The S&P 500 is the benchmark for the investing world. This well-known index comprises 500 of the largest and most visible corporations in the United States, the world's leading economy.
It's also a great hunting ground for phenomenal long-term stock ideas to fit any investing strategy. Dividend investors are a large group with a specific investing strategy, buying stocks that will help them build large income streams from dividends. Many of these dividend enthusiasts rely on these five generous dividend-paying S&P 500 stocks for their huge payouts.
Let's find out a bit more about these five stocks.
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1. Altria Group
American tobacco giant Altria Group (MO 0.86%) has made millions for shareholders over the past century selling Marlboro cigarettes in the United States. The company's golden years are far behind it now that the general public is better informed about the dangers of smoking. Still, the addictive properties of nicotine give Altria the pricing power to continue growing profits despite smoking rates declining since the 1960s.
NYSE: MO
Key Data Points
Cigarettes are cheap to manufacture, so the company has few operating expenses. Most of Altria's profits go to shareholders as dividends. The company's dividend payout ratio is roughly 80% of cash flow. Altria's raised the dividend 58 times over the past 54 years, meaning investors are getting paid more over time. Shares offer a generous 9.3% dividend yield at today's share price.
2. AbbVie
Pharmaceuticals are a lucrative industry, especially if the company manages to develop a blockbuster drug. Patents protect proprietary formulas from competition for several years and allow the company to benefit from its development efforts. AbbVie (ABBV 0.74%) was a significant benefactor for several years from the success of Humira, the world's top-selling drug. Unfortunately, its patent protection expired recently. But don't worry; the company used its Humira profits to build the rest of the company into a juggernaut and it has several other drugs ready or in development to take up the slack.
AbbVie has become a favorite among dividend investors. Not only is the yield juicy at 4.5%, but the payout has also grown by an average of 17% annually over the past decade. The dividend payout ratio is still manageable at 42% of cash flow, so investors could see a nice one-two combo of yield and dividend growth moving forward.
3. Verizon Communications
Virtually everyone in America has a cellphone or smartphone. The importance of smartphones to consumers' everyday lives has made telecommunications companies like Verizon Communications (VZ 1.46%) more like utility companies. People seemingly pay their phone bills as religiously as their water or electricity. This creates steady revenue streams for Verizon, which results in fertile ground for steady and increasing dividend payments.
NYSE: VZ
Key Data Points
Verizon must invest constantly in upgrading and maintaining its wireless network, so investors should look at net income instead of cash flow to judge the dividend. Fortunately, Verizon spends just half its earnings on the dividend, so investors should be in good shape with its 7.1% dividend yield.
4. Philip Morris International
Marlboro is a worldwide brand, but Altria only sells it in America. Philip Morris International (PM +1.43%) was spun off from Altria over a decade ago and owns international rights to Marlboro. That shortens its dividend history, but Philip Morris has raised its dividend yearly as a public company. That streak currently stands at 15 years. The dividend payout ratio is high at 103%, but profits could grow and bring that ratio down over the coming years.
How? Philip Morris has done a great job innovating and moving into growing nicotine categories. It developed IQOS, a device that heats (but doesn't burn) tobacco to produce vapor. It also acquired Swedish Match, which makes the Zyn brand of oral nicotine pouches. Philip Morris is bringing these opportunities to global markets, including America, so the stock has long-term growth potential.
5. AT&T
A small group of significant players dominates the U.S. wireless communications market. Verizon is second-largest to AT&T (T 3.29%), which holds a 47% share. Today, AT&T is a different company from what it's been for most of the decade. It tried, failed, and exited the entertainment industry and is now concentrating on telecommunications again. The stock offers a dividend yield of more than 6.8%.
NYSE: T
Key Data Points
It's not all rosy. The company still carries $138 billion in long-term debt, scars from its former entertainment ambitions. However, the dividend payout ratio is back to under half of net income after management cut the dividend once to free up more money to pay off its debt. Financially, AT&T seems back on its feet, giving investors confidence to continue the dividends.
