These stocks pay above-average yields and dividend income has the potential to grow even more in the future.
When buying a dividend stock, you should carefully consider the company’s long term prospects, as well as the dividend payout ratio. Intel It recently suspended its dividend, which is not all that surprising for a company that has struggled with profitability and grown its foundry business. In this climate, it’s hard to expect the company to invest in costly growth strategies. and Pay dividends.
There are plenty of other dividend stocks out there that are safer and carry less risk that could make a better fit in your portfolio. Here are three stocks that offer long-term dividend income: Abbott Laboratories (ABT 0.05%), ExxonMobil (XOM -0.47%)and AT&T (T 1.31%).
Abbott Laboratories
One of the safest dividend stocks is undoubtedly shares of healthcare company Abbott Laboratories. Last year, the dividend king announced it would increase its dividend for the 52nd consecutive year, and the company has now been paying dividends for 100 years.
There’s also little reason why Abbott can’t continue to do well. With revenues across multiple segments, including nutrition, diagnostics, pharmaceuticals, and medical devices, the company’s business is well diversified and stable. Abbott reported robust revenue growth of 4% in the most recent quarter (ended June 30), driven by impressive 10% growth in its medical devices division. The company has received clearances and approvals for new products, including two new continuous glucose monitoring devices, suggesting there’s room for even more growth in the future.
Abbott’s steadily growing business makes it an ideal choice for income investors. Its payout ratio is modest at about 67%, and its dividend yield seems low at 2%, but still, S&P 500 That’s an average of 1.4%. And with the likelihood of future rate hikes very high, investors have plenty of incentive to buy healthcare stocks and hold on to them for years to come.
ExxonMobil
Investors can lock in a higher yield from oil and gas producer Exxon Mobil, which has a 3.2% yield that’s more than double the S&P 500 average. While it doesn’t have as long a track record as Abbott when it comes to increasing its dividend, the company has raised its payout for 41 consecutive years. With a payout ratio of just 45%, Exxon Mobil has plenty of room to extend that record this year.
Notably, Exxon continues to grow its dividend despite the volatility of oil prices and the impact that has had on its business. Last year’s $60 billion acquisition of Pioneer Natural Resources made Exxon even larger and positioned it to deliver low-cost production for years to come. Over the past three years, Exxon has amassed $115 billion in profits.
Despite the growth of electric vehicles, investors may not necessarily have to worry too much about investing in top oil and gas stocks in the near future. Goldman Sachs Demand for oil is expected to continue to grow and is not expected to peak until 2034. After that, demand may decline, but oil is likely to remain the dominant source of energy for the foreseeable future.
AT&T
The highest-yielding stock on this list is AT&T. The communications stock’s yield of 5.7% has fallen as investors have bought up the company’s shares this year, but it’s still higher than AT&T’s typical yield. The company has been slowly winning over skeptics with strong quarterly results, and we expect its stock price to continue to rise in the coming months, which will result in a lower yield.
The company’s free cash flow for the most recent quarter ending in June was $4.6 billion, up from $4.2 billion in the same period last year. Free cash flow is one of the key metrics for the company’s dividend, telling investors how healthy a carrier’s cash flow is and how much room the company has to pay dividends and pay down debt. Given that the company pays out roughly $2.1 billion in dividends per quarter, it wouldn’t be surprising to see AT&T announce a dividend hike this year.
AT&T hasn’t been a great buy in recent years, with its shares down 34% since 2020, but its financial position looks much stronger today. The company is no longer chasing costly growth opportunities in the streaming industry and is instead focused on becoming a top communications provider, making it a more attractive choice for income investors looking to own a stable dividend stock.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Abbott Laboratories and Goldman Sachs Group. The Motley Fool recommends Intel and recommends buying Intel’s January 2025 $45 calls and selling Intel’s August 2024 $35 calls. The Motley Fool has a disclosure policy.
