What is a dividend?
Dividend stocks distribute their profits to their shareholders through dividend payments. Some shareholders desire dividends for financial gain or to reinvest in additional company shares. A company’s financial stability and strength can be shown by consistent and increased dividend payments.
Companies may provide dividends on a regular basis, such as once a quarter or once a year, or they may distribute special, one-time payout.
Dividend stocks
Stocks that pay out dividends on a regular basis to their owners, typically in the form of cash, are known as dividend stocks. The finest dividend stocks can be fantastic strategies to build long-term wealth in addition to being valuable sources of income.
Nevertheless, not all dividend stocks make for excellent investments, and many buyers are unsure of where to begin. In light of this, we have compiled a list of dividend-paying stocks as well as some of the key characteristics of the best dividend stocks.
Benefits of dividend stocks
Some benefits of dividend stocks are as follows:
- It is a passive income for investors
- The stocks offer a good return on investment
- Protection from inflation
- Preferential tax treatment
- Reduced risk
- Predictable income
- Profit without selling
How to identify dividend stocks?
Investors can make money from dividend-paying stocks in two different ways: through an increase in the stock price and through distributions made by the firm.
Many dividend-paying companies are in defensive industries that can withstand economic downturns with less volatility in addition to offering steady income.
Companies that pay dividends typically have a lot of cash on hand. This makes them promise long-term performance prospects.
Top 6 dividend stocks for 2022
Microsoft (MSFT-NASDAQ)
Microsoft has consistently increased its revenues as one of the best corporations in the world. Investors are confident in the business of the company’s emphasis on recurring, or subscription-based, revenue sources.
MSFT’s payout ratio is very low and has a strong balance sheet, the company has plenty of room to raise its dividend. It also has more cash than debt. We wouldn’t be surprised if Microsoft soon joined the Dividend Aristocrats group given its 12-year streak of dividend growth. The dividend stock’s market cap, annual dividend, and dividend yield are as follows:
Market Cap: $1,795.90B
Annual Dividend: $2.72 per share
Dividend Yield: 1.19%
Clearway Energy (CWEN.A – NYSE)
Although renewable energy is primarily thought of as a place for growth investors, it also offers fantastic income opportunities. The company owns and manages utility-scale wind and solar assets.
It sells power to utility companies under extremely long-term contracts. Clearway Energy is a great option if you’re seeking a lower-volatility, safer way to make money from renewable sources. The dividend stock’s market cap, annual dividend, and dividend yield are as follows:
Market Cap: $6.35B
Annual Dividend: $1.44 per share
Dividend Yield: 5.02%
JPMorgan Chase & Co (JPM- NYSE)
One of the biggest financial organizations in the United States, JPM provides services in investment banking, retail and commercial banking, and wealth management. JPM has a respectable dividend yield and has consistently increased its payout over the previous five years.
Over the past five years, JPM has grown earnings per share (EPS) at a steady average pace of over 15% annually. Just be aware that the stock’s 35% price decline since October 2021 is a contributing factor to its current high dividend yield. Its market cap, annual dividend, and dividend yield are as follows:
Market Cap: $333.23B
Annual Dividend: $4.00 per share
Dividend Yield: 3.60%
Texas Instruments Incorporated (TXN- NASDAQ)
TXN, once known for its calculators, now generates the majority of its revenue from the production of semiconductors. TXN is the biggest producer of analog chips globally.
Over the past five years, the company has increased dividends at an average annual rate of more than 18%. That stock on this list has practically every other stock’s highest dividend growth.
Over the past five years, TXN has consistently increased EPS by about 17%. The business should be able to continue paying out a respectable dividend in the future due to this robust profit growth. Its market cap, annual dividend, and dividend yield are as follows:
Market Cap: $141.72B
Annual Dividend: $4.96 per share
Dividend Yield: 3.34%
EXXON MOBIL (XON- NYSE)
The largest oil and gas business in the United States, Exxon Mobil, has ties to the Standard Oil dynasty of John D. Rockefeller. In response to pressure from investors and the general public regarding the company’s involvement in climate change, Exxon declared a goal in 2022 to decrease or offset greenhouse-gas emissions from its activities to zero by 2050. Its market cap, annual dividend, and dividend yield are as follows:
Market Cap: $417.60B
Annual Dividend: $3.52 per share
Dividend Yield: 3.55%
Chevron (CVX-NYSE)
Leading energy firm Chevron has detailed a strategy to give shareholders strong returns from its advantages in conventional energy sources like oil and gas. It enables us to take the lead in the future with reduced carbon emissions. The business takes great pride in its solid financial position and track record of rewarding shareholders with cash. Its market cap, annual dividend, and dividend yield are as follows:
Market Cap: $316.19B
Annual Dividend: $5.68 per share
Dividend Yield: 3.55%
Conclusion
Stocks or ETFs that pay dividends might be a great way to increase your income. Even if you reinvest those dividends, bear in mind that if you own these shares in a taxable brokerage account, you will be required to pay taxes on the income you get. You must hold the shares in a tax-advantaged account if you wish to avoid paying taxes.
Before investing, make sure you thoroughly study any dividend stocks. If their business suffers, several companies with significant payout today may be forced to reduce the payments.
Disclaimer statement: Before making an investment decision, it is recommended for all investors undertake their own independent research into investment techniques. Investors are also cautioned that the past success of investment products does not guarantee future price growth.