Are you more interested in steady gains than dramatic price swings? These three reliable dividend payers are unlikely to be the best-performing stocks in any given year. Over time, though, there's a good chance they can outperform the broad market with a combination of price appreciation and growing dividend payments.
With years of annual payout raises under their belts, these stocks can be relied on to generate a positive return for your portfolio. Here's a look at what they've accomplished for income-seeking investors in the past to show how buying them in August could work for you.
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1. CVS Health
At recent prices, shares of CVS Health (CVS -0.22%) offer a 3.2% yield. The average dividend yield from stocks in the S&P 500 works out to just 1.5% at the moment.
Shares of CVS Health have been under pressure because the ratings on many of its Medicare Advantage plans dipped below four stars when the COVID-19 health emergency subsided earlier this year. Health insurers receive bonuses for highly rated Advantage plans, and the loss of bonuses is expected to hurt operating income by up to $1 billion this year.
It won't happen overnight, but Aetna, CVS Health's insurance business, shouldn't have a hard time improving the star ratings for its Medicare Advantage plans. The ratings fell because COVID-19 relaxed some rules that snapped back into place this spring.
Income-seeking investors want to jump on this stock now because its dividend could roar higher in the years ahead. The highly profitable healthcare business needed less than one-fifth of the free cash flow it generated over the past year to meet its dividend obligation.
2. American Tower
American Tower (AMT -0.70%) is a real estate investment trust (REIT) that owns over 200,000 signal towers and related communications sites. It also owns an interconnected collection of data centers.
REITs generally make great stocks for income-seeking investors because they can avoid taxes by distributing at least 90% of profits to shareholders as dividends. American Tower currently offers a 3.3% yield. That isn't as tempting as some high-yield stocks you can buy now, but its growth rate is hard to beat. Since 2012, the payout has risen by nearly 20% annually.
Telecom companies are still in the middle of a 5G expansion, and demand for high-speed internet access is on the rise. With these factors in mind, American Tower expects revenue to increase about 3.9% this year in spite of higher interest rates that are watering down general economic activity. Putting some shares of this highly reliable stock into your portfolio looks like a great way to boost your passive income stream.
3. Medtronic
Medtronic (MDT 0.62%) has a 3.2% yield at the moment, and investors can rely on the payout to keep growing. With over $31 billion in annual sales, it's the world's largest medical device company. That size allows it to market everyday devices that you'll find in almost any hospital room at a price point that few of its competitors can match.
The company has raised its dividend for 46 consecutive years by funneling profits from older products into the development of new ones. Over the past 12 months, it invested $2.7 billion into research and development and has more than a little to show for it.
The company is rolling out Hugo, its surgical robotics platform, in international markets right now. Later this year, we'll find out if an ongoing urology study produced results that could lead to a big U.S. rollout in 2024.
An impressive pace of innovation allowed Medtronic to increase its dividend payout at an annual rate of 9% over the past decade. Putting some shares into your portfolio now to hold for a decade could be a smart move.
