There is no shortage of investing strategies to make money on Wall Street. However, buying dividend stocks has historically been among the most successful.
According to a report published 10 years ago by J.P. Morgan Asset Management, a division of money-center bank JPMorgan Chase (JPM 0.15%), income stocks have a history of wildly outperforming companies that don't offer a dividend. Between 1972 and 2012, companies that initiated and grew their payouts averaged a 9.5% annual return. By comparison, the annualized return of non-dividend stocks over the same 40-year period was a mere 1.6%.
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But not all dividend stocks are the same. While the following seven companies aren't typically going to jaw-drop investors with their yields, the sheer dollar amount they devote to paying dividends certainly will. On a combined basis, these seven dividend stocks are paying out approximately $96 billion each year to their shareholders.
1. Microsoft: $20.24 billion in annual dividends paid to shareholders
The company that currently holds the crown as having the highest nominal-dollar dividend in the country is tech stock Microsoft (MSFT -2.45%). Although Microsoft's yield of 1.1% isn't much of a head-turner, its base annual dividend of $2.72 with 7.44 billion shares outstanding equates to an annual payout in excess of $20 billion.
One of the reasons Microsoft can sustain such a mammoth dividend is its revenue mix. Although core segments like Windows are no longer a growth story, its legacy operations still generate substantial cash flow. Microsoft has been able to utilize this cash to reinvest in faster-growing initiatives, as well as make acquisitions (e.g., LinkedIn and Nuance Communications).
Microsoft's future is very much dependent on the cloud and artificial intelligence (AI). Excluding currency movements, Azure delivered 38% sales growth in the December-ended quarter, and now accounts for almost a quarter of global cloud infrastructure service spending. With the exception of Windows Commercial and Office Consumer products and cloud services, every other cloud-focused sales channel grew by a double-digit percentage (sans currency movements) in the most recent quarter.
Historically high oil prices have helped ExxonMobil significantly grow its cash flow. WTI Crude Oil Spot Price data by YCharts.
2. ExxonMobil: $14.81 billion
Historically, big oil has always been an excellent source of dividend income. Global energy major ExxonMobil (XOM 0.23%) keeps that tradition alive, with an annual payout to its shareholders of around $14.8 billion.
It's no secret that ExxonMobil is benefiting immensely from an increase in the price of crude oil. Russia's invasion of Ukraine, which has no obvious end date, calls into question Europe's energy supply needs. Couple this with three years of reduced capital investment resulting from the COVID-19 pandemic, and you have a recipe for constrained supply and an above-average price for oil.
ExxonMobil's payout is further protected by its integrated operating model. While it generates the lion's share of its profit from drilling oil and natural gas, it also operates chemical plants and refineries (aka, its downstream assets). Even though this downstream segment doesn't have the same juicy margins as its drilling operations, it serves as the perfect hedge against crude oil price weakness. When the price of oil drops, demand for petroleum products often increases.
3. Apple: $14.55 billion
Apple (AAPL 0.52%) is another one of the highest-paying dividend stocks on the planet, in nominal-dollar terms. There's a reasonable chance it would have topped this list had the company not repurchased more than $550 billion worth of its common stock over the past 10 years and reduced its outstanding share count.
The stability of Apple's payout begins with its mountain of operating cash flow ($109.2 billion in calendar year 2022). This cash flow represents the ongoing success of its physical product portfolio (iPhone, iPad, and Mac), as well as the burgeoning growth potential of its subscription service segment. Services are a higher margin segment for Apple, and will play a key role in the coming years by minimizing sales fluctuations tied to iPhone replacement cycles.
Apple also has an incredibly loyal customer base that trusts the brand. According to Interbrand, Apple has held the No. 1 spot as the world's most-valuable brand for 10 consecutive years. Interbrand's brand value calculation takes into account the financial performance of a brand's products and services, the role a brand plays in the purchase decision-making process, and a brand's ability to keep customers loyal.
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4. JPMorgan Chase: $11.76 billion
Similar to big oil, financial stocks are known for their steady dividends and healthy capital-return programs -- especially during economic expansions. Among bank stocks, JPMorgan Chase is the cream of the crop, with an $11.76 billion annual payout to its shareholders.
This is proving to be a particularly interesting time for bank stocks. Normally, when the winds of recession begin blowing, the Federal Reserve comes to the rescue by lowering interest rates to spur lending activity. But with the Fed 100% focused on taming historically high inflation, higher interest rates are translating into beefier profits for bank stocks. In 2022, JPMorgan Chase recognized $67.1 billion in net interest income, up $14.4 billion from the previous year.
JPMorgan Chase has also made steady progress encouraging its customers to bank online or via mobile app. As of the end of December, it had 49.7 million active mobile customers, which was up 4.2 million from the prior-year period. The more people bank online, the more flexibility JPMorgan Chase has with regard to branch consolidation and improving its operating efficiency.
5. Johnson & Johnson: $11.75 billion
There, arguably, isn't a healthcare stock on the planet that rewards its shareholders as well as Johnson & Johnson (JNJ -1.15%). J&J, as the company is more commonly known, has raised its dividend for 60 consecutive years and is one of only two publicly traded companies with the highest possible credit rating (AAA) assigned by Standard & Poor's, a division of S&P Global. For those curious, Microsoft is the other public company with a AAA rating.
There are two explanations for Johnson & Johnson's impressive dividend. First of all, healthcare stocks are naturally defensive. Since we can't control what ailments we develop or when we become ill, there's always going to be demand for prescription drugs, medical devices, and healthcare services. This consistency of demand helped J&J to 35 consecutive years of adjusted operating earnings growth prior to the pandemic.
The other factor that allows J&J to support a juicy payout is its sales mix. For more than a decade, high-margin pharmaceuticals have grown into a larger percentage of Johnson & Johnson's revenue. However, brand-name drugs have a finite period of sales exclusivity. J&J fights back against future patent expirations by reinvesting in its pipeline, collaborating with other drug developers, and leaning on its world-leading medical device segment.
Chevron has increased its base annual payout for 36 consecutive years. CVX Dividend data by YCharts.
6. Chevron: $11.54 billion
Just in case it wasn't clear the first time, big oil stocks are known for their hefty dividends. Chevron (CVX 1.04%), which has increased its base annual payout for 36 consecutive years, is now parsing out over $6 per share in dividends and more than $11.5 billion per year, in aggregate.
Among large-scale energy stocks, Chevron's payout is especially safe given the health of its balance sheet. Higher oil and gas prices allowed Chevron to reduce its net debt from $25.7 billion to just $5.4 billion last year. That's a net debt ratio of only 3.3%, which gives the company plenty of financial flexibility to increase its dividend, as well as undertake a $75 billion share repurchase program.
Similar to ExxonMobil, Chevron's integrated operating structure plays a big role in its ongoing success. While higher energy commodity prices are far more favorable for its high-margin drilling segment, the transmission pipelines, refineries, and chemical plants Chevron owns allow it to generate predictable cash flow in virtually any economic climate.
7. Verizon Communications: $10.96 billion
The seventh brand-name dividend stock that's been sharing the wealth with its investors is telecom stock Verizon Communications (VZ -0.68%). Verizon's 6.8% yield is tops on this list, with the company paying close to $11 billion annually to its shareholders.
Despite Verizon's best growth days being long gone, it does have a handful of catalysts helping to modestly grow both its profits and payout. The first of these is the ongoing rollout of 5G wireless infrastructure. Upgrading its wireless network is both costly and time-consuming. However, this investment should be well worth it, with consumers increasing their data consumption.
The other notable catalyst has been broadband growth. After making sizable investments in 5G mid-band spectrum, Verizon delivered its best quarter of broadband net additions -- 416,000 net additions in the fourth quarter -- in more than a decade. Broadband tends to be a steady driver of cash flow, as well as an excellent lure to encourage service bundling.
