These 5 dividend stocks pay out $ 71 billion a year, combined, to their shareholders

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While there are many ways to make money on Wall Street, buying dividend stocks has been about as safe a strategy as it gets. Dividend-paying companies are often profitable, time-tested, and more importantly, have circles around long-term dividend non-payers.

In 2013, JP Morgan Asset Management published a report that compared the average annual performance of companies that initiated and increased their payments between 1972 and 2012 to companies that did not offer a dividend over the same period. In total, dividend-paying stocks have averaged an annualized return of 9.5% over four decades, compared to a meager annualized return of 1.6% for non-dividend stocks.

While there is no shortage of dividend-paying stocks that income investors can choose from, the following five companies are truly in a league of their own. You see, on a combined basis, they pay out $ 71 billion in dividend income each year to their shareholders.

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Microsoft: $ 18.62 billion

No publicly traded company in the US will pay a bigger dividend in the next 12 months than the software kingpin Microsoft (NASDAQ: MSFT). Based on its annual base payout of $ 2.48, Microsoft rewards its shareholders with $ 18.6 billion in dividend income. Yet despite this market-leading payout, Microsoft’s dividend yield is only 0.9%.

There are three factors that have made Microsoft such an overwhelming success for long-term investors. First, the historical activities of the company remain cash cows. Microsoft will never see the growth of its Windows franchise it saw two decades ago, but it continues to be the clear leading operating system for personal computers.

Second, Microsoft is benefiting from aggressive investments in cloud computing. Azure cloud infrastructure service saw 51% year-over-year sales growth in Microsoft’s fiscal fourth quarter and established itself as the second cloud infrastructure service in terms of global revenue share . Cloud services offer juicy margins which help generate abundant cash flow.

Third, Microsoft’s strong cash flow has enabled the company to complete a number of acquisitions. While these buyouts don’t always work out as expected, more often than not they have increased Microsoft’s revenue potential.

Two oil pumps operating at sunrise.

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ExxonMobil: $ 14.72 billion

Income investors might not approach oil stocks in 2021 the way they were before the coronavirus pandemic, but the oil and gas giant integrated ExxonMobil (NYSE: XOM) continues to be a gush on the dividend front. Over the next 12 months, shareholders will receive just over $ 14.7 billion in dividend income.

One of the reasons ExxonMobil has been such a stable revenue stock for so many decades is its integrated operating model. The company’s most significant margins come from its upstream assets, which drill for oil and natural gas. However, the company’s downstream assets – refineries and petrochemical plants – hedge against declines in crude prices. When the price of crude oil goes down, input costs for refiners and chemical plants also go down. This hedging ensures that ExxonMobil almost always generates positive operating cash flow.

Prudent fiscal management is another reason ExxonMobil has been a dividend stud. Although it takes tens of billions of dollars in annual spending to develop oil, natural gas and natural gas liquids projects around the world, ExxonMobil has the ability to turn its capital expenditure tap on and off. to adapt to current economic conditions. The reduction in its investments in 2021 creates an additional cushion for the company to continue to pay its return above the average of 5.9%.

Two excited kids playing with new iPhones on display in an Apple Store.

Image source: Apple.

Apple: $ 14.55 billion

If you thought Microsoft’s 0.9% return is minimal, Apple‘s (NASDAQ: AAPL) The 0.6% yield probably looks microscopic. However, this is more because Apple’s stock price has skyrocketed over time than Apple is not looking after its investors. Since launching a quarterly dividend in 2012, Apple’s payout has increased 132%. In total, Apple’s annual base payment of $ 0.88 equates to a distribution of $ 14.55 billion to its shareholders in the following year.

The largest publicly traded company in the United States has thrived on brand recognition and innovation. The iPhone is the most popular smartphone in the United States, and new product launches are regularly greeted by queues at Apple stores. The introduction of a 5G-enabled iPhone late last year is expected to lead to a multi-year device upgrade cycle that continues to line Apple’s pockets.

The other exciting development for Apple is its continued drive to become a service-oriented company. CEO Tim Cook is overseeing this transition, with Apple focusing on higher margin subscription services and portable devices. This transformation is expected to ultimately reduce product replacement cycles associated with revenue aggregation, as well as increase operating cash flow.

A bank manager shaking hands with potential clients.

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JPMorgan Chase: $ 11.96 billion

Another big dividend payer that income investors can “bank on” is the central bank. JPMorgan Chase (NYSE: JPM). After announcing a quarterly dividend increase of 11% at the end of June, this pillar of banking stability is set to distribute nearly $ 12 billion in dividend income over the next 12 months.

The cyclical nature of the bank is one of the factors that makes JPMorgan Chase such an important income security. While economic contractions and recessions are inevitable, they usually only last a few months to a few quarters. By comparison, virtually all economic expansions are measured in years. Since bank stocks spend much more time in the sun than in the shade, they are able to pass on large payments.

JPMorgan Chase also benefits from its omnichannel presence. It is actively investing in digitization initiatives to promote online and mobile banking, and unlike its peers, it is expanding its physical branches into new markets. Having multiple ways to connect with consumer and business customers is a winning proposition.

Finally, JPMorgan Chase CEO Jamie Dimon has done a remarkable job of avoiding riskier derivative investments for his bank during his nearly 15 years at the helm. By focusing on the bulk of the banking industry (i.e. growth in loans and deposits), JPMorgan Chase has been able to deliver good returns to shareholders.

Growing piles of generic drug pills resting on a messy pile of hundred dollar bills.

Image source: Getty Images.

Johnson & Johnson: $ 11.15 billion

Last, but not least, the health conglomerate Johnson & johnson (NYSE: JNJ) has exactly what the doctor ordered: an annual payment of $ 11.15 billion to shareholders. Next April, J&J will almost certainly increase its base annual payment for the 60th consecutive year. Only a handful of publicly traded companies in the United States have a longer active streak of increasing their annual dividend.

For starters, Johnson & Johnson is successful because it operates in the very defensive healthcare industry. No matter how the US economy or stock market performs, people are still getting sick and in need of health services, pharmaceuticals, and medical devices. This creates a predictable demand floor for almost all healthcare stocks, including J&J.

Johnson & Johnson’s long-term outperformance is also a function of whether its three operating segments bring something important to the table. For example, even though the company’s consumer healthcare segment is the slowest growing, it provides highly predictable cash flow and strong pricing power. Meanwhile, growth in medical devices is currently modest, but is expected to accelerate dramatically as the world’s population ages. Finally, pharmaceuticals provide the bulk of J & J’s growth and margins. However, brand name drugs have a limited period of exclusivity. These segments all work together to generate significant operating cash flow for J&J.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging 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.


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