These 7 Dividend Stocks Make Every Quarter Feel Like Christmas

The holiday season is in full swing, and amid all the festivities and cheer, there’s sure to be some last-minute scrambling to find gifts, decorations, and other celebratory accoutrements. Preparing for Christmas, New Year’s, and other holidays tends to have people pretty busy, but the end of the year can still be a good time to think about investments that will give back over the long term. Quality dividend stocks fall into that category. Read on for a look at seven companies that will send you cash each quarter just for owning their stock. 

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PepsiCo (Nasdaq: PEP) has long been a go-to stock for income-focused investors -- boasting a solid yield, a fantastic track record of dividend growth, and a resilient underlying business. While the company’s soft-drink sales are seeing some pressure due to customers in the North American market shying away from soda in favor of healthier drinks, PepsiCo is well diversified. Last quarter saw roughly a third of the company’s revenue come from its North American beverages segment, with sales from its Frito Lay snacks, Quaker Foods products, and business in international markets accounting for the rest of its revenue. 

Pepsi has increased its payout annually for 46 years straight and continues to deliver substantial dividend growth. The company’s last payout increase arrived in May, delivering an impressive 15% dividend hike. Shares yield 3.3% at current prices and trade at roughly 20 times this year’s expected earnings.

With a deep lineup of valuable consumer brands, nearly unmatched scale and distribution advantages, and a favorable outlook for long-term dividend growth, PepsiCo is a stock that’s worth adding to a dividend portfolio.

After the company’s recent 2% payout increase, AT&T (NYSE: T) stock pays $0.52 on a quarterly basis, yields 6.9%, and is backed by a 34-year history of annual payout increases. Even with the company’s huge yield and big debt load, AT&T has its forward distribution well covered and is in good position to keep returning cash to shareholders. Those are qualities that should put the telecom giant’s stock on income investors’ radar.

AT&T stands out as a solid defensive stock that can be counted on for regular income generation, and shares look attractively priced trading at roughly 8.5 times this year’s expected earnings. Investors shouldn’t count on big sales or earnings growth in the near term, as cord cutting and tough competition in the mobile wireless space are putting pressure on the business, but the stock’s eye-catching yield and predictable payout-growth schedule are reasons to be patient as the company sets up ways to benefit from its acquisition of Time Warner and technology trends like 5G and the Internet of Things.

Apple (Nasdaq: AAPL) might not be the first stock that comes to mind when you think of income investing, but the company has been rapidly increasing its dividend since it resumed returning cash to shareholders in 2012 and has increased its payout roughly 93% over that stretch. The company’s last payout increase came in at a hefty 16%, hiking its quarterly distribution to $0.73 per share, and there’s a good chance that investors will see more big payout growth going forward.

Apple has generated enough free cash flow over the trailing 12-month period to cover its forward dividend distribution more than four times over, and impressive growth for the company’s high-margin services segment suggests that cash flow and earnings could continue to rise at a healthy clip even if iPhone sales cool off a bit. Shares trade at roughly 12.5 times this year’s expected profits -- a level that looks appealing given the company’s impressive brand strength, momentum for its services business, and fast-growing returned-income component.

IBM (NYSE: IBM) has been trying to reinvent itself, pivoting to a business that’s increasingly focused on cloud services as demand for its legacy hardware and software products wanes. The transition hasn’t been a smooth one, and the company’s sales and earnings performance over the last decade has been uninspiring. Its stock has lost roughly a third of its value over the last five years, and management has been hiking the dividend in hopes of keeping shareholders happy -- raising its payout by 65% over during that time and more than tripling it over the last decade.

Big payout increases and soggy stock performance have pushed its dividend yield up to 5.2% -- higher than it's been in nearly a quarter-century, and investors can look forward to shares purchased today boasting an even bigger yield down the line. IBM has delivered annual payout growth for 23 years running and has paid a quarterly dividend uninterrupted since 1916. The stock trades at roughly 8.5 times this year’s expected earnings and pays $1.57 per share on a quarterly basis.

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Hanesbrands (NYSE: HBI) currently pays shareholders $0.15 per share each quarter, and its dividend yield has never been higher at roughly 4.4%. Known for its namesake Hanes clothing lines and brands like Playtex, Champion, and Wonderbra, the company looks to have a defensible position in a sturdy, consumer-staples industry, and the cost of covering its dividend comes in at a reasonable 60% of trailing free cash flow.

Hanesbrands hasn’t increased its payout since early 2017, with management instead prioritizing paying down debt on the heels of a big acquisitions push, but the company has tripled its dividend over the last five years, and shares don’t look prohibitively priced trading at roughly eight times this year’s expected earnings. 

No matter what happens with the stock market and the economy, odds are good that people will still need waste removal services. Trash collection and disposal is a recession-proof industry, and high costs of entry, relatively low margins, and government contracting processes give Waste Management (NYSE: WM) a regional monopoly in the areas in which it operates. That means that the business is steady and faces little in the way of pressure from new competitors, making the company an attractive defensive investment and positioning it to keep income flowing back to shareholders on a regular basis. Shares have a dividend yield of roughly 2% and trade at 22 times this year’s expected earnings. 

Philip Morris (NYSE: PM) stock has taken a beating this year due to slowing growth for its cigarette-replacement, heated tobacco products. However, the big selloffs have made the stock's dividend even more appealing. Shares yield roughly 5.5% at current prices, and investors can look forward to continued payout growth. While adoption for its iQOS line of heated tobacco products has slowed in Japan, Philip Morris still has roughly 80% market share in the region, and it expects global annual shipments for the product category will have more than doubled by 2021, reaching 100 billion units. With pricing increases for traditional cigarettes and expansion for heated-tobacco alternatives, Philip Morris should be able to keep its dividend-growth streak alive.

The company has increased its distribution annually for 10 years running -- ever since it was spun off from Altria. Philip Morris recently delivered its biggest dividend growth in five years, increasing its payout by nearly 7% to reach $1.14 per quarter. Covering the current dividend will require roughly 85% of the company's trailing free cash flow, but high payout ratios are normal for companies in the tobacco industry and are workable because capital expenses tend to be relatively low, steady, and predictable. 

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Companies that return income to shareholders have historically outperformed those that do not, and owning a portfolio of strong, dividend-paying stocks can be a great way to generate extra income and build wealth over the long term. So, whether you’re investing for yourself or for loved ones, dividend stocks backed by solid businesses are a gift that can keep on giving.

Keith Noonan owns shares of AT&T, Hanesbrands, and IBM. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.