If over the past few months you’ve become much more concerned with simply fighting inflation, you’re not alone. This pullback is a not-so-sweet reminder that owning only growth stocks can come at a high price. Value stocks – and dividend stocks in particular – have their place after all. For some investors, raising cash now may be the only way to avoid falling behind inflation.
With that as a backdrop, here’s a look at three S&P500 companies that not only offer reliable tax results, but distribute above-average dividends to shareholders. This combination of predictability and ongoing income makes them powerful additions to almost anyone’s portfolio.
Dividend yield: 5.1%
Verizon (VZ -0.53%) is one of the largest wireless service providers in the country (sometimes the largest, depending on how the data is counted), keeping 143 million consumer and business cell phones connected to the rest of the world, at the end of the first trimester. These customers collectively contributed $133.6 billion in revenue for all of 2021, of which $10.4 billion was returned directly to shareholders in the form of dividends.
Don’t expect those numbers to change significantly anytime soon, if ever. Although some customers change service providers from time to time, most do not. Verizon’s first-quarter churn was only about 1%, meaning it ended the quarter with 99% of the customers it started the quarter with.
This is a big problem, especially for companies that pay dividends. Cash flow predictability is essential when you commit to paying a regular and generous dividend, which Verizon is. The company has paid a dividend every quarter since becoming Verizon in 2000 and has increased its annual payout over the past 15 years.
There’s no real growth to speak of in the cards, other than population growth and inflation pushing prices up. Data from Pew Research indicates that 97% of Americans already have a cell phone. Given that consumers are indeed dependent on their mobile phones as one of their main connections to the world, it’s not as if any of them will suddenly decide that they no longer need service. wireless. This dynamic paves the way for perpetual, dividend-paying income that currently only consumes about half of Verizon’s earnings.
Dividend yield: 5.3%
There may come a time when global smoking cessation efforts finally reduce tobacco use, and perhaps all of its alternatives as well. That day is not today, however, nor in the foreseeable future. As the figure tends to fall, the World Health Organization predicts that the global number of smokers is likely to only slip from 1.32 billion in 2015 to 1.27 billion by 2025.
Say what you will about the health risks of smoking and vaping, but it’s all good news for the tobacco giant Philip Morris International (PM -3.36%). And this news just got better.
Although perhaps best known for being the name behind Marlboro cigarettes, Philip Morris is actually the owner of several cigarette brands, selling their products in over 175 different countries. Perhaps seeing the headwind that has been against the tobacco industry for years, Philip Morris is also looking to reinvent itself as a company that will eventually offer only smoke-free products.
It sounds crazy at first, until you learn that the company is cultivating a heated tobacco and vaping business around its so-called IQOS device that drastically reduces the risk of inhaling anything other than air, but still serves up the nicotine that smokers crave. The plan is just crazy enough to work, forcing consumers to pay for vaping and heated tobacco refills the same way they buy cigarettes over and over again, thus maintaining its dividend. Market research firm Technavio estimates that the e-cigarette market will swell at an average annual rate of 17% through 2024, on its way to becoming a $53 billion market.
Here’s the Kicker: The U.S. Food & Drug Administration Just Told a Rival Tobacco Company Altria it must stop marketing a similar device – sold under the Juul label – in the United States. While the development hasn’t stopped Philip Morris shares from continuing to slide from their peak in May, it’s a significant win for the company in at least one key market.
T price. Rowe
Dividend yield: 4.1%
Finally, add a mutual fund company T. Rowe Prize Group (TROW -1.97%) to your list of stocks that pay big dividends.
It’s easy to assume that the worst is market-related – even market-related.addicted — stocks while the stock market is struggling as it is now. To that end, T. Rowe shares have nearly halved since their November peak. At the very least, it threatens the profitability of the fund company; it could even threaten its dividend.
But those fears are overblown.
It’s an often overlooked nuance of mutual fund business, but fund companies don’t get paid for their performance. Their income is a percentage of the amount of money under management. As long as investors in his funds stay invested despite the headwinds undermining their values, T. Rowe Price will still earn management fees. Given the 12% drop in the market over the past three months, the organization’s second quarter revenue is expected to be just as lower than its first quarter revenue. Ditto for earnings, which are expected to fall from $2.62 per share in the first quarter to just $2.48. This is obviously a step in the wrong direction, but not a big step. And, not a permanent one. Analysts expect moderate earnings growth of 5% for the whole of next year, from $10.25 per share to $10.81, in line with its expected sales growth.
Perhaps most importantly for potential buyers, it’s more than enough to cover the dividend. T. Rowe Price currently pays only $1.20 per share per quarter, or $4.80 per share for a full year.