What are dividend stocks?
Dividend stocks are types of stocks that pay their holders some portion of the issuing company’s profits. These payments are mostly in cash although there are some other ways by which these payments could be made.
Below, we shall discuss dividend stocks meaning, list and types. We shall also see their characteristics and some frequently asked questions on dividend stocks.
Dividend stocks meaning
Dividend stocks are shares that pay stockholders a return on their investment (ROI). This return on investment is mostly in form of cash dividends although some companies may pay in stocks and other forms as well. These dividends are usually paid quarterly or annually. Due to this regular dividend payment, they are also known as income stocks since they serve as an income source for the stockholders.
What are dividend rights?
Dividend right is a type of shareholders’ rights that gives a shareholder the right to receive the same dividends that are identical to those that other shareholders of the same class receive. Shareholders have different types of rights as a result of the ownership stake they have in a company. The dividend right is a type of right given to a shareholder to receive dividends according to the class of stocks the shareholder holds. If a company doesn’t pay a dividend, the shareholder has the right to sell the shares and receive the cash payment as well as any bonus payout that was promised when the shares were bought.
Even though dividend stocks can be issued by businesses in any industry, they are most often issued by companies in the following sectors.
- Real estate.
- Consumer staples.
- Information technology.
Investors seeking to purchase dividend stocks can do so through a stockbroker either online or offline or by investing in a mutual fund or an exchange-traded fund (ETF) or a real estate investment trust (REIT).
Dividend stocks list
- Coca-Cola Co
- Great Ajax Corp
- Mesabi Trust
- Apple Inc
- Microsoft Corporation
- Dell Technologies Inc
- Harley-Davidson Inc
- Marriott International Inc
- Papa John’s Int’l, Inc.
- Paramount Global
- Alliancebernstein Holding LP
- Western Asset Mortgage Capital Corp
- Ready Capital Corp
- NEWTEK Business Services Corp
- Camping World Holdings Inc
- Annaly Capital Management, Inc
- FS KKR Capital Corp
- Southern Copper Corp
- Altria Group Inc
- Triton International Ltd
- Universal Corp
- AT&T Inc.
- Verizon Communications Inc.
- Duke Energy Corp
- Consolidated Edison, Inc
- Kimco Realty Corp
- Kinder Morgan Inc
- Exxon Mobil Corp
- Wendys Co
Above is a list of some company stocks that pay dividends. In the table below, we give a closer look at these companies, their share price as well as their dividend yield as listed on the New York Stock Exchange (NYSE) or National Association of Securities Dealers Automated Quotations (NASDAQ)
|Market||Ticker symbol||Company name||Share price in dollars||Dividend yield (%)|
|NYSE||AJX||Great Ajax Corp||10.59||9.82|
|NYSE||DELL||Dell Technologies Inc||43.65||3.03|
|NASDAQ||MAR||Marriott International Inc||155.48||0.77|
|NASDAQ||PZZA||Papa John’s Int’l, Inc.||85.07||1.64|
|NASDAQ||PARAA||Paramount Global Class A||27.62||3.48|
|NYSE||AB||Alliancebernstein Holding LP||41.47||11.57|
|NYSE||WMC||Western Asset Mortgage Capital Corp||12.70||12.61|
|NYSE||RC||Ready Capital Corp||13.48||12.46|
|NASDAQ||NEWT||NEWTEK Business Services Corp||20.58||14.58|
|NYSE||CWH||Camping World Holdings Inc||25.99||8.66|
|NYSE||NLY||Annaly Capital Management, Inc||6.46||13.65|
|NYSE||FSK||FS KKR Capital Corp||20.75||13.10|
|NYSE||SCCO||Southern Copper Corp||47.98||10.41|
|NYSE||MO||Altria Group Inc||43.72||8.22|
|NYSE||TRTN||Triton International Ltd||59.40||4.38|
|NYSE||VZ||Verizon Communications Inc.||44.63||5.73|
|NYSE||DUK||Duke Energy Corp||106.16||3.79|
|NYSE||ED||Consolidated Edison, Inc||95.07||3.33|
|NYSE||KIM||Kimco Realty Corp||21.44||3.73|
|NYSE||KMI||Kinder Morgan Inc||17.95||6.19|
|NYSE||XOM||Exxon Mobil Corp||90.72||3.88|
List of some companies that do not pay dividends
- Amazon.com, Inc.
- Generac Holdings Inc.
- Tesla Inc
- Macy’s Inc
- General Motors Company
- Nio Inc – ADR
- Plug Power Inc
- Block Inc
- Tilray Inc
- US Foods Holding Corp
- Wynn Resorts, Limited
- Zillow Group Inc
- Meta Platforms Inc
- Biogen Inc
- Boeing Co
- Airbus SE
- JD.Com Inc
- Edwards Lifesciences Corp
Listed above are some companies whose stocks do not pay dividends to the stockholders as of July 27th, 2022.
Characteristics of dividend stocks
- Low volatility
- Low risk
- Regular dividends
As stated earlier, dividend stocks are stocks that pay dividends to the stockholder. Here, we shall look at the two main features of these stocks.
Dividend stocks, unlike penny stocks, have low volatility, which means that upward or downward changes in the price of these stocks are not so abrupt.
Due to their low volatility and because these stocks are mostly issued by already established companies, they generally entail less risk compared to other securities.
The payment of regular dividends is the most prominent feature of this type of stock. Dividends are issued mostly quarterly or yearly.
Types of dividends
- Special or extra
- Stock repurchase
Although the return on investment (ROI) on dividend stocks is usually paid as cash, there are several other ways in which they are paid. We shall discuss them below.
This dividend is usually disbursed quarterly or semi-annually. It is usually paid before the issuing companies’ annual profits have been calculated and before its annual general meeting, hence it often comes from the previous year’s profits. The interim dividend is mostly lesser than the final dividend and is paid in years when the issuing companies have done exceptionally well and garnered excess profits.
Special or extra dividend
As the name implies this type of dividend is not a regular dividend hence it is special or extra because it does not have any effect on the regular dividend that the shareholder is entitled to. The issuing company pays this kind of dividend as a one-off event; usually attached to a specific event such as the sale of assets, large cash inflow, or some other high earnings. The special dividend is usually higher than the regular dividend shareholders receive.
This type of dividend is usually from stocks in specific foreign or domestic companies that the stockholder has held for at least sixty to ninety days. Additionally, the qualified dividend is usually taxed between 0% to 23.8% depending on the investor’s adjusted gross income (AGI), taxable income, and net investment income tax (NIIT).
This is the most common way by which companies pay stockholders. The cash dividend is paid as checks or electronic transfers to the stockholder. The payment is usually quarterly, semi-annually, or annually although there are few instances where the payment is made monthly.
The stock dividend is generally disbursed when the issuing company does not have liquid cash with which to pay dividends to its stockholders. New stocks are therefore issued as dividends to existing shareholders based on either the cash equivalent they were supposed to be paid or as a percentage of the number of stocks they currently own.
Liquidating dividend is paid when a company decides to seize operations; mostly because they are not generating adequate profits or is unable to cover operational costs or the owners no longer want to operate the business. The dividend is usually paid after all other creditors and lenders have been paid. It is also known as terminal distribution or liquidating distribution.
Scrip dividend is a dividend option whereby the issuing company gives the stockholders the option of either receiving their dividends in cash at a future date or in new stocks that have been issued by the same company. Companies mostly offer this type of dividend when there is not enough cash to pay all their stockholders or when they want to increase the company’s outstanding shares. The scrip dividend is also known as a liability dividend or bonus issue or capitalization issue.
Stock repurchase dividend
With the stock repurchase dividend, the issuing company offers to buy back some stocks from the stockholders. The stocks that the company buys back are known as treasury stocks. Usually, the company offers a higher price than the current market price; this serves as an incentive for the stockholders to sell as they get a definite return on their investment.
A property dividend is a physical asset that the issuing company pays its stockholders instead of a cash dividend or stock dividend. The physical asset will usually have a value equal to that of the cash or stock dividend that would have been paid.
What is ex-dividend?
An ex-dividend is a term used to describe a type of stock purchase in which the buyer does not receive the dividend associated with the stock in the next payment of dividends, rather, the next dividend is paid to the seller. Usually, companies fixed a date (known as the ex-dividend date) before which a buyer of a stock can be entitled to receive the next dividend payments. When the buyer buys the stocks before this date, he/she is entitled to be paid in the next dividend payment. If the buyer purchases a stock on the ex-dividend date or after this date, then the seller receives the dividend payments and not the buyer.
What is a dividend aristocrat?
A dividend aristocrat is a company that pays out a large percentage of its profits in dividends. These companies are often considered to be high-quality investments because their dividends are stable and reliable. They typically have strong fundamentals, such as good revenue growth and a low debt to equity ratio. Dividend aristocrats usually have high-quality stocks that are able to sustain high dividend payments over time.
The dividend aristocratic companies pay distributions that are above the median payout for its peers.
Characteristics of dividend aristocrats
Some of the factors that could make a company a dividend aristocrat include:
- strong cash flow
- high dividends
- low levels of debt
- stable share prices
- the company should have increased its dividends over the past five years.
However, dividend aristocrat definition excludes companies that have raised their dividends in response to stock price fluctuations. The goal of a dividend aristocrat is to maintain shareholder wealth by increasing payout ratios while also growing earnings. Dividend aristocrats are a valuable resource for investors because they tend to be more stable and tend to pay higher dividends than other companies.
What is DRIP in stocks? (Dividend ReInvestment Plan)
DRIP in stocks is an acronym for Dividend ReInvestment Plan. It refers to a method of reinvesting all or part of your quarterly dividend payments in additional shares of the same company’s stock. This increases your ownership stake in the company and gives you a chance to benefit from any future price increases.
Are dividend stocks worth it?
Dividend stocks may be worth investing in them only when the stocks are of companies that are healthy and stable. However, there’s no guarantee that a company will continue to pay dividends in the future. Therefore, before investing in a dividend stock, you should research the company to make sure it’s worth it.
What to look for in dividend stocks
If you’re looking to invest in dividend stocks, there are a few things you’ll want to keep in mind.
- It’s important to find companies that have a consistent payout policy.
- Make sure the company is profitable and has enough cash flow to cover its dividend payments. A company that has a strong balance sheet will be able to weather any financial storm without affecting its ability to pay dividends.
- Review the company’s history of dividend growth to see if it’s likely to continue paying out increases in the future. That is, make sure the company has a history of growing its dividends in line with inflation.
- Look for companies with strong management characteristics. A good management team is likely to be able to manage cash well and maintain healthy balance sheets.
- Finally, be sure to compare dividend yields before investing in a stock – different companies pay different rates of dividends.
Frequently asked questions
What is dividend stock?
Dividend stock is any stock that pays stockholders a certain amount either annually or quarterly. It serves as a means of steady income for its owners through the regular dividend payment associated with such stocks.
Are income stocks and dividend stocks the same?
Yes, both income stocks and dividend stocks mean the same thing. They are stocks that pay their holders regular dividends.
What is a stock dividend?
A stock dividend is a disbursement a stockholder receives from the company in which they own stocks.
Which sectors issue dividend stocks?
A lot of sectors issue dividend stocks but the most common are real estates, utilities, energy, telecommunications, consumer staples, finance, information technology, and healthcare.
Why is dividend yield important?
The dividend yield is important because it tells the investor how much they will get paid for each dividend stock they purchase.
Does O’Reilly stock pay dividends?
According to the information gotten on 27th July 2022 on Google Finance, O’Reilly Automotive Inc stock does not pay dividends as they did not indicate a dividend yield percentage.
Will WBD stock pay a dividend?
It is impossible to tell if WBD will pay a dividend in the future but currently, according to the information gotten on Google Finance on 27th July 2022, Warner Bros Discovery Inc stock does not pay dividends since they did not indicate a dividend yield percentage.
What is a dividend policy?
A dividend policy is the guidelines that the dividend stock issuing company uses to guide and structure the disbursement of dividends.
Dividend stocks are a source of stable income for the stockholder and can be used by them to either reinvest or take care of their living expenses. Since these stocks are generally low risk and have low volatility, their holders tend to enjoy long-term gains from them through the various dividend payments they could get from them. These payments could be quarterly, semi-annually, or yearly.