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Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.
A study from the Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered an annualized return of 9.18% over the past half-century (1973-2023). Over the same timeline, this was more than double the annualized return for non-payers (3.95%).
In a panic over the COVID-19 surge, the Federal Reserve slashed interest rates to 0.00% to 0.25% in March 2020. Mortgage rates plunged to the lowest level in decades, and government spending exploded. History will determine just how bad the decisions were then, but after a one-and-a-half-year hiking cycle, the Fed has held rates at its current 5.25% to 5.5% since July 2023.
With rate cuts on the way in September, growth and income investors should grab quality companies that pay high-yield dividends and hold them forever. The combination of the rate-cutting cycle, which may take the funds rate back to 3.5% by 2026, and investors looking for safe passive income could drive top dividend stocks much higher in price. We found five that are perfect buy-and-hold ideas now and all pay at least a 5% dividend.
Why do we cover dividend stocks?
Dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner's continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.
AT&T
AT&T is the world's fourth-largest telecommunications company in terms of revenue.
The legacy telecommunications company has been undergoing a lengthy restructuring while lowering its dividend, which still stands at 5.58%. AT&T Inc. ( NYSE: T ) provides worldwide telecommunications, media, and technology services. Its Communications segment offers wireless voice and data communications services.
AT&T sells through its company-owned stores, agents, and third-party retail stores:
- Handsets
- Wireless data cards
- Wireless computing devices
- Carrying cases
- Hands-free devices
AT&T also provides:
- Data
- Voice
- Security
- Cloud solutions
- Outsourcing
- Managed and professional services
- Customer premises equipment for multinational corporations, small and mid-sized businesses, and governmental and wholesale customers.
In addition, this segment offers residential customers broadband fiber and legacy telephony voice communication services.
It markets its communications services and products under:
- AT&T
- Cricket
- AT&T PREPAID
- AT&T Fiber
The company's Latin America segment provides wireless services in Mexico and video services in Latin America. This segment markets its services and products under the AT&T and Unefon brands.
Kinder Morgan
Kinder Morgan is one of North America's largest energy infrastructure companies.
This is one of the top energy stocks, remains a favorite across Wall Street, and pays a dependable 5.33% dividend. Kinder Morgan Inc. ( NYSE: KMI ) is an energy infrastructure company in North America.
The company operates through four segments:
- Natural Gas
- Products
- Terminals
- CO2
The Natural Gas Pipelines segment:
- Owns and operates the interstate and intrastate natural gas pipeline and underground storage systems
- Natural gas gathering systems and natural gas processing and treating facilities
- Natural gas liquids fractionation facilities and transportation systems
- Liquefied natural gas liquefaction and storage facilities
The Products Pipelines segment owns and operates refined petroleum products, crude oil and condensate pipelines, associated product terminals, and petroleum OKEpipeline transmit facilities.
The Terminals segment owns and operates liquids and bulk terminals that store and handle various commodities, including:
- Gasoline
- Diesel fuel
- Chemicals
- Ethanol
- Metals
- Petroleum coke
- Owns tankers
Lastly, the CO2 segment produces, transports, and markets CO2 to recover and produce crude oil from mature oil fields. It owns interests in or operates oil fields, gasoline processing plants, and a natural oil pipeline system in West Texas. It holds and runs approximately 83,000 miles of pipelines and 144 terminals.
Pfizer
Pfizer is an American multinational pharmaceutical and biotechnology corporation headquartered at The Spiral in Manhattan.
This top pharmaceutical stock was a massive winner in the COVID-19 vaccine sweepstakes but has been beaten down over the last year as many are not getting boosters. Pfizer Inc. ( NYSE: PFE ) discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide and pays a hefty 5.88% dividend, which has risen yearly for the last 14 years.
The company offers medicines and vaccines in various therapeutic areas, including:
- Cardiovascular metabolic and women's health under the Premarin family and Eliquis brands
- Biologics, small molecules, immunotherapies, and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena, and Braftovi brands
- Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga, and Paxlovid brands.
Pfizer also provides medicines and vaccines in various therapeutic areas, such as:
- Pneumococcal disease, meningococcal disease, tick-borne encephalitis
- COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba, and the Prevnar family brands
- Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis, and Cibinqo brands
- Amyloidosis, hemophilia, and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX, and Genotropin brands
Trading not far from its lowest split-adjusted level in thirteen years, the stock is an incredible bargain at current levels and pays a massive dividend. Pfizer reported revenues of $13.3 billion in the second quarter, representing 3% year-over-year operational growth, despite an expected decline in COVID revenues and a 14% year-over-year operational increase in revenues from the company's non-COVID product portfolio.
The pharmaceutical giant raised full-year 2024 revenue guidance to $59.5 to $62.5 billion and lifted adjusted diluted EPS guidance to $2.45 to $2.65. Patient investors will get paid one of the highest blue-chip dividends, and shares trade at a reasonable 9.88 times estimated 2025 earnings.
UGI
UGI owns AmeriGas, the largest propane marketer in the United States.
This Dividend Champion has paid dividends since 1885 and offers a fat 6.02% dividend and stellar total return potential. UGI Corp. ( NYSE: UGI ) and its subsidiaries distribute, store, transport, and market energy products and related services in the United States and internationally.
The company operates through four segments:
- AmeriGas Propane
- UGI International
- Midstream & Marketing
- UGI Utilities
Its extensive network of 1,400 propane distribution locations distributes propane to approximately 1.3 million residential, commercial/industrial, motor fuel, agricultural, and wholesale customers.
The company distributes liquefied petroleum gases (LPG) to:
- Residential
- Commercial
- Industrial
- Agricultural
- Wholesale
- Automobile fuel customers
- Provides logistics, storage, and other services to third-party LPG distributors
In addition, it retails natural gas, liquid fuels, and electricity to approximately 12,400 residential, commercial, and industrial customers at 42,000 locations.
Further, the company distributes natural gas to approximately 677,000 customers in eastern and central Pennsylvania counties through its distribution system of roughly 12,500 miles of gas mains and supplies electricity to approximately 62,600 customers in northeastern Pennsylvania through 2,560 miles of lines and 14 substations.
Additionally, it operates electric generation facilities, which include:
- Coal-fired
- Landfill gas-fueled
- Solar-powered
- Natural gas-fueled facilities
- Natural gas liquefaction, storage, and vaporization facility
- Propane storage and propane-air mixing stations
- Rail transshipment terminals
It manages natural gas pipeline and storage contracts; develops, owns, and operates pipelines, gathering infrastructure, and gas storage facilities.
VICI Properties
VICI Properties is a real estate investment trust based in New York City that specializes in casino and entertainment properties.
This is the top pick across Wall Street in the net lease group and is ideal for more conservative investors looking for gaming exposure and a solid 5.84% dividend. VICI Properties Inc. ( NYSE: VICI ) is an S&P 500 experiential real estate investment trust that owns one of the largest portfolios of market-leading gaming, hospitality, and entertainment destinations, including three of the most iconic entertainment facilities on the Las Vegas Strip.
- Caesars Palace Las Vegas
- MGM Grand
- The Venetian Resort Las Vegas
VICI Properties owns 93 experiential assets across a geographically diverse portfolio consisting of 54 gaming properties and 39 other experiential properties across the United States and Canada. The portfolio comprises approximately 127 million square feet and features approximately 60,300 hotel rooms and over 500 restaurants, bars, nightclubs, and sportsbooks.
Its properties are occupied by industry-leading gaming, leisure, and hospitality operators under long-term, triple-net lease agreements. VICI Properties has a growing array of real estate and financing partnerships with leading operators in other experiential sectors, including:
- Bowlero
- Cabot
- Canyon Ranch
- Chelsea Piers
- Great Wolf Resorts
- Homefield
- Kalahari Resorts
VICI Properties also owns four championship golf courses and 33 acres of undeveloped and underdeveloped land adjacent to the Las Vegas Strip.
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