Stocks that pay dividends are some of the most stable and reliable investments you can make.
Dividend-paying companies are typically large and well-established, with a history of paying out dividends to shareholders year on year.
We will see in this article that some companies consistently maintain their dividend-paying ratio for decades, along with steady growth in raising dividend payments yearly.
What is a dividend in stocks?
A dividend is a distribution of a company’s earnings to its shareholders. Dividends can be in the form of cash or shares of stock and are usually paid out quarterly and annually. Some companies pay dividends monthly.
Companies often increase their dividend pay-out as their earnings grow, making dividends a popular source of steady earnings for investors.
Dividends are paid based on the dividend policy that a company follows – a stable dividend policy, a constant dividend policy, or a residual dividend policy.
Why do companies pay a dividend? How does it work?
A dividend is a payment made by a company to its shareholders out of its profits. The purpose of dividends is to return a portion of a company’s profits to its shareholders. This allows shareholders to share in the company’s success and encourages them to remain invested in it for a long time.
Another reason is when a company has no reinvestment plans in expanding the business, or there is no business opportunity to invest, and it pays out a percentage of the profits in the form of dividends. Growth companies mostly reinvest profits into the business, and matured companies prefer dividend payouts.
The dividends paid out by a company vary depending on how profitable the company is. Companies that are doing well will typically pay out regular and consistent dividends. The companies in the growth stage may not pay you dividends as they are consistently searching for new investment opportunities to expand their businesses.
The board of directors decides how much money to allocate for dividends each quarter and then sends a notification to shareholders informing them of the payment date and amount.
Shareholders can receive their dividends in cash or reinvest them back into the company by buying more shares. Many companies offer a dividend reinvestment plan (DRIP) which allows shareholders to automatically reinvest their dividends to buy more company shares. This allows shareholders to compound their returns over time.
Dividend aristocrats
The term ‘dividend aristocrat’ is one that has gained a lot of traction in recent years. Dividend aristocrats are a select group of stocks that have increased their dividends for 25 consecutive years. They are often considered some of the safest and most reliable dividend investments.
Dividend aristocrats are often large-cap stocks with a history of paying dividends. They typically have a higher price-to-earnings (P/E) ratio than the market average and can offer investors a higher yield on their investment. Dividend aristocrats are usually well-known companies like Coca-Cola, Johnson & Johnson, Procter & Gamble and Microsoft.
The main benefit of investing in dividend aristocrats is their consistent income stream. Dividend aristocrats typically have lower volatility than the broader market, making them a more stable investment. In addition, they often outperform the benchmark over the long term.
Dividend aristocrats act like royalty – delivering steady, predictable cash payments for a longer period.
10 US stocks that pay dividends
| Ticker | Company name | Exchange | Closing price | Dividend Yield | DPS (Dividend Per share) | Dividend-paying frequency |
| AGNC | AGNC Investment corp | NASDAQ | $12.68 | 11.51% | $0.12 | Monthly |
| SDIV | SDIV Global X SuperDividend ETF | NYSE | $9.28 | 13.08% | $1.20 | Monthly |
| MO | Altria Group Inc. | NYSE | $45.62 | 7.92% | $3.60 | Quarterly |
| OKE | Oneok Inc. | NYSE | $64.32 | 5.85% | $3.74 | Quarterly |
| MSFT | Microsoft | NASDAQ | $290.17 | 0.87% | $2.48 | Quarterly |
| CWEN.A | Clearway Energy | NYSE | $38.62 | 3.47% | $1.40 | Quarterly |
| CWEN.A BIPC | Brookfield Infrastructure Corp. | NYSE | $49.20 | 3.30% | $1.95 | Quarterly |
| O | Realty Income | NYSE | $72.94 | 3.99% | $2.93 | Monthly |
| TGT | Target | NYSE | $173.06 | 2.26% | $3.78 | Quarterly |
| LOW | Lowe’s | NYSE | $216.62 | 1.63% | $3.45 | Quarterly |
1. AGNC Investment Corp:
Ticker symbol: AGNC
AGNC Investment Corp is a real estate investment trust. (REIT) founded in 2008.
AGNC Investment Corp. (“AGNC”) is an internally-managed real estate mortgage investment trust (“REIT”). They invest substantially in agency mortgage-backed securities (“agency MBS”), which they finance primarily through collateralized borrowing agreements structured as repurchase agreements.
According to “The Motley fool”, AGNC Investment Corp. is one of the highest-yielding mortgage REITs on this list, with an 11.51%. With an investment of $350,000, AGNC can turn $1 million by 2030.
2. Global X SuperDividend
Ticker symbol: SDIV
Global X SuperDividend (SDIV) has access to the 100 highest dividend-paying equities worldwide.
Global X SuperDividend tracks an index of 100 high-yielding global equity securities globally, weighted by market capitalization.
The index is rebalanced annually by assigning each equal stock weight. The index is evaluated quarterly for changes in dividend payments or the company’s dividend policy outlook.
3. Altria Group Inc.
Ticker symbol: MO
MO tobacco companies have been the undisputed market leaders in the U.S. tobacco industry for decades.
Philip Morris International is having second thoughts about working with Altria to market its IQOS heated tobacco device since Altria recently acquired the leading competitor to Altria’s smokeless tobacco products.
While the market may have hammered stock down, its shares still have significant lucrative upside potential, according to “The Motley Fool”.
4. Oneok Inc.
Ticker symbol: OKE
Oneok Inc. provides a full suite of midstream services for natural gas and NGLs, from gathering and processing to transportation, storage, and marketing.
The company owns NGL pipelines in the Rocky Mountain, Permian, and Mid-Continent regions, connecting NGL production sites with consumption hubs.
5.Microsoft
Ticker symbol: MSFT
There is no need for any introduction for Microsoft. Whenever you use a computer, you are most likely to use one of Microsoft’s products.
The multinational technology company Microsoft is the world’s largest computer software company. It produces computer and gaming hardware, cloud computing services, video games, search, and other online services.
Its corporate headquarters is in Redmond, Washington, and it has branches in over 60 countries.
MSFT is also one of the Dividend Aristocrats with a history of paying dividends for 25 years.
6. Clearway Energy
Ticker symbol: CWEN.A
The corporation provides natural gas and blended solar and wind energy distribution and generation services. It provides services for major corporations, universities, hospitals, and government organizations.
Clearway has developed a diversified range of projects, ranging from community solar systems to some of the largest wind and solar installations in the United States.
According to Yahoo Finance, Clearway Energy has a higher return on equity than the average (18%) in the Renewable Energy industry. However, the company also has a higher debt-to-equity ratio of 1.58% as of June 2022.
7. Brookfield Infrastructure Corp.
Ticker symbol: CWEN.A BIPC
Brookfield Infrastructure Corporation is a Canadian corporation that manages a globally diversified portfolio of high-quality infrastructure assets.
“Strong cash flows from our base business were recorded during the second quarter, given the essential nature of our investments and the highly regulated or contracted revenue frameworks they operate under,” said Sam Pollock, Brookfield Infrastructure CEO, as discussed in Yahoo Finance.
8. Realty Income
Ticker symbol: O
Realty Income is an S&P 500 corporation and an S&P 500 Dividend Aristocrats index member.
This REIT corporation owns nearly 12,000 independent commercial real estate properties.
Realty Income has demonstrated solid performance and consistency in paying dividends for almost 50 years since its listing on the exchange. It has consistently been increasing its dividend payment since then.
9. Target
Ticker symbol: TGT
Target is a general merchandise retailer. It has almost 2000 stores in all 50 states in the United States.
Target provides edited food selection, including perishables, dry goods, dairy, and frozen goods.
Target reported an 89% drop in quarterly earnings compared to a year ago. The stock currently yields 2.5% with an annual dividend of $4.32 per share.
10. Lowe’s
Ticker symbol: LOW
Lowe’s Companies, Inc. (Lowe’s) operates home improvement and hardware stores. The firm sells various maintenance, repair, remodelling, and decorating products.
The company has nearly 2,200 home improvement and hardware stores with 208 million square feet of retail space in the United States and Canada.
LOW has a track record of paying dividends at 24.5% in the last 20 years, as per Dividend.com
Conclusion
Investing in dividend-paying stocks can be a profitable bet for a long-term income stream. The legendary Warren Buffett prioritizes three uses for cash that is in excess of any dividend payment, including reinvesting in the business, making new acquisitions, and buying back stock at a discount. If you are considering stocks that pay dividends, ensure your portfolio’s investment style and objective are aligned with your investment decisions.
One thing to know is that the stock’s share price decreases by the dividend amount declared.
You can gauge how much money you will make from an investment by looking at the current yield, which is the proportion of the stock price paid out in dividends.
The company’s dividend history also gives you a fair idea of the company’s prospects. Those companies that have a long history of paying dividends are typically more stable and reliable than those that don’t.
Finally, the company’s financials are the utmost important factor to watch out for to know the financial health of the company and whether it will be able to continue paying dividends in the future.
It is always better to consult a financial advisor if you are unsure about investing.
Frequently Asked Questions – FAQs
Q. What is a stock dividend?
A stock dividend is a dividend paid in the form of additional shares of stock rather than in cash. This type of dividend is often used by companies looking to conserve some money or experiencing financial difficulties.
While a stock dividend may benefit the company, it can have negative consequences for shareholders, as it can dilute their ownership stake. One can use stock dividends to avoid paying taxes on dividends.
Q. How does a stock dividend work?
When a company declares a stock dividend, it will specify the shares each shareholder will receive. For example, if a company has 100 shares and declares a 10% stock dividend, each shareholder will receive ten additional shares. A stock dividend is usually announced by the board of directors and is payable to shareholders.
The number of shares each shareholder owns increases, but the value of each share decreases by the value of the dividend. The payment of a stock dividend does not change the value of a shareholder’s investment, but it does give them more shares.