When high-flying growth stocks made all of the headlines last year, dividend stocks often got ignored. But the Nasdaq remains down 20% in 2022, and many of those former hot stocks haven't bounced back.
In volatile times like these, a steady and increasing stream of dividends can help risk-averse investors sleep better at night.
Healthy dividend stocks have the potential to:
Offer a plump income stream in both good times and bad times.
Provide much-needed diversification to growth-oriented portfolios.
Outperform the S&P 500 over the long haul.
Here’s a look at three stocks with oversized dividends. Remember, you don’t have to start big.
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JPMorgan Chase (JPM)
Let’s start with a bank stock.
With inflation running hot, people are concerned about the continuous interest rate hikes from the Fed. But as it turns out, banks typically do well in a rising interest rate environment.
Banks lend money at higher rates than they borrow, pocketing the difference. When interest rates increase, the spread for how much a bank earns widens.
JPMorgan Chase is the largest U.S. bank, with a whopping $4.0 trillion in assets. The stock had a strong rally in 2021 but later gave up some of the gains. Year to date, it’s down around 30%.
The latest financials didn’t cheer up investors. In Q2, JPMorgan produced $2.76 per share in earnings, well below Wall Street's expectations of $2.88.
Dividend checks, on the other hand, remain plentiful. Last summer, the bank announced an 11% increase to its quarterly dividend rate to $1 per share.
It currently yields 3.6%, which is higher than what’s offered at Goldman Sachs (2.4%), Bank of America (2.7%) and Wells Fargo (2.8%).
Walgreens Boots Alliance (WBA)
Despite being one of the essential service providers, Walgreens hasn’t been a market darling. The company’s shares have tumbled more than 50% in the last five years.
Dividends, however, have only increased. Last month, Walgreens boosted its quarterly payout by 0.5%, marking its 47th consecutive annual dividend increase.
Looking further back, you’ll see that the retail pharmacy giant has paid uninterrupted dividends for more than 89 years.
The company has a growing business to back its rising dividends. Year to date, EPS has increased 190.6%.
Today, Walgreens yields 4.9%, a generous amount compared to competitors like CVS Health (2.1%) and Walmart (1.8%).
Annaly Capital Management (NLY)
For the real yield hunters, Annaly Capital Management deserves a look.
The company is not nearly as well known as the stocks mentioned above, but it offers a staggering annual yield of 13.2%.
Structured as a real estate investment trust, Annaly is a diversified capital manager. The REIT invests in agency mortgage-backed securities, residential real estate, and middle-market lending.
Shares tumbled more than 50% during the pandemic-induced market crash in early 2020. Since then, Annaly has made a strong recovery. While the stock is not quite back to where it was before COVID, the sheer size of its dividend payments make it stand out.
The REIT reported earnings last month. For Q1, earnings available for distribution came in at 30 cents per share, representing dividend covereage of over 135%.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.