It's hard to beat dividends when investing in the stock market. The market, or any particular stock, will fluctuate over time, sometimes significantly. But a healthy, growing company will keep paying out its dividends -- and will increase them over time, too.
In this prolonged period of ultra-low interest rates, dividends also offer compelling income streams, with many yields topping interest rates -- and inflation, as well. So, when looking for stocks to buy, consider dividend payers.
Here are three promising companies, each of which recently offered a dividend yield above 4%.
ConocoPhillips (NYSE:COP)Oil giant ConocoPhillips, recently yielding 4.2%, has upped its payout by an annual average of 14% over the past five years. Its stock has grown by an annual average of about 12% over the past 30 years, but the past year has been a tough one, with the plunging price of oil. Not surprisingly, this has weighed on ConcoPhillips's stock, which is down roughly 3% since this time last year.
In its fourth quarter, earnings plunged from $2.5 billion in 2013 to a loss of $39 million, despite a 5% increase in production. In response to the current environment, the company is cutting back on capital spending and reducing its drilling and exploration activities. It's expecting a modest production gain in 2015, though.
With a payout ratio recently near 50% and positive free cash flow, ConocoPhillips's dividend seems quite safe. The company has ample catalysts for further growth, too, such as a return to higher oil prices, falling oil services prices, possible significant discoveries, and perhaps even an acquisition or merger. Patient investors are likely to do well with ConocoPhillips.
Philip Morris International (NYSE:PM)Tobacco giant Philip Morris International, recently yielding 4.8%, is a less predictable company than National Retail Properties because it's in a changing industry. While developing markets are producing new tobacco consumers, millions worldwide are also giving up the smoking habit, encouraged by governmental pressures such as taxes and public-service campaigns. It's also facing some less-protracted challenges, such as the currently strong dollar that's diminishing the value of all the revenue it collects in various foreign currencies.
In the company's last quarter, revenue and earnings shrank, much of that due to currency exchange issues, but sales volume dropped, too.
On the plus side, while it, too, isn't trading near bargain levels, Philip Morris International remains a solid income producer, with a hefty and growing dividend payout and prodigious free cash flow that tops $6 billion annually. Its profit margins have dropped a bit in recent years, but its net margin remains near 25%, which is quite strong. Its boffo Marlboro brand offers pricing power and major market share, and the world still has enough smokers to keep the company in cash.
National Retail Properties (NYSE:NNN)Recently yielding 4.1%, National Retail Properties is a REIT (real estate investment trust), so it's required to pay out at least 90% of its income as dividends. It has been paying -- and increasing -- its dividend for 25 years now, which reflects able management that has maintained rather steady operations over the years. Over those 25 years, its average annual return to shareholders has been 14.7%.
As you might have guessed, it's focused on commercial retail properties, and its portfolio boasts more than 2,000 of them geographically diversified across 47 states. Better still, it's an impressive performer, with an occupancy rate recently at 99%. Its average remaining lease term is a full 12 years, making the company's cash flows rather reliable for quite a while. It also mainly employs landlord-favoring "triple-net" leases (thus its NNN ticker symbol), where tenants are responsible for paying for property taxes, insurance, and building maintenance.
It's not perfect, as the stock isn't near bargain levels lately, and eventual interest rate hikes will put some pressure on it and its REIT brethren. Still, it's likely to be a great long-term income generator, and you might want to at least add it to a watchlist.
Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.