Wall Street accommodates a variety of investment styles. Buying and holding time-tested dividend stocks over long periods just happens to be one of the more successful strategies.
The power of income investing is truly exemplified by a study released 10 years ago from the wealth management division of JPMorgan Chase (JPM 0.06%). This study found that public companies initiating and growing their payouts between 1972 and 2012 produced an annualized return of 9.5%. Comparatively, public companies that didn't offer a payout trudged their way to an annualized return of just 1.6% over the same period.
Although most investors tend to focus on yield, some brand-name businesses stand out for the sheer size of their nominal-dollar payouts. What follows are some of the biggest "givers" on Wall Street. These seven dividend stocks combine to pay out $98.2 billion annually to their shareholders.
Image source: Getty Images.
1. Microsoft: $22.29 billion in annual dividends paid to shareholders
Don't let its modest yield of 0.9% fool you: Tech stock Microsoft (MSFT 1.82%) is a dividend juggernaut! It has raised its base annual payout for 14 consecutive years and is currently doling out more than $22 billion to its shareholders each year (based on its $0.75-a-share quarterly payout).
The not-so-subtle secret to Microsoft's success continues to be its blending of the old with the new. Most investors overlook the company's legacy operations (e.g., its Windows operating system) without realizing that these generally slow-growing segments still generate boatloads of operating cash flow and have well-identified moats. This cash allows Microsoft to invest in higher-growth initiatives and undertake earnings-accretive acquisitions.
As for the "new," Microsoft has gone full bore into cloud services. Its Azure is the world's No. 2 cloud infrastructure service provider, and it's been gaining on Amazon, whose Amazon Web Services holds the top market share. Microsoft's sustained double-digit growth rate and massive cash balance bode well for its future.
Apple's quarterly payout has grown by nearly 154% since recommencing its dividend in August 2012. AAPL dividend per share (quarterly) data by YCharts.
2. Apple: $15 billion in annual dividends
Another dividend stock that could have income investors scratching their heads is Apple (AAPL -0.35%), the largest publicly traded company in the United States. Though the company's yield is a paltry 0.6%, its $0.24 quarterly payout works out to $15 billion in annual dividends for shareholders.
What Apple brings to the table is one of the most-trustworthy and recognized brands. Consumers tend to be very loyal to its products, and the company's iPhone has absolutely dominated in the U.S. since a 5G-capable version hit store shelves in the fourth quarter of 2020.
But what it really thrives on is innovation, with CEO Tim Cook currently overseeing the transformation of Apple into a platforms company. Although it has no intention of abandoning the physical products that endeared the company to consumers (the iPhone, iPad, and Mac), it's evolving as a business to focus even more on subscription services. This move should improve the company's operating margin over time and further enhance customer loyalty.
3. ExxonMobil: $14.52 billion in annual dividends
The energy sector is typically known for healthy dividends, and big oil is certainly no slouch. Integrated oil and gas company ExxonMobil (XOM -2.78%), which has increased its base annual payout for 40 consecutive years, is expected to parse out just over $14.5 billion to its shareholders over the next 12 months.
One reason ExxonMobil has been such a steady payer for income seekers is its operating structure. As an integrated energy company, it generates its juiciest margins from drilling. However, it also operates downstream assets, such as refineries and chemical plants. If the price of crude oil declines, demand for downstream products tends to increase. This acts as a hedge to help ensure a steady stream of operating cash flow.
Macroeconomic factors have also mostly worked in ExxonMobil's favor. Since the pandemic began, crude oil supply has been tight. This is to say that reduced capital investment from global energy majors, coupled with Russia's invasion of Ukraine (which has no clear end date), has constrained global oil supply. This should provide a lift to the spot price of crude oil.
Image source: Getty Images.
4. JPMorgan Chase: $12.22 billion in annual dividends
Along with energy, financial stocks -- more specifically, bank stocks -- are known to return quite a bit of capital to their shareholders. America's leading bank by assets, JPMorgan Chase, is expected to distribute more than $12.2 billion in dividends to its shareholders in the coming 12 months.
The fuel behind that dividend is interest rates and time. Although consumers with credit card debt and recent homebuyers aren't enjoying the cumulative 525-basis-point increase in the federal funds rate since March 2022, banks certainly are. Every Federal Reserve rate hike is resulting in added net-interest income for banks with outstanding variable-rate loans.
Time is also the friend of JPMorgan Chase. Though banks are cyclical, and therefore prone to loan losses and delinquencies during recessions, downturns in the U.S. and global economies are relatively short-lived. Of the 12 U.S. recessions following World War II, just three have lasted at least 12 months. It means bank stocks are thriving and making loans far more often than they're on the defensive.
A historically high spot price for crude oil has fueled Chevron's capital-return program. WTI crude oil spot price data by YCharts.
5. Chevron: $11.54 billion in annual dividends
Did I mention that big oil pays out some hearty dividends? Integrated oil and gas stock Chevron (CVX 0.37%) has increased its base annual payout in each of the past 36 years, and it's on pace to pay shareholders more than $11.5 billion in dividends on an annual basis.
Chevron benefits from many of the same catalysts as ExxonMobil. Its upstream drilling operations are thriving from tight global oil supply, and its integrated operations lead to transparent and predictable operating cash flow.
Being able to accurately forecast operating cash flow at least a year in advance is what gives Chevron's management and board the confidence to outlay capital for new projects and approve a share buyback program for up to $75 billion.
Its balance sheet is also pristine. Though ExxonMobil is no slouch, Chevron's net-debt ratio at the end of the June quarter clocked in at just 7%. This gives it superior financial flexibility when compared to other energy majors.
6. Johnson & Johnson: $11.47 billion in annual dividends
Healthcare stock Johnson & Johnson (JNJ -0.46%) is known for padding investors' pocketbooks. J&J has increased its base annual dividend in each of the last 61 years and is expected to pay close to $11.5 billion to its shareholders over the next year.
Its revenue mix has been one of the key catalysts fueling its dividend growth. For more than a decade, the company has been shifting its sales focus to pharmaceuticals. Though brand-name drugs have finite periods of sales exclusivity, they generate superior margins and afford Johnson & Johnson exceptional pricing power. Continuing to invest in drug research and collaborations can further grow J&J's operating margin.
The other factor responsible for the company's dividend growth is leadership continuity. In the 137 years since J&J was founded, it has had just eight CEOs, including current CEO Joaquin Duato. Having consistency in key leadership positions ensures that growth initiatives are being properly implemented from start to finish.
7. Verizon Communications: $11.17 billion in annual dividends
The seventh and final dividend stock that doles out a hearty nominal payout is telecom Verizon Communications (VZ 1.17%). Based on its quarterly dividend of $0.665 per share, it should pay almost $11.2 billion to its shareholders over the next 12 months.
There look to be two factors propelling Verizon's lofty dividend. To start with, its needle is pointing modestly higher due to the 5G revolution. Faster download speeds are encouraging consumers to use more data, which is a boon for Verizon's wireless segment. At the same time, 5G speeds are helping the company add broadband users at the fastest rate in years.
The other positive for Verizon is that it provides near-essential services. Regardless of how well or poorly the U.S. economy performs, consumers are fairly reluctant to give up their smartphones, wireless service, or internet access. Historically low churn rates mean Verizon can count on predictable cash flow.
