You have $1,000 (or $200 or $50,000) burning a hole in your pocket and you're itching to invest in some stocks. Might I suggest some dividend payers? Here's why:
|
Dividend Status |
Average Annual Total Return, 1973-2023 |
|---|---|
|
Dividend growers and initiators |
10.19% |
|
Dividend payers |
9.17% |
|
No change in dividend policy |
6.74% |
|
No dividend |
4.27% |
|
Dividend shrinkers and eliminators |
(0.63%) |
|
Equal-weighted S&P 500 index |
7.72% |
Data source: Ned Davis Research and Hartford Funds.
Image source: Getty Images.
See? Dividend payers are solid performers. One reason is that a company has to reach a point where it has some fairly dependable earnings before it will commit to a regular payout for shareholders.
Here are some solid dividend-paying contenders for your portfolio.
1. Pfizer
Pfizer (PFE 1.69%) has hit a bit of a rough patch, after doing well with its COVID vaccine and Paxlovid treatment. But demand for those is not what it used to be, as the pandemic subsides. But that's far from the end of Pfizer's story, because it has other promising avenues for growth -- and it's growing now.
The company's fourth-quarter results showed top-line growth of 7% year over year, and 12% growth when excluding COVID products. It has also been cutting costs -- billions of dollars' worth. Meanwhile, its acquisition of Seagen is boosting its efforts in oncology.
NYSE: PFE
Key Data Points
The company's share price decline has pushed up its dividend yield to a recent fat 6.7%. And Chief Executive Officer Albert Bourla has said, "I want to reinforce our commitment to maintaining and growing our dividend over time."
Pfizer's shares seem attractively valued, with a recent forward-looking price-to-earnings ratio (P/E) of 8.7, well below the five-year average of 10.6.
2. Verizon Communications
Verizon Communications (VZ 0.22%) is another company that has seen its stock drop and its dividend rise; it was recently yielding a hefty 6.6%.
Business hasn't been growing quickly, but it's growing nonetheless: The fourth-quarter results were solid, with modest revenue growth exceeding expectations. It's increasing its subscribers in wireless and broadband, too.
The company is still very debt-heavy, but it paid off $8.5 billion of that in the quarter, leaving it with $117.9 billion.
NYSE: VZ
Key Data Points
That debt load is not a great thing to have, but Verizon is a cash cow, producing tens of billions of dollars of free cash flow annually, much of which it can use to pay down debt. Meanwhile, bulls are hopeful about its prospects in artificial intelligence (AI); it's already incorporating the technology into its operations and is investing in AI further. The company is also continuing to expand its fiber and 5G networks.
The shares seem reasonably valued, too, at recent levels, with a forward P/E of 8.8, below the five-year average of 9.2.
3. Vici Properties
Vici Properties (VICI +0.42%) is a real estate investment trust (REIT), which means it must pay out at least 90% of its taxable earnings as dividends. And Vici pays out a lot in dividends, with a recent yield of 5.7%.
NYSE: VICI
Key Data Points
REITs tend to specialize in one or more niches of the real estate market, and Vici is focused on casinos and other entertainment properties in the U.S. and Canada, including Caesars Entertainment, MGM Resorts, Penn Entertainment, and Century Casinos. Its average lease term for its tenants is 40 years, and there are built-in rent increases.
The stock has averaged annual growth of 6.3% during the past five years, and its dividend has grown, too, from $1 per share in 2018 to $1.73. There's a lot to like about VICI, so learn more about it if you're interested. It's worth considering if you're bullish on the gambling industry, real estate, or both.
4. Medtronic
Medtronic (MDT +1.19%) is a medical device maker and a dividend payer with a recent yield of 3.3%. That payout has grown at an average annual rate of about 5% during the past five years, and management has been upping it for 47 consecutive years. (That certainly suggests that Medtronic plans to continue increasing its dividend.)
It's another company incorporating AI and machine learning into its products (such as robotic surgery equipment), and it's targeting double-digit percentage earnings growth this year. Medtronic is posting steady growth, with fiscal third-quarter adjusted revenue up 4.1% for the period ended Jan. 24.
Medtronic's diversified portfolio and pipeline of products in development are encouraging for long-term investors. And with a recent forward P/E of 14.7, below the five-year average of 17.5, its stock seems attractive, too.
5. United Parcel Service
Lastly, consider United Parcel Service (UPS 2.68%), with its recent dividend yield of 5.7%. It's not quite the no-brainer investment it might have been in years past -- partly due to its cutting back on the number of Amazon packages it will now deliver.
That might seem bad, but those deliveries offered thin profit margins, and the company is working on its Efficiency Reimagined plan to cut costs and boost profits. In its fourth quarter, revenue grew slowly, but earnings per share popped by 11%.
Meanwhile, the stock seems attractively valued, with a forward P/E ratio of 14.6, below the five-year average of 16.2. It may not grow quickly, or even grow a lot in the coming year, but patient investors can collect a generous payout while they wait.
Take a closer look at any of these stocks that interest you and know that there are plenty of other attractive dividend payers out there, too -- not to mention some excellent dividend-focused exchange-traded funds.
