These 6 dividend-paying stocks pay out $ 82 billion a year, combined, to their shareholders
If you are looking for ways to outperform the stock market over the long term, consider buying dividend paying stocks.
According to an analysis by JP Morgan Asset Management, dividend-paying stocks have historically revolved around their non-dividend-paying counterparts. Between 1972 and 2012, publicly traded companies that launched and increased their payout averaged an annual return of 9.5%. In comparison, stocks without dividends achieved an average annual gain of 1.6% over the same period.
This disparity should come as no surprise. Companies that pay a dividend are almost always profitable, typically have clear long-term strategies and perspectives, and offer proven business models.
Perhaps no dividend-paying stock is better suited than the following six companies. On a combined basis, they are expected to pay out around $ 82 billion in dividends this year.
Microsoft: $ 16.93 billion
You probably wouldn’t know by Microsoftof (NASDAQ: MSFT) Yield 0.96%, but it divides more revenue on an annual basis to its shareholders than any other public company in the United States, at just over $ 16.9 billion.
Microsoft’s huge payout is a combination of cloud growth and high margin legacy cash flow. Revenue from the company’s Intelligent Cloud segment grew 23% to $ 14.6 billion in the last quarter, with Azure sales up 50%. Cloud services revenues are applicable to a wide range of business platforms, which means Microsoft has several avenues to squeeze high-margin, double-digit growth from businesses and consumers.
Ole Softy also continues to generate a good amount of cash flow from its legacy operations. Its Windows franchise may not be the growth it once was, but it remains the dominant operating system on personal computers.
With nearly $ 132 billion in cash and cash equivalents on its balance sheet and $ 68 billion in operating cash flow over the past 12 months, it’s pretty safe to say that the arrow points upward for future payments of Microsoft.
AT&T: $ 14.85 billion
Telecom giant AT&T (NYSE: T) has seen its peak of growth come and go. Today, management understands that its role in building shareholder value means doing everything it can to maintain its lucrative 7% return. This year AT&T is on track to pay more than $ 14.8 billion in dividends.
The good news for income seekers is that AT&T executives have backed the company’s strong payout and are not seeing it disappear or shrink. The company recently announced the sale of a minority stake in its subsidiary DIRECTV, which will allow it to reduce its debt. Additionally, AT&T halted share buybacks last year to ensure its cash flow could support its prime dividend.
Despite its relatively slow-growing operating model, AT&T has a few organic catalysts on the horizon. The rollout of 5G networks is expected to drive increased wireless operating margins as businesses and consumers seize the opportunity to upgrade their devices and enjoy faster download speeds for the first time in a decade.
Additionally, AT&T HBO Max’s streaming service is gaining momentum. With WarnerMedia releasing its 2021 films on HBO Max the same day they are slated to hit theaters, it should have no problem adding new subscribers.
ExxonMobil: $ 14.72 billion
Despite a difficult 2020, which saw demand for crude oil plummet off a cliff, the integrated oil and gas giant ExxonMobil (NYSE: XOM) has also held firm on its 6.3% payout and has no intention of reducing or stopping its dividend.
ExxonMobil’s operating model is one of the reasons it has been able to weather roller coaster crude demand over the past year better than many of its peers. As an integrated company, ExxonMobil can rely on its downstream operations (refineries and chemicals) as a cover when its generally more lucrative upstream drilling operations struggle to drive down crude prices. If oil prices fall, refineries and chemical plants benefit from lower input costs.
In addition, ExxonMobil has levers to improve its financial outlook. Last year, the company slashed its pre-pandemic capital spending plan by about $ 10 billion. This year it’s pretty much the same, with ExxonMobil only due to spend between $ 16 billion and $ 19 billion on capex. By comparison, that went from a planned investment of $ 30 billion to $ 33 billion in 2020, before the pandemic surfaced.
ExxonMobil continues to invest cautiously in high yield projects and is expected to benefit from a steady economic rebound from the lows of the pandemic.
Apple: $ 13.77 billion
It is perhaps not surprising that the backbone of technology Apple (NASDAQ: AAPL) is one of the leading dividend paying companies on Wall Street. Interestingly, Apple’s overall payout has declined slightly in recent years as the company aggressively repurchased its common stock. Still, an estimated payment of $ 13.77 billion in 2021 isn’t something to sneeze at.
As many investors are probably aware, Apple’s journey to become the largest publicly traded company in the United States would not have been possible without its core products. Specifically, Apple’s iPhone innovation has enabled it to absorb a significant share of the US market and a notable percentage of the international share of smartphones.
However, CEO Tim Cook sees Apple transforming itself into a platform and service company in the long run. The company’s high-margin services and wearable device penetration have the potential to drive higher operating margins and more consistent cash flow.
With nearly $ 89 billion in operating cash flow last year, Apple’s payment looks incredibly secure.
JPMorgan Chase: $ 10.98 billion
Among the big banks, JPMorgan Chase (NYSE: JPM) distributes the best reward to its shareholders. Assuming its current payout stays the same, it will return nearly $ 11 billion in dividend income to investors in 2021.
What’s interesting is that JPMorgan Chase has taken an interesting double-growth approach. Although it is aggressively investing in digital initiatives like other banking stocks – and was rewarded with a 10% increase in the number of active mobile customers in the fourth quarter of 2020 – it is also opening branches in new markets. . As many of his competitors are closing physical branches to cut interest-free spending, CEO Jamie Dimon seems to be re-emphasizing the importance of local customer and business engagement.
JPMorgan has also learned its lesson from the financial crisis of more than a decade ago. Today, he is much better equipped to handle recessions, and he largely avoids riskier derivative investments that could get him into trouble. By focusing on the essentials of banking (loan and deposit growth) and an emphasis on digital transactions, JPMorgan appears on track to deliver a healthy return on assets.
Verizon: $ 10.39 billion
Finally, AT & T’s main rival, Verizon (NYSE: VZ), also analyzes a hell of an annual dividend payment. If its current quarterly payout remains unchanged, Verizon will return nearly $ 10.4 billion in dividend income to shareholders this year.
Similar to its rival, Verizon is expected to benefit for years from the 5G revolution. It’s been a decade since businesses and consumers have seen download speeds increase significantly, which should pave the way for a massive, multi-year technology upgrade cycle. Since wireless companies like Verizon generate some of their juiciest margins from data consumption, the spending on infrastructure upgrades should be worth it.
In addition to aggressively expanding its 5G reach, Verizon plans to use its recent purchases in midband 5G spectrum to provide fixed broadband services to residential customers. By 2023, Verizon’s broadband services are expected to reach up to 30 million U.S. homes.
Like AT&T, Verizon is a slow growing company. But the transparency and predictability of its cash flow make it a rock solid dividend stock.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.