If earning dividend income is a priority for you, it's important to focus on quality stocks that offer above-average yields and that also regularly increase their payouts. That way, you can ensure you're collecting a good yield today and that it's likely to rise in the future, giving you an incentive to buy and hold.
Two stocks that fit both criteria and that increased their dividend payments this month are Johnson & Johnson (JNJ -1.15%) and Southern Company (SO 0.62%). Let's find out a bit more about these two high-yielding dividend stocks.
1. Johnson & Johnson
On April 18, healthcare company Johnson & Johnson announced it was going to increase its dividend payment by 5.3%. The increase will boost its quarterly per-share dividend up to $1.19. At its current share price of around $164, that puts its yield at right around 2.9%, more than a full percentage point better than the S&P 500 average of 1.7%.
For Johnson & Johnson investors, dividend rate hikes have become an annual tradition. This marks the 61st straight year that the Dividend King increased its payouts. This consistently in boosting rates is a big part of what makes J&J a great choice for dividend growth investors.
News of the dividend boost comes as the company released its first-quarter earnings numbers for 2023. While it did incur a net loss of $68 million for the first three months of the year, that was due to nonrecurring litigation expenses totaling $6.9 billion related to its problematic talcum powder products. On an adjusted basis, the company's earnings per share of $2.68 were nearly identical to the $2.67 adjusted per-share profit that Johnson & Johnson reported in the same period last year.
It's achieved operating growth of at least 7% in each of its major segments, including consumer health. It will be spinning off that segment into a separate entity later this year so that it can focus more on its medical device and pharma businesses, which offer more promising long-term growth opportunities.
Overall, Johnson & Johnson remains one of the safest dividend stocks investors can own. It offers an above-average yield, and the company has consistently raised its payouts for decades.
2. Southern Company
Southern Company doesn't have the impressive streak that Johnson & Johnson does when it comes to dividends, but it is another solid income-generating investment to own. Earlier this month, Southern announced it was increasing its dividend payments for a 22nd straight year. The two-cent increase to boost the per-share quarterly payout to $0.70 is a roughly 3% hike.
The energy company serves millions of customers through its electric and natural gas services. Utility businesses normally make strong, stable dividend investments. Southern Company is no exception to that, with the company reporting strong earnings over the past decade, averaging a profit margin of 12% during that time frame.
SO Profit Margin (Annual) data by YCharts
The fact that utility businesses provide necessities can minimize the volatility and risk that people take on with these types of investments. Over the past 10 years, when including its dividend, Southern Company generated total returns of 137% for investors. That's lower than the S&P 500's 217% gains, but the trade-off for investors is that they get a bit less volatility with Southern Company.
Although Southern's dividend increase was a bit modest, the stock pays a higher yield than Johnson & Johnson at 3.8%. To collect $1,000 in dividends from the utility stock, you would need to invest roughly $26,300 in Southern Company versus about $34,500 with the healthcare giant.
In the end, both of these stocks are solid long-term investments with excellent track records for raising their dividend payments.
