When putting capital to work in the stock market, there are generally two ways to earn a return. Investors benefit when the stocks they own appreciate in value. Additionally, certain companies pay out a portion of their income in the form of dividends. This is something many investors prioritize when looking at stocks to add to their portfolios.
If you're an investor who likes dividends, then look no further. Here are three stocks that can provide attractive streams of income.
Lowe's
One of the leading retailers for home improvement products, Lowe's Companies (LOW -0.03%), has paid a dividend every quarter since the company went public in 1961. Even more impressively, the company's payout has increased for more than 25 straight years. That is a remarkable feat.
Most recently, the business paid $2.4 billion in dividends in the last fiscal year (ended Feb. 3). Because Lowe's generated net income of $6.4 billion in fiscal 2022, its payout ratio of 37% leaves plenty of room for future dividend increases.
The company has hit a bit of a rough patch thanks to macroeconomic factors affecting consumer spending and the housing market. Fiscal 2022 revenue of $97.1 billion was up just 0.8% year over year. Higher operating costs pressured margins as well. After strong gains posted throughout the depths of the pandemic, the business is dealing with a sizable slowdown now.
Nonetheless, Lowe's has been able to raise its top-line figure steadily over the past few years. And diluted earnings per share (EPS) have skyrocketed, from $4.09 in fiscal 2017 to $10.17 in fiscal 2022. This strong fundamental performance, bolstered by investments made to improve omnichannel capabilities, has resulted in the share price being up 141% over the last five years.
Target
Another major retailer, Target (TGT 1.28%), has been rewarding shareholders with its dividends for a long time. Management recently declared a $1.08 quarterly dividend which, when paid, would be the 223rd consecutive payout since the company went public in 1967. For income-seeking investors, it's really hard to beat this track record.
The stock's recent impressive rise has boosted shareholder returns -- it's up 122% over the past five years. This performance trounces that of the S&P 500, which was up just 53% during the same time. With the exception of fiscal 2022, an otherwise difficult operating environment, Target has proven that it can consistently increase revenue and earnings at a healthy clip. And while the stock currently trades at a price-to-earnings ratio of 27, it is down 40% from its all-time high. This gives investors an attractive entry point to add shares to their shopping cart.
Like Lowe's, Target is also dealing with macro headwinds. Most notably, inflation is pinching people's wallets, leading to pressured discretionary spending. Target's comparable-store sales were up just 0.7% in the fourth quarter. But the company's top-notch digital presence, particularly with its same-day services that leverage its own footprint of almost 2,000 stores, positions Target well to gain once the economy rebounds and consumer spending normalizes.
American Express
The final stock that dividend lovers should consider taking a closer look at isn't a retailer. Instead, it's American Express (AXP -0.08%). The global credit card giant has paid a steadily rising dividend for decades, a trend that even the Great Recession couldn't derail. On Jan. 27, the company announced a 15% increase to its regular quarterly dividend, from $0.52 to $0.60 a share. That new disbursement translates to a yield of 1.3% based on the current share price.
Warren Buffett's Berkshire Hathaway is American Express's largest shareholder, and for good reason. Besides the attractive dividend payout, this is simply just a wonderful business. That's because American Express stands out among its financial services peers thanks to its lucrative business model of being a card issuer, payments network, and merchant acquirer all in one. This allows the company to capture essentially all of the economics any time its cards get swiped.
With its generally higher-income customer base still spending at healthy levels, and the resurgence in travel demand, American Express was able to grow net revenue 25% in 2022. And although higher interest rates are leading to greater write-offs, this business should have no problem navigating the current macroeconomic uncertainty.
