Are you looking for a way to supplement your income? Consider investing in dividend-paying stocks, which pay you back regularly because you also (ideally) benefit from rising stock prices. Today, the average dividend yield of the shares of S&P 500 is about 1.4%.
However, you can earn a lot more with Sciences of Gilead (NASDAQ: GILD) and Verizon Communications (NYSE: VZ). Both stocks have a yield of over 4% and are safe long-term buys. On an investment of $ 25,000 in either of these companies, you could earn more than $ 1,000 each year.
1. Gilead Sciences
Gilead currently pays a quarterly dividend of $ 0.71, which is higher than the $ 0.68 it paid last year. Over a five-year period, the company increased its dividend payments by 51%, a compound annual growth rate (CAGR) of 8.6%. While this does not guarantee that management will continue to increase payouts, it is a good sign for investors that increasing the dividend is a priority for management. The current stock yield of 4.1% is well above average, making Gilead one of the highest paying income investments you can buy right now.
Investors may be frightened by looking at Gilead’s payout ratio, which is currently well above 100%. But that’s because of a bad quarter last year in which the company incurred a one-time expense related to the acquisition of immuno-oncology company Forty Seven; it made his finances worse than they really are.
On April 29, Gilead released its first quarter results, reporting diluted earnings per share of $ 1.37 for the period ending March 31 (nearly double its dividend payouts). Profits of $ 1.7 billion were up 12% year-over-year and sales were also up 16% to $ 6.4 billion. The company received a $ 1.5 billion increase in remdesivir, its COVID-19 treatment, which offset the decline in HIV-related products.
The pandemic has negatively impacted Gilead’s core business, meaning that in the near future, we may see the reverse of the above – a situation where sales of remdesivir plummet while sales of HIV resume. But even with a potential drop in income, Gilead still seems to have a lot of leeway to support its dividend payments. The company has always been strong, with margins of around 80% over the past five years; operating profit has remained at 37% or better for all but one of those years.
Gilead shares have fallen about 9% over the past year, while the S&P 500 has climbed more than 40%. While growth may be a challenge for the business in the near future, it is still a solid dividend with safe payouts to buy today.
2. Verizon Communications
Verizon pays its shareholders an even higher return of 4.3% per year. It has also increased dividend payments over the years, but the increases have been more gradual; they rose 11% from $ 0.565 the telecom giant paid in 2016 to $ 0.63 today, for a CAGR of 2.1%. While this is not a terribly high rate of increase, it is at least sufficient to offset the impact of inflation. Its payout ratio stands at 54%, which leaves room for further price increases.
It’s another stock that won’t offer much year-over-year growth, but at least provides stability. In each of the past five years, Verizon’s net income has reached 10% or more of its revenue. Sales of $ 128.3 billion in 2020 were down 2.7% from a year earlier, with lockdowns and lack of travel weighing on the company’s operations.
But the good news for investors is that the company is off to a good start in fiscal 2021. Verizon’s first quarter results showed operating revenues for the first three months of the year were up 4 % compared to the period of the previous year, thanks to a good performance in its consumer segment up 4.7%. Over the whole of 2020, this area of ââactivity, which is the most important, fell by 2.8%. For 2021, the company expects its adjusted earnings per share to be between $ 5 and $ 5.15, which would put its payout ratio based on that metric at around 56%.
Over the past 12 months, Verizon’s stock has outperformed Gilead’s, up 6%. It’s always well below the performance of the S&P 500, but for income investors, that’s not necessarily a bad thing – a rise in the share price means a lower return. Buying those dividend-paying stocks now can be a good decision. It might only be a matter of time before investors turn away from high-priced growth stocks to safe-income investments like Verizon.
This article represents the opinion of the writer, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! 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.[ad_2]