dividend -- in March, June, September, and December -- you'd need to invest roughly $34,800 in the stock.
It has been a rough ride for Walgreens shareholders over the past five years. The stock has lost close to 50% of its value during that time. Modest profits and minimal growth haven't been a recipe for investor success. However, Walgreens is shifting more resources toward healthcare and offering primary care through a partnership with VillageMD. The company has also been launching Health Corners at its stores (it expects more than 100 by the end of the year), which allow individuals to get in-person advice from a health expert. By giving more of an incentive for customers to visit their local Walgreens, that can improve foot traffic and lead to greater revenue growth. Walgreens is a trusted retail pharmacy and by offering more medical care and advice to its customers, it can unlock more value in the long term.
Plus the company's margins should improve with Walgreens stating that it is on track to achieve $3.5 billion in annual cost savings by 2024 through its transformational cost management program. While the past few years haven't been great for the business, the company is taking steps to improve both its growth prospects for the future and its bottom line.
And as a Dividend Aristocrat, Walgreens has a solid track record for reliable dividend growth. Although its margins may be lacking -- the company's normal profit margin is just a few percentage points of revenue -- that hasn't prevented it from raising its dividend every year for decades. If your primary focus is dividend income, Walgreens makes for an excellent investment to put in your portfolio.
2. TC Energy
You can get an even better yield from energy infrastructure company TC Energy. At the current share price, it yields 5.4%, so you would need to invest roughly $29,630 into the stock to generate $400 in quarterly dividend payments. The company makes its distributions every January, April, July, and October.
Because it's a midstream player, TC Energy provides investors with much more stability than many oil and natural gas stocks. Regardless of what's happening with the prices of fossil fuel commodities, it keeps collecting its fees. Even amid the downturn in oil prices in 2020, TC Energy's revenue dropped by less than 2% to 13 billion Canadian dollars. And in 2021, the top line rose 3% to CA$13.4 billion. Earnings per share of CA$4.27 last year were 23% higher than the CA$3.48 in dividends TC Energy paid out.
Over multiple decades, the company has increased its dividend at a compound annual rate of 7%. Like Walgreens, TC Energy's payouts have been incredibly consistent and make it an ideal stock for dividend investors to own for the long haul.
3. AT&T
WarnerMedia is no longer part of AT&T, and that's a good thing for dividend investors. Trying to balance growth and competing with other streaming services (and potentially spending billions to fight for content) didn't seem like it was going to go hand-in-hand with the telecom's continued strong dividend payouts.
With WarnerMedia hived off, AT&T can focus on its core telecom business again, and its stock looks like a much more attractive option for income-oriented investors. The telecom also recently increased its prices on older plans, which should bode well for its financials while at the same time nudging more consumers into its newer, unlimited plans.
Like Walgreens, AT&T has also been working on bringing its costs down. By the end of this year, it expects to achieve $1 billion in cost reductions. The company plans for further reductions as well, with another $2 billion in savings potentially being realized before the end of next year. By being a stand-alone business, and no longer having to worry about the high costs that can come with developing and acquiring content for a streaming business, AT&T says it is able to pursue more transformational initiatives to improve its bottom line. AT&T is also working on using its free cash flow to bring down its debt levels, and even suggested that share buybacks could be a possibility as that happens, which could help give its share price a boost. Trimming its costs and debt should make the stock a safer buy over the long term.
AT&T adjusted its dividend after the WarnerMedia spinoff from $2.08 per year to $1.11. The good news is that it reflects a manageable payout ratio that's estimated to be 40% of free cash flow. And it's still good enough to make it a fairly high-yielding stock. At the current share price, that amounts to a yield of 5.3%. Investors would need to buy approximately $30,200 worth of AT&T stock to generate quarterly payments of $400. And with its payouts typically occurring every February, May, August, and November, that would cover the rest of the calendar and give investors dividend payments every month from the stocks on this list.
AT&T completed its breakup with WarnerMedia (which is now part of Warner Bros. Discovery) in April. Given that it has paid dividends for decades and now has a more sustainable payout and a more stable future ahead, it has become a much more attractive income investment to buy today.
