Although stock prices tend to get most of the attention, they're not the only way to make money from stocks. The other way is through dividend payouts. Dividends are paid to shareholders (usually quarterly) from a company's profits and are another way to reward investors.
If you're looking to receive income from your investments, look no further than dividend-paying stocks. Here are three to consider.
1. Altria Group
Altria Group (MO -0.37%) is the parent company to some of the world's most popular tobacco brands, including the iconic Marlboro. It's been a lackluster past five years for Altria's stock, which is down over 20% during that span. But it's well-known that most investors don't flock to Altria expecting outsized gains in stock price -- it's all about the dividend.
With a dividend yield hovering around 8.3% ($0.94, paid quarterly), Altria is one of the more lucrative dividend stocks in the S&P 500.
Even with declining smoking rates in the U.S., Altria has impressively increased its gross profit margins over the past decade. In 2012, its gross margin was around 59%, and now it sits above 68%. I think it's important to note Altria's gross profit margins because it's been able to do so by increasing prices to counter a drop in cigarette shipment volume (its bread and butter).
Data by YCharts.
Investors are rightly curious about whether Altria can continue to grow its profits with such noticeable cigarette shipment drops, especially considering that its recent attempts to "move beyond smoking" have come up far shorter than expectations. However, I believe the potential upside and dividend yield outweigh the potential downside at current prices.
2. Walmart
No company in the world brings in more revenue than Walmart (WMT -0.08%). In fact, it brings in more revenue than Microsoft, JPMorgan Chase, and Alibaba -- combined. Although it's always been a cash cow, its sales have been helped recently as people have flocked to its stores to help offset rising inflation.
Walmart has been a quintessential blue-chip stock, but after recently increasing its yearly dividend for the 50th consecutive year, it has also officially reached Dividend King status. Its roughly 1.5% dividend yield isn't necessarily jaw-dropping by any means, but it's as stable a yield as you'll find in the stock market.
Sometimes it's best to simplify investing decisions and just ask yourself, "Will this company make money regardless of the macroeconomic conditions?" If the answer is yes, then you're likely on the right track. With Walmart, the answer to that question has routinely been yes.
With a price-to-earnings ratio of around 36 -- which is higher than its trailing five-year average of 33.7 and 10-year average of 25.5 -- Walmart is a bit more expensive than usual, but this is likely due to investors gravitating to the stock for stability during these uncertain economic times.
Still, long-term investors should take comfort in knowing Walmart should continue to be dominant for quite some time while becoming more shareholder-friendly along the way.
3. Big 5 Sporting Goods
Big 5 Sporting Goods (BGFV 4.05%) is a sporting goods store (surprise, surprise) that's had one of the wilder rides since the beginning of the COVID-19 pandemic. In early April 2020, Big 5's stock had reached a low of around $0.71. By November 2021, it had increased over 6,000% to over $44. It has since dropped over 80% from its peak.
Big 5 Sporting Goods had a tough 2022, with net sales down 14%. Its first-quarter 2023 hasn't been much better, with net sales down over 7% year over year.
However, I believe management has been making the right decision to focus on preserving margins instead of increasing sales during this time to help weather the storm -- especially after pandemic-fueled sales spikes took its revenue to an all-time high.
Data by YCharts
With a dividend yield of around 12% ($0.25 quarterly), Big 5 Sporting Goods has one of the highest payouts you'll find. However, this isn't always a good thing as dividend yields move inversely with stock prices. Assuming things improve for the company, the yield is bound to level down.
The company's healthy balance sheet gives me confidence it can maintain its dividend going forward. At its current prices, the potential benefits outweigh the risks.
