Whether you're new to investing or you've been doing it for decades, the past 15 months have been difficult. The benchmark S&P 500 index has fallen around 16% since the beginning of 2022.
After watching the collapse of several high-profile banks, your risk tolerance is likely a lot lower than it was a year ago. Luckily, there are at least three dividend-paying stocks out there with reliable cash flows that keep growing along with their quarterly payouts.
The topsy-turvy stock market could throw more curveballs in our direction before the next bull market, but they probably won't prevent these stocks from making their dividend payouts. Here's why these three have a great chance to deliver strong returns, regardless of the market's general direction in the years ahead.
1. CVS Health
You're most likely familiar with CVS Health's (CVS 1.45%) leading chain of retail pharmacies, but there's a lot more to this company.
CVS Health runs America's largest pharmacy benefits management business, and this isn't the only operation that gets a boost from its enormous retail footprint. In 2018, CVS Health became one of America's largest health insurance benefits managers by acquiring Aetna for around $78 billion.
At recent prices, CVS Health offers an above-average 3.1% yield. This is the lowest-yielding stock on this list, but it has more potential for growth than the other two combined. Managing health insurance benefits allowed the company to raise its dividend payout a whopping 169% over the past decade.
America's aging population will steadily require more healthcare services, many of which CVS Health will provide directly. The company currently operates over 1,100 walk-in medical clinics, and the proposed acquisition of Oak Street Health for $10.6 billion will add hundreds of primary care providers, working in 169 medical centers.
With its ability to directly provide many of the health benefits it also gets paid to manage, investors can look forward to strong profit growth from CVS Health for many years to come.
2. PennantPark Floating Rate Capital
As its name implies, PennantPark Floating Rate Capital (PFLT 0.80%) is a lender that specializes in adjustable-rate debt instruments. At the moment, the stock offers an eye-popping 11.6% yield and monthly dividend payments.
PennantPark Floating Rate Capital is a business development company that lends to businesses valued below $2 billion. It doesn't just hand out loans to any middle-market business that comes calling. By focusing on companies that are owned by established private equity sponsors, PennantPark rarely bets on losers.
The company's overall portfolio consisted of 125 companies at the end of 2022. Just two of those companies, representing 1.1% of the total portfolio, were on nonaccrual status.
For the vast majority of its 15-year history, receiving interest rates that rise in step with the Federal Reserve's target rate didn't seem like such a big deal. The floating rate debt that makes up around 75% of PennantPark's portfolio is looking a lot more attractive now than it did just a year ago.
The Fed rapidly raised its target rate from a range between 0.25% and 0.5% last March to a range between 4.5% and 4.75% at the moment. Thanks to its floating rate loans, the average yield on this company's debt rose to 11.9% at the end of 2022 from just 8.1% a year earlier.
There were two portfolio companies in nonaccrual at the end of December, which was twice as many as PennantPark had at the end of September. While the stock looks like a smart buy right now, investors want to keep their eyes peeled for further delinquencies.
3. Paramount Global
Right now, shares of Paramount Global (PARA 9.66%) offer a 4.5% yield which is more than twice the yield you'd receive from the average dividend-paying stock in the S&P 500 index. Purchasing shares of this media giant would also align your portfolio with those of some billionaire investors, including Warren Buffett.
It's easy to see why successful investors are eager to scoop up shares of Paramount. Its streaming services are growing by leaps and bounds. The company added 9.9 million subscribers to Paramount+ in the fourth quarter of 2022. This helped subscription revenue soar 66% year over year to $3.4 billion in 2022.
The company's ad-supported video-on-demand (AVOD) service, Pluto TV, added 6.5 million monthly active users during the last three months of 2022. With 79 million monthly active users at the end of last year, it's the most popular AVOD service of all.
Big brands that cherish the safety they can expect from premium programming are rapidly redirecting their ad budgets away from cable TV and toward AVOD platforms like Pluto. Buying the stock now and holding it over the long run could work wonders for your passive income stream.
