“`html
Rethinking Your Portfolio: The Long-Term Benefits of Dividend-Paying Stocks
Including dividend-paying stocks in your investment strategy is a decision worth considering, as they have demonstrated strong performance over time.
Typically, companies that issue dividends have stable income and growth, which allows them to reward shareholders consistently. This means investing in these firms can yield not only stock price increases but also regular dividend boosts.
Image source: Getty Images.
Next, I’ll present five solid dividend-paying stocks. But first, take a look at the compelling data below from a Hartford Funds report that highlights the potential gains of dividends.
|
Dividend-Paying Status |
Average Annual Total Return, 1973-2023 |
|---|---|
|
Dividend growers and initiators |
10.19% |
|
Dividend payers |
9.17% |
|
No change in dividend policy |
6.74% |
|
Dividend non-payers |
4.27% |
|
Dividend shrinkers and eliminators |
(0.63%) |
|
Equal-weighted S&P 500 index |
7.72% |
Data source: Ned Davis Research and Hartford Funds.
Five Dividend-Paying Stocks to Consider
Here are five well-regarded dividend-paying stocks that could enhance your long-term portfolio. Each offers a solid dividend yield and has a history of increasing its payouts, with an S&P 500 index fund provided for comparison.
|
Stock |
Recent Dividend Yield |
5-Year Avg. Annual Dividend Growth Rate |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|---|
|
Altria (NYSE: MO) |
8.2% |
4% |
7.75% |
5.51% |
|
Chevron (NYSE: CVX) |
4.3% |
6.5% |
8.73% |
5.65% |
|
Verizon Communications (NYSE: VZ) |
6.5% |
2% |
(2.01%) |
3.12% |
|
AbbVie (NYSE: ABBV) |
3.3% |
7.7% |
23.17% |
14.45% |
|
Realty Income (NYSE: O) |
5% |
3.7% |
(0.31%) |
7.4% |
|
Vanguard S&P 500 ETF |
1.28% |
4.7% |
15.87% |
13.47% |
Data sources: Yahoo! Financial and Morningstar.
1. Altria
This tobacco company, despite a decline in cigarette use to an 80-year low according to Gallup, remains a top choice for dividend income. Altria’s dividend yield is substantial, and it has a track record of increasing payouts for over 50 years. With a recent payout ratio of 68%, its dividends appear sustainable. Additionally, the company is diversifying into alternative products like vaping.
2. Chevron
Chevron may struggle with low oil prices, but it has historically performed well across different economic conditions. Its dividend yield surpasses 4%, and the company has raised its payouts consistently from $4.32 per share in 2017 to $6.52 recently. Chevron’s payout ratio of 62% reflects a strong commitment to returning value to shareholders, making it a choice for energy sector believers.
3. Verizon Communications
Verizon’s steep dividend yield comes amid stock price declines. While it has faced revenue growth issues, it shows promise through improving profitability and strong free cash flow. These funds can support dividends, reduce debt, and facilitate expansion into fiber and 5G technologies. Growth may be slow, but it is expected to happen.
4. AbbVie
Although AbbVie’s recent dividend yield is lesser than others listed, its stock price growth has been notable. The company faces challenges, such as a higher-than-ideal payout ratio above 100% due to the loss of patent protection for Humira. However, AbbVie is focused on developing next-generation medications, which could drive future performance.
5. Realty Income
Realty Income, a real estate investment trust (REIT), pays monthly dividends, a rarity among public companies. With over 15,450 properties across various sectors, it is contributing to economic growth. As of late June, the company reported a 31% year-over-year revenue increase, signaling ongoing expansion.
Consider Exchange-Traded Funds (ETFs) Too!
If selecting individual dividend stocks feels daunting, ETFs can offer diversified exposure to dividend-paying stocks without the need for picking specific companies.
“`
Maximizing Income: Consider These Dividend-Focused ETFs
For those hesitant about individual stocks, dividend-focused exchange-traded funds (ETFs) can be a smart alternative. Here are some noteworthy options to explore.
|
ETF |
Recent Yield |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|
|
SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) |
4.18% |
8.67% |
N/A |
|
Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) |
3.61% |
13.05% |
12.02% |
|
iShares Core Dividend Growth ETF (NYSEMKT: DGRO) |
2.24% |
12.59% |
12.49% |
|
Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) |
1.65% |
12.93% |
12.33% |
Data source: Morningstar.com, as of Oct. 22, 2024.
Incorporating dividend-paying ETFs can enhance your long-term investment strategy.
Is Now the Right Time to Invest $1,000 in Chevron?
If you’re considering an investment in Chevron, here are some insights:
Recently, the Motley Fool Stock Advisor analyst team highlighted their pick of the 10 best stocks for investors, and Chevron was notably absent. The selected stocks have potential for significant returns in the upcoming years.
For example, consider Nvidia, which was recommended on April 15, 2005. An investment of $1,000 back then would now be worth about $865,595!*
Stock Advisor offers an easy-to-follow path for investors, covering portfolio building, consistent updates, and two new stock recommendations each month. Since 2002, this service has more than quadrupled the returns of the S&P 500.*
Explore the 10 recommended stocks »
*Stock Advisor returns as of October 28, 2024
Selena Maranjian holds positions in AbbVie, Realty Income, Schwab U.S. Dividend Equity ETF, and Verizon Communications. The Motley Fool also has and recommends positions in AbbVie, Abbott Laboratories, Chevron, Realty Income, Vanguard Dividend Appreciation ETF, and Vanguard S&P 500 ETF, with recommendations for Verizon Communications as well. The Motley Fool maintains a disclosure policy.
The views and opinions expressed herein are solely those of the author and do not reflect those of Nasdaq, Inc.
