Dividend yielding stocks are an excellent way to add an income flow to your equities portfolio.
What exactly is a dividend? A dividend is a portion of a company’s profit that is paid to shareholders in the form of a cash payment.
You can take a quick look at our article What is a Dividend Yield? for a brief reminder.
Dividend Yield Stocks in 2022
So, let’s see how dividend yielding stocks have performed in 2022.
Given the ongoing market volatility, dividend stocks have outperformed growth stocks in 2022. Dividend-paying companies have characteristics like high recurring free cash flow and a long history of profitability. While these stocks do not always exhibit high growth, regular dividend payments help to add stability to your portfolio.
Now, let’s review some of the popular dividend-yield stocks and how they performed in 2022 (remember that the dividend yield information below is accurate at the time of writing):
Walgreens Boots Alliance INC (NASDAQ: WBA)
The first dividend stock is a company that some investors outside of the United States might not know as well. Walgreens is one of the largest pharmacies and drug store chains in the country. The company was formed when Walgreens acquired the Alliance Boots company in full in 2014. Alliance Boots is a pharmacy company that operates in Europe, that was originally founded in 1849 in Bern, Switzerland.
This stock pays out a current dividend yield of 5.30% with a trailing 12-month dividend yield of 5.31%.
3M (NYSE: MMM)
3M stands for the Minnesota Mining and Manufacturing Company and has been an American industrial staple since 1902. Under several different brands and subsidiaries, 3M is responsible for well over 60,000 different consumer and industrial products. Some well-known products include adhesives like tape, medical-grade masks including the N95, and even dental and orthodontic products. 3M is a component of the S&P 500, the S&P 100, and the Dow Jones Industrial Average.
The stock currently pays out a dividend yield of 4.84% with a trailing annual dividend yield of 4.98%.
Amcor PLC (NYSE: AMCR)
Amcor is an American-Australian packaging and food container producer that was established back in 1860. The company is based out of Zurich, Switzerland, but also has headquarters in both the United States and Australia. The stock is also dual-listed on the Australian Stock Exchange and the New York Stock Exchange.
AMCR is a component of the S&P 500 index and pays out a dividend yield of 3.91% with a trailing annual dividend yield of 3.94%.
American Express Company (NYSE: AXP)
American Express is a global payment services company that is most well known for its American Express credit cards. It was founded in New York way back in 1850, and has since grown to become one of the largest and most influential financial companies in the world. It is a component of the S&P 500, the S&P 100, and the Dow Jones Industrial Average.
Its stock pays out a dividend yield of 1.31% with a trailing annual dividend yield of 1.24%.
Clearway Energy Inc Class A (NYSE: CWEN.A)
Clearway Energy is one of the largest renewable energy companies in America. It operates wind farms and solar generation projects that have a total energy capacity of 7,500 MW of clean and renewable energy. The company was founded in 2012 and is based out of New Jersey. Energy stocks often pay out strong dividend yields as these companies see a high rate of cash flow and recurring revenues.
Clearway pays out a dividend yield of 4.00% with a trailing annual dividend yield of 3.53%.
Benefits of having Dividend Yield Stocks
The benefits of owning dividend yield stocks are clear; investors will receive a regular cash payment from the company just for owning the stock. Investors can use this to buy more shares of the stock, otherwise known as dividend reinvestment. Over time, this will increase the position and therefore also increase the number of regular dividends you receive. Investors can also use these dividends to buy different stocks and diversify their portfolios. Either way, a steady cash flow is a wonderful tool for compounding for any investor.
Dividend yield stocks are almost always value stocks. This means they typically have a strong position within their industry and are often even an industry leader for their specific product or service. This leads to a high rate of cash flow and profitability. Compared to growth stocks, value stocks do not usually need to reinvest this cash to continue to grow their business at the rate of a growth company. In this way, value stocks can be a great foundational part to your portfolio and provide stability and a hedge against market volatility..
What should you pay attention to when investing in Dividend Yield Stocks?
As strange as it may sound, a high dividend yield isn’t always a good sign. This either means that the stock price has fallen considerably, or there is a good chance that the company will not be able to sustain the yield.
One thing to look at is the historical dividend yield of the stock. If the company has always paid out a high dividend yield then there is a good chance that it is sustainable. If it has only recently become a high yield, then it will require you to do some more research into why the dividend yield has suddenly spiked.
The dividend payout ratio calculates how much of the company’s net income is paid out as dividends. This is a key metric to look at as it can tell you how sustainable the dividend yield truly is. If the payout ratio is more than 100%, the company will likely be cutting its dividend back. If the payout ratio is low, then it will likely be a sustainable payout for the foreseeable future.
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