Are you looking for a reasonably high-yielding dividend stock to add to your portfolio? How about one that has a streak of increasing its dividend for decades?
The good news is, you don't have to compromise. There are two dividend stocks that offer both a high yield and impressive track records for dividend growth and are good buys today: Medtronic (MDT 0.14%) and ExxonMobil (XOM -0.09%). For the record, these two stocks boast of yields nearly twice that of the S&P 500. Let's take a closer look.
1. Medtronic
Medtronic is a top medical-device company with operations all over the world. It makes pacemakers, insulin pumps, and other devices that patients rely on. The healthcare business has been strong financially over the years and has enabled the company it to increase its dividend with great consistency.
In 2022, the company announced that it would raise its quarterly dividend by 8% to $0.68. That's a significant rate hike. It also marked the 45th consecutive year that the company has raised its payout. If Medtronic keeps increasing its dividend for the next five years, it will become a Dividend King.
MDT Dividend data by YCharts.
Five years ago, the company was paying $0.46 every quarter. The dividend has gone up by 48% since then, averaging a compounded annual growth rate (CAGR) of 8.1%. That tells investors that the company's recent rate hike was consistent with its five-year average, suggesting things are continuing to go well.
The company's payout ratio is a bit high at 88%, but the business should do better this year with China no longer under COVID-related lockdowns. China is one of Medtronic's key markets, and a return to normal in the country should see Medtronic's earnings improving. This, in turn, should lead to a lower and more manageable payout ratio. Nearly half of the company's revenue comes from international markets and unfavorable foreign currency rates have also been negatively impacting Medtronic's financials.
Medtronic is also spinning off its patient monitoring and respiratory intervention businesses (potentially within the next year), which can make the remaining business a lot leaner and should lead to better growth down the road. Currently, the combined businesses generate about 7% of revenue for the company.Medtronic has also obtained roughly 150 product approvals within the past 12 months which should also lead to more revenue growth in the future. .
Investors, however, remain concerned about Medtronic, as the stock is trading near its 52-week low. With an impressive dividend yield of 3.4%, Medtronic is a dividend stock to own as it offers a great payout and has an impressive track record. With a potentially better year ahead in 2023 and beyond, Medtronic could make for a great buy right now, given its low price that may not last long.
2. ExxonMobil
ExxonMobil has an impressive streak of its own. It's been raising its dividend for 40 years, and its yield is also around 3.5% right now.
The oil and gas producer can have fluctuating earnings due to volatile commodity prices, making it all the more impressive that it hasn't cut its payouts during the tough times. Shell, for example, made headlines in 2020 when it announced it was slashing its dividend for the first time in decades, due to the pandemic.
ExxonMobil made no such announcement and continued to pay the dividend -- which was just enough to keep its streak going as its 2020 dividend was still higher than the 2019 dividend it paid out. The choppiness in the dividend is evident in the chart below, as the company's rate hikes haven't been as high or consistent as Medtronic's.
XOM Dividend data by YCharts.
The key takeaway here is that, even during some incredibly challenging circumstances, which included oil prices briefly turning negative, the company persevered and was able to keep going. ExxonMobil's commitment to its shareholders is evident with its strong dividend increases. Had the price of oil remained low for long, the oil company may have had no choice but to stop raising its dividend.
But its versatility is why this is one of the most impressive income stocks you can own in the oil and gas industry. With oil prices currently looking stronger than they were three years ago, and ExxonMobil coming off a record year where it generated $56 billion in profit, the near future is a lot more stable for the business. There's still risk with the stock, given its exposure to oil prices, but it can be a solid buy for income investors who want some exposure to oil and gas.
