Dividend stocks can provide you with a reliable stream of passive income. The challenge, of course, is being able to identify the stocks that can be counted on to deliver cash to their investors quarter after quarter and year after year.
You'll want to invest in strong, high-quality companies with solid growth prospects. You'll likely also appreciate businesses with proven histories of rewarding their share owners with rising cash payouts.
The following three dividend stocks meet these challenging criteria. All three are attractive buys today.
1. Microsoft
Few businesses are as financially sound as Microsoft (MSFT 1.33%). The tech juggernaut has over $100 billion in cash and investments on its fortress-like balance sheet. Microsoft is also a profit- and cash-generating machine, with a staggering $70 billion in net income and $63 billion in free cash flow over the trailing 12 months.
NASDAQ: MSFT
Key Data Points
The software star passes roughly a quarter of these profits on to its shareholders via a steadily rising dividend. Its stock currently yields a respectable 1.1%.
MSFT Dividend data by YCharts.
A host of highly regarded cloud technology platforms is driving this impressive financial performance. Microsoft's Office 365 dominates the corporate productivity software market, while Windows powers more than 70% of desktop computers worldwide. And Microsoft's Azure computing infrastructure platform is a potent growth driver as businesses increasingly shift their operations to the cloud.
With these broad-based revenue streams and Microsoft's bountiful cash reserves helping to reduce the risks for investors, you'll be able to sleep well at night while owning this stalwart dividend stock.
2. Apple
Like Microsoft, Apple's (AAPL +2.08%) financial strength is awe-inspiring. The tech colossus produced a stunning $100 billion in net income and $111 billion in free cash flow in its 2022 fiscal year, which ended on Sept. 24. Apple also has a sterling balance sheet, with a whopping $169 billion in cash and investments.
NASDAQ: AAPL
Key Data Points
The iPhone lies at the center of Apple's vast technological empire. Macs, iPads, and wearables like the Apple Watch and AirPods help to round out the company's highly regarded product portfolio. Popular services -- such as Apple Pay, iCloud+, and a promising new advertising network -- provide additional growth and profit potential.
Apple's stock yields a modest 0.7%. But that figure belies the massive scale of its capital returns to shareholders, which included nearly $15 billion in dividends and over $89 billion in stock buybacks in fiscal 2022 alone.
Moreover, Apple has raised its cash payout every year since it began paying a dividend in 2012. Yet the tech giant is still paying out only about 15% of its profits as dividends, so investors can safely expect their cash payments to continue to increase in the coming years.
3. Starbucks
From its humble beginnings as a single coffee shop back in 1971 to its well-earned status as a global titan with over 35,000 stores today, Starbucks (SBUX +0.63%) is one of the greatest growth stories in corporate history. Yet, with some major international markets still largely untapped, Starbucks has a long runway for expansion still ahead.
Much of this growth will take place in China. The Chinese government's decision to ease its COVID-19-related restrictions and reopen its economy should provide Starbucks with a powerful growth catalyst in 2023.
NASDAQ: SBUX
Key Data Points
Looking further ahead, the company plans to have nearly 9,000 stores in China by 2025, up from roughly 6,000 today. Starbucks' store count in the country could eventually eclipse the over 15,000 locations it has in the United States, considering that China's population is four times larger than that of the U.S.
All told, management expects Starbucks' revenue and earnings per share to grow by as much as 12% and 20%, respectively, in fiscal 2023. That type of growth should allow the coffee king to boost its cash payout to shareholders, which currently yields a solid 2%, and extend its 12-year streak of annual dividend increases.
