Who doesn't like to get paid to own something while doing nothing? That's precisely the allure of dividend stocks. Although it's usually mature companies that pay dividends because management feels the company has the capacity to generate returns for shareholders by paying them straight cash rather than reinvesting in the business.
The best dividend stocks balance this reinvestment and shareholder payout, likely resulting in a lower dividend yield. However, these are some of the best stocks to invest in for the long haul, and I think there are three stocks investors should be taking a closer look at during July.
1. Microsoft
Microsoft (MSFT 0.46%) is the second-largest company by market cap in the U.S. market but has growth many others would be jealous of. Sporting just under a 1% dividend yield, Microsoft is familiar to many with its business product suite and personal computing products like Xbox and the Surface Book.
However, investors should be most excited about its Intelligent Cloud, which experienced year-over-year sales growth of 26% to $19.1 billion during Microsoft's third quarter (ended March 31). Its Azure cloud computing division led the way and experienced 46% year-over-year growth.
As a whole, Microsoft's revenue rose 18% over the prior year to $49.4 billion, with earnings per share rising 9%. For the fourth quarter, Microsoft expects revenue of $52.8 billion at the midpoint, indicating 14% growth. Microsoft is likely to announce a dividend increase, as it has maintained its current quarterly payout of $0.62 per share over the last four quarters.
With the cloud computing market estimated to hit $1.6 trillion by 2030 and Azure owning a 21% market share, Microsoft could be sitting on a $336 billion future revenue stream.
Microsoft has solid future growth prospects and a decent dividend payout. These factors make Microsoft a solid choice when looking for dividend stocks.
2. Accenture
With technology becoming more integrated into the world, many businesses are looking to step up their solutions in nearly every area. Yet, most lack the expertise to enact these changes. Enter Accenture (ACN 0.17%). Accenture is a $175-billion consulting firm that employs more than 710,000 people worldwide. It can design, build, and maintain many products and solutions across multiple industries.
As for a dividend, Accenture pays a respectable $3.88 annually, giving it a 1.4% yield.
Accenture recently reported its third-quarter (ended May 31) results on June 23, which were everything investors could hope for. Its revenue rose 22% from the year-ago quarter to $16.2 billion, and its earnings per share (EPS) rose 16% to $2.79, despite a 6% impact from suspending business in Russia. Bookings rose 10% to $17 billion, indicating businesses are still willing to reinvest in their technology despite economic headwinds arising.
Fourth-quarter guidance was also strong, with the company guiding 22% growth at the midpoint.
However, the most impressive Accenture metric is its return on invested capital (ROIC).
ACN Return on Invested Capital data by YCharts.
This metric conveys how much value a company creates versus what it invests, and Accenture has been masterful at this crucial business technique for a long time.
Additionally, a high ROIC will allow Accenture to return more capital to shareholders, making the stock a top pick for investors looking for a great dividend payer.
3. Texas Instruments
Texas Instruments (TXN 2.35%), the highest yielding stock on this list, pays its investors a 3.1% yield. It isn't on the cutting edge of chipmaking. Instead, it focuses on making essential semiconductors utilized in nearly every device that contains electronics.
That isn't a criticism of Texas Instrument's product line, as they are incredibly vital (ever heard of the chip shortage affecting automotive production?). However, Texas Instrument's growth isn't going to blow investors away.
TXN Revenue (Quarterly YOY Growth) data by YCharts.
Texas Instruments punched another solid quarter for sales with 14% year-over-year growth during its first quarter. Additionally, its EPS was up 26% from the prior year, giving it more resources to reward investors.
However, Texas Instruments will be reinvesting its profits to build more semiconductor production facilities in the U.S., with the company recently breaking ground for one of these plants in May 2022. The company estimates these plants, along with its others, will support 7% annual revenue growth from 2030 and beyond.
Texas Instruments also has an impressively high ROIC of 42%. If its new facilities generate revenue management projects, this critical metric will maintain its high value.
Texas Instruments pays investors a solid dividend and has plans to maintain its growth in the future. Therefore, investors should keep the company at the top of their list regarding dividend stocks.
Dividend stocks can provide investors with market-beating returns and consistent and maintained growth. This stock trio checks both boxes and is primed to outperform the market over the next three to five years.
