Best Dividend Stocks with Yields Over 5%
One of the best ways to grow your investment portfolio and build wealth is to invest in blue-chip stocks paying growing dividends. What you need to know is that only a handful of companies can be considered as proper blue-chip companies.
To better understand what blue-chip stocks and dividends are and how they impact your investment portfolio, we address the meaning of the two terms.
Keep reading to find out!
What Is a Dividend?
A dividend is a sum of money paid by a corporation to its shareholders as part of the profits earned. Dividends can be in the form of cash payments, property or shares. However, cash payments are the most common.
Shareholders can use the money to re-invest in the corporation and increase their portfolio. Or they can choose to diversify and invest in other financial instruments.
The amount to be paid out as a dividend to shareholders is determined by the board of directors. But shareholders can approve through voting rights.
What Is a Blue-Chip Stock?
Blue-chip stocks are stocks of large and recognizable businesses who are market leaders in their industries. Simply put, blue-chip stocks are stocks of financially sound companies that have been operating for several years. For instance, IBM, Boeing, Apple, and Coca Cola Co.
Blue-chip companies get their nickname from blue poker chips. These are high-value chips in poker. These companies have a market capitalization in the billions. Dividends aren’t necessary for a company to be considered a blue-chip.
Blue-chip stocks are components of reputable market averages or indexes such as S&P 500, Dow Jones Industrial Average and NASDAQ.
For a company to qualify for blue-chip status, the accepted benchmark is a capitalization of $5 billion. Blue-chip companies have survived several challenges and as such, they are a safe investment. Problem is, this is not always the case.
A good example is the 2008 Global Recession where investors witnessed the bankruptcies of Lehman Brothers and General Motors.
Despite this, they are appropriate as core holdings for a larger portfolio.
Solid Blue-Chip Stocks with Dividend Yields over 5%
1. AT&T (NYSE: T)
Dividend Yield: 5.9%
With a market value of more than $250.85 billion, AT&T is a well-known provider of mobile and broadband services. The company serves more than 160 million subscribers across the US. Headquartered in Dallas, Texas, it is the largest telephone operating organization by total revenue amounting to $163.8 Billion.
In 2008, AT&T gained a world-class library of entertainment content, TV and film studios. This impressive portfolio of entertainment assets was through the acquisition of Time Warner in 2018.
In the same year, the company reported profits of 78 cents a share with revenue estimates of $41.7 billion. As such, the company beat expectations of 65 cents. AT&T has also added more than 2.5 million customers beating other US Wireless service providers.
At the time of writing, the dividend yield stood at 5.94% with a P/E ratio of 14.48. The company will be rolling out its 5G network. This will open new markets for the company to increase sales and revenue. The Department of Justice has also chosen the company to “improve its mission performance with modernized technology.” This will enable the DOJ to transition to a next-gen communication platform.
In 2019, AT&T entertainment success started with Aquaman which grossed more than $1.1 billion worldwide.
2. Altria Group Inc (NYSE: MO)
Dividend Yield: 6.7%
Headquartered in Henrico County, Virginia, Altria Group Inc (MO) is an American corporation and among the world’s top producers of cigarettes, tobacco and other products.
With a net income of $6.963 billion in 2018, the company has diversified positions in cannabis and alcohol. As the undisputed market leader in the US tobacco industry, Altria Group owns Philip Morris USA, John Middleton, Nat Sherman, and the US Smokeless Tobacco company.
Apart from the tobacco industry, the company has an interest in wine estates through a partnership with Ste. Michelle Wine Estates. As a Fortune 200 company, Altria has a market capitalization of $94.13 billion.
Altria Group acquired a 35% stake in Juul, a market leader in e-vaping products, for $38 billion. In a note, Adam Spelman, a Citibank analyst complained the deal is too expensive. In fact, he commented that the company overpaid. This led to a drop in Altria Group share price after Spelman downgraded its rating from neutral to sell.
With a dividend of $0.80 and a dividend yield of 6.418%, the company generated 9% annual EPS growth and was able to return more than $30 billion to the shareholders. This was through share repurchases and dividends.
Altria Group has been paying out dividends for the past 49 years and delivered annual growth of 10.3%.
3. Royal Dutch Shell PLC (NYSE: RDS.A)
Dividend Yield: 5.9%
With over 86,000 employees spread across more than 70 countries, Royal Dutch Shell PLC is a global group of petrochemical and energy companies. The global group has interests in more than 21 refineries where it produces more than 3.9 million barrels of crude each day. In 2017, Royal Dutch Shell PLC had revenues of $240 billion. As such, it earned the 7th position on the list of Fortune 500 companies.
The global group has a market capitalization of 255.6 billion despite being hit hard by the downturn of oil prices from 2014 to 2016. Speaking of 2016, the global group made a major acquisition of the UK’s third-largest energy player, BG Group.
This made Royal Dutch Shell PLC, the world’s leading producer of LNG (liquefied natural gas). The company is planning to build a massive liquefied natural gas plant in Canada. Why?
The demand for LNG is forecast to rise from 300 million tons to 500 million tons by 2030. This is due to the growing demand in Asia. With a dividend of $0.94 and a dividend yield of 5.966%, the company will allocate $25 billion to share repurchases.
This starts in 2018 through 2020. The company is also planning to reduce its debt by more than $14.5 billion.
4. AbbVie (NYSE: ABBV)
Dividend Yield: 6.4%
Founded in 2013, AbbVie is the sixth-largest biotech company by market capitalization ($99.317 billion) in the world. Headquartered in North Chicago, Illinois, the company has more than 29,000 employees. As a biotech company, its focus is more than treating diseases. In fact, the company aims at making a remarkable impact on people’s lives.
The highly focused and research-driven biotech company has introduced new oncology drugs namely Venclexta and Imbruvica. As such, the sale of these drugs has contributed more than $4 billion in revenue. This is expected to grow at double digits through 2019.
Experts forecast that by 2025, the drugs will contribute $9 billion in sales. The company will also be introducing two best in class immunology agents namely Risankizumab and Upadacitinib. This will contribute a further $10 billion.
In 2019, AbbVie posted its quarterly earnings of $2.26 per share compared to earnings per share of $2 in 2018. This quarterly report was an increase of 2.26%. In the past four quarters, the company has surpassed EPS estimates more than three times. At the time of writing, the dividend price was $1.07 and the dividend yield was 6.316%.
Every year, AbbVie hikes its dividend payout and will continue to do so for 46 consecutive years. This includes an 11.5% increase in 2019.
How to Find More High Paying Dividend Stocks
To find more high paying dividend stocks, consider the following tips. Always ensure that the company’s dividend grows every year and it has a strong balance sheet able to withstand setbacks. Also, make sure the company pays out a dividend with a good yield covered by cash flow.
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