Looking for a little more investment income? If so, you're not alone. Dividend stocks look much more attractive against the backdrop of economic uncertainty and market volatility. Dividend yields are higher than they've been in years, as well, lifted by rising interest rates on bonds.
The question is, which dividend stocks should you buy? Don't make it more complicated than it has to be. Some of the market's very best dividend payers are hiding in plain sight. They're the companies you see every day. You may even be one of their regular customers.
1. Verizon
If you're looking for meaningful growth from Verizon Communications (VZ 0.88%), forget about it.
Numbers from Pew Research indicate 97% of U.S. adults already own a mobile phone. Although Verizon also offers cable television and at-home internet services, its cable business is a victim of the same cord-cutting movement that's slowly crushing the conventional cable TV industry, while its broadband operations only boast about 8 million subscribers. That market is pretty well saturated too.
Any real growth of its customer base is going to come from population growth. And the country's population has grown by less than 1% in recent years. This pace is projected to slow even more going forward.
If your only concern is reliable, sustainable dividend income, though, Verizon's got it in spades. It's paid out something in every single quarter since it came into existence back in 2000 by virtue of the merger between Bell Atlantic and GTE. Better still, the company's raised its quarterly dividend payment every year since 2007.
This consistent dividend and dividend growth is rooted in consumers' commitment to keeping their mobile phones connected. People might skip a meal or postpone the purchase of a new car. By and large, though, we're addicted to our cellphones.
Offsetting the lack of real growth potential here is the sheer size of the dividend payment to newcomers. Verizon's current dividend yield stands at an impressive 7.1%, making it one of the highest-yielding names within the S&P 500.
2. Coca-Cola
Shares of The Coca-Cola Company (KO 0.68%) aren't paying out nearly as much as Verizon is right now -- its yield is much more modest at 3.1%. What the stock lacks in current payout, however, it makes up for in dividend growth.
The current quarterly payment rate of $0.46 per share is 18% bigger than the dividend just five years ago and 64% higher than the quarterly dividend 10 years ago. Indeed, Coca-Cola has upped its annual dividend payout every year for the past 61 years, qualifying it as one of the entire market's very few Dividend Kings, or companies that have raised their dividend payments for at least 50 consecutive years.
This track record is ultimately a testament to the brand name's enduring strength. IG Markets ranks Coca-Cola as the world's fifth-most-recognized brand, while Interbrand suggests Coke is the planet's seventh-best global brand. Business Insider ranks it the eighth-most-powerful brand in the world.
You get the idea. When it comes to selling something as simple as soda or one of the company's other lines like Dasani water, Minute Maid juices, or Gold Peak tea, name recognition matters. The Coca-Cola Company has it and is big enough and deep-pocketed enough to keep it.
3. Prudential
Last but certainly not least, put insurer Prudential Financial (PRU 1.26%) on your list of dividend stocks to consider if you're looking for shelter from the storm.
Actually, Prudential isn't just an insurance outfit. It also offers investment and retirement planning services and serves the institutional market as well as individual consumers. This diverse base of business helps smooth out what might otherwise be choppier, less-consistent revenue and earnings.
In this vein, know that the company's adjusted per-share profits are consistently greater than the stock's dividend payments, leaving wiggle room in case things get complicated as they did in 2020. Only about half of last year's profits -- which were suppressed by the macroeconomic environment -- were used to make dividend payments. The rest were either used to buy back shares of the company or retained to grow the business. And as of the latest look, the current dividend yield is a healthy 5.5%.
The case for holding a piece of the Prudential rock, however, goes well beyond the dividend. It's a powerhouse company right now, thanks to its ability to do what other insurance companies can't.
Case in point: A year ago, this company partnered with LeapFrog Investments to co-purchase a strategic stake in South African investment services outfit Alexander Forbes Group Holdings. The deal looks like a foothold for other similar deals in high-growth markets.
This year will also be the one in which a bigger cost-savings initiative put in place all the way back in 2019 should finally be completed, ultimately adding $820 million back to the annual bottom line. In the meantime, the company has got $4.5 billion worth of liquidity on its books -- more than enough to fund this year's authorized $1 billion stock buyback in addition to its intended dividend increase.
Connect the dots. There's a lot to like here, particularly if you're looking at Prudential as a prospective income investment.
