A dividend yield compares a company’s dividend to its share price. A $50 stock that pays a dividend of $2 per year (usually in four installment payments) has a dividend yield of 4% — which is calculated by dividing $2 by $50 to get 0.04.
Dividend stocks are great for your long-term profits because they give two ways to earn money: From the share price increasing and from dividends — which also tend to be increased over time.
Here are three stocks that pay dividends you should consider, and each has increased its payouts at a rate higher than average.
Many Wall Street investors are happy over the future of “fintech” — companies focused on financial technology. Here is one such company, but it is much more established — enough to have routine dividend payments: Visa (NYSE:V). Visa partners with fintech companies and even invested in some.
Their dividend isn’t much right now, at only 0.6%, but its growth over the last five years has averaged 18% per year. With that rate, its $0.32 quarterly payments will be $0.73 in five years and $1.67 in a decade. There’s plenty of growth potential too, as Visa’s payout (the part of earnings given out in dividend form) was only 26%.
2. Bank of America
Bank of America (NYSE:BAC) is a respected large bank — having over 10% of all deposits in the country. Even top investor Warren Buffett likes the company enough to own almost 12% of it, making it his second largest holding.
Their dividend yielded almost 1.9%, and they have increased that payout by an average of 29% per year over the last five years. Their current yield is smaller than other big banks, but their ratio is lower than other big banks too, showing they have even more room for increases. An expanding dividend is very likely, because the firm is sitting on substantial left over capital. It’s so large they can’t spend the money by buying another bank, so a big chunk of those earnings are likely to be given as dividends.
Then there is Broadcom (NASDAQ:AVGO). This company is a huge chipmaker, with a recent market cap close to $200 billion. It has a good dividend yield, too, recently at 3%. But even better, their payout has been increasing at an average rate of 49% per year over the last five years. That’s more than seven-fold in a short time.
Broadcom’s last earnings report and outlook were good too, with double-digit growth and optimism about the future, as a recovering economy will probably greatly boost demand for Broadcom’s products. Meanwhile, the firm has a backlog of orders to complete.
Author: Steven Sinclaire