There's something enormously gratifying about having a steadily growing stream of cash payments deposited into your investment account quarter after quarter and year after year.
If you would like to earn more passive income from your investments, here are two companies that excel at delivering generous and reliable dividends to their shareholders.
Verizon
The telecom industry is fertile ground for dividend-paying stocks. Verizon Communications (VZ 1.17%) in particular is attracting attention from investors seeking to harvest income from their portfolios. The reasons are clear: The wireless leader's stock currently yields 6.7% and offers an attractive risk-to-reward profile.
More than 100 million people rely on Verizon for their 5G wireless and broadband internet needs. These loyal customers create dependable cash flow, which the telecom passes on to investors via bountiful dividends. Its free cash flow increased by 33% to $18.7 billion in 2023, aided by a decline in capital expenditures.
Now that the construction of its 5G network is largely complete, lower cash outlays should continue to support robust free cash flow in the coming years. Verizon, in turn, should have little trouble covering its approximately $11 billion in annual dividend payments. Investors can thus safely expect the company to extend its impressive 17-year streak of consecutive cash payout increases.
Image source: Verizon Communications.
Verizon's excess cash flow could be put toward continued debt reduction, which should strengthen its balance sheet and further reduce the risks for shareholders. This deleveraging could accelerate if the Federal Reserve cuts interest rates later this year as expected.
Verizon reduced its net unsecured debt by $1.6 billion to $126.4 billion in 2023. Lower financing costs could make it easier for it to pay down more debt in 2024 and the years that follow.
Moreover, Verizon offers investors something that's not common in the current buoyant market environment: a bargain-priced stock. Its shares can currently be had for less than 9 times the adjusted profit forecast for 2024. For context, the broad-market S&P 500 index (SNPINDEX: ^GSPC) trades for about 21 times earnings estimates for the next 12 months.
Altria
If you would like to generate even more dividend income from your diversified investment portfolio, consider Altria Group (MO -0.37%). The tobacco leader offers a hefty 8.9% yield today, as well as a remarkable track record of over 50 straight years of annual dividend raises.
Smoking rates have declined in the U.S., a trend that is likely to continue. Yet Altria has been able to generate sizable profits from cigarette sales by consistently raising prices.
MO operating income (TTM) data by YCharts; TTM = trailing 12 months.
Sales of traditional cigarettes should remain lucrative for Altria over the coming decade. Yet the company's efforts to broaden its product range are the key to its future.
Altria's oral nicotine pouches (free of tobacco leaves) are selling well, with shipments up 38.5% in 2023. Management moved aggressively to bolster Altria's smoke-free offerings in June with a $2.8 billion acquisition of vaping device maker NJOY Holdings. In all, the company sees a path to $5 billion in smoke-free sales by 2028, up from $2.7 billion last year.
Looking further ahead, Altria could have an even larger growth opportunity in cannabis. It owns roughly 40% of Cronos Group's shares. Should the U.S. move to legalize marijuana, Altria's stake in that Canadian cannabis producer, combined with its own extensive tobacco distribution network, could give it significant advantages in a market that could eventually approach $100 billion in annual sales, according to some estimates.
Yet today, Altria's shares remain on sale. This stalwart dividend stock currently trades for less than 9 times its profit forecast for 2024. Buy soon and you'll likely be buying alongside the company. Altria recently announced its intentions to sell a portion of its stake in Anheuser-Busch InBev and use the proceeds to boost its own share-repurchase program by as much as $2.4 billion.
