In this period of market uncertainty and volatility, many investors are flocking to quality and stability -- companies that are built to weather the macroeconomic storm. They are also seeking out stocks that generate solid income via dividends, because good dividend stocks can not only provide you with income, but the dividends can also be reinvested to boost a stock's total return. And often, good dividend stocks are associated with high-quality, stable companies that are built for the long haul.
Here are three stocks that have been generating great dividends for a long time and should continue to over the long haul.
1. US Bancorp
Two of my selections are banks because banks are a good place to invest right now, for dividends or otherwise. And US Bancorp (USB +3.09%) (like my other bank pick) is one of the most efficient banks in the country, with an efficiency ratio of 57.5%, which is lower than the major banks. In simple terms, the efficiency ratio tallies a bank's operating costs divided by its net revenue and presents the sum as a percentage. The lower the percentage, the better.
US Bancorp consistently increased its revenue this year, buoyed by major increases in net interest income generated from its loans, due to rising interest rates.
NYSE: USB
Key Data Points
The bank was able to boost its quarterly dividend to $0.48 per share in September, up from $0.46 per share the previous quarter. This is the 11th straight year that it has raised its dividend. It also has a high dividend yield of 4.41% -- which is higher than the industry average -- with a comfortable payout ratio of 44%.
With interest rates expected to remain high well into next year and perhaps into 2024, US Bancorp should continue to generate strong revenue during this downturn. Ultimately, when the economy strengthens, potentially in the back half of 2023 or 2024, the bank should be in good shape to continue its growth as banks thrive in a growing economy when more people are borrowing and lending.
2. PNC Financial Services Group
PNC Financial Services (PNC +3.08%) is the sixth-largest bank in the country, just behind US Bancorp, which is the fifth-largest in the United States. There are many similarities between PNC Financial and US Bancorp, not the least of which is its dividend.
PNC offers one of the best dividends in the banking industry, with a quarterly payout of $1.50 per share at an above-average yield of 3.87%. It also has a very sustainable payout ratio of 38%, which suggests it can keep paying the dividend and has plenty of room to raise it going forward.
NYSE: PNC
Key Data Points
Like US Bancorp, it has a long track record of raising its dividend. This is the 12th straight year that it has increased its dividend, which means it was able to do so during the pandemic crash, when most banks were unable to boost their dividends.
PNC is also one of the most efficient large banks, with an efficiency ratio of 59%, which is an improvement from 63% the previous quarter and 69% a year ago.
And like US Bancorp, PNC Financial was able to increase its loan balances and revenue through this difficult market, helped by higher net interest income due to higher interest rates. That should continue into next year, and beyond, as the economy improves.
3. T. Rowe Price Group
T. Rowe Price (TROW +2.88%) is one of the leading asset management firms, with a primary focus on actively managed funds and investments. As the company generates revenue from fees on its assets under management, this is not a great market environment for T. Rowe Price or any money manager for that matter. So, the returns don't look good, and they probably won't next year either, at least in the first half of the year, as the market could experience another correction in 2023.
But T. Rowe Price has been through bad markets before and it has always been able to increase its dividend, including this year. It has paid out a quarterly dividend of $1.20 per share for all four quarters, up from $1.08 per share dividend last year.
NASDAQ: TROW
Key Data Points
This is the 36th consecutive year that T. Rowe Price increased its annual dividend payout, earning it a designation as a Dividend Aristocrat. It currently pays out its dividend at a robust yield of 3.96%, with a sustainable payout ratio of 49%.
The reason T. Rowe Price is considered such a great dividend stock is because, even in a bear market, it maintains high margins. It also has $4.5 billion in cash and investments, up from $4.2 billion at the start of the year, and $2.6 billion in free cash flow, which is the money a company generates from its business operations after capital expenditures.
It's a pretty good bet that the dividend will remain intact, given T. Rowe Price's efficiency and capital strength, and when the bear market ends, its assets and earnings will grow with it.
There is a lot of uncertainty out there, but these three high-yield stocks are solid, stable options for dividend investors.
