Dividend stocks are companies that pay out a portion of their earnings to a class of shareholders on a regular basis. These companies usually are well established, with stable earnings and a long track record of distributing some of those earnings back to shareholders. These distributions are known as dividends, and may be paid out in the form of cash or as additional stock. Most dividends are paid out on a quarterly basis, but some are paid out monthly, annually, or even once in the form of a special dividend. While dividend stocks are known for the regularity of their dividend payments, in difficult economic times even those dividends may be cut in order to preserve cash.
One useful measure for investors to gauge the sustainability of a company's dividend payments is the dividend payout ratio. The ratio is a measure of total dividends divided by net income, which tells investors how much of the company's net income is being returned to shareholders in the form of dividends versus how much the company is retaining to invest in further growth. If the ratio exceeds 100% or is negative (meaning net income is negative), this indicates the company may be borrowing to pay dividends. In these two cases, the dividends are at a relatively greater risk of being cut.
Below, we look at the top 5 dividend stocks in the Russell 1000 by forward dividend yield, excluding companies with payout ratios that are either negative or in excess of 100%. Each of the dividend stocks listed below significantly underperformed the Russell 1000's total return over the past 12 months of 21.1%, as of February 23, 2021. All data below is as of February 23.
- Forward Dividend Yield: 6.24%
- Payout Ratio: 32.29%
- Price: $12.18
- Market Cap: $2.1 billion
- 1-Year Total Return: -17.5%
Brandywine Realty Trust is a self-administered and self-managed REIT that owns, leases, develops, and manages primarily suburban office properties. It also has an ownership interest in and operates a commercial real estate management services company. On February 24, Brandywine announced that its board of trustees had declared a quarterly cash dividend of $0.19 per common share. The dividend is payable on April 21, 2021 to holders of record as of April 7, 2021.
- Forward Dividend Yield: 6.04%
- Payout Ratio: 86.79%
- Price: $27.48
- Market Cap: $21.1 billion
- 1-Year Total Return: -18.3%
PPL Corp. is an energy and utility holding company. Through subsidiaries, the company generates electricity and markets wholesale and retail energy. The company has 10 million utility customers in the U.S., primarily in the south and east coasts, and in the U.K.
- Forward Dividend Yield: 5.55%
- Payout Ratio: 91.41%
- Price: $86.44
- Market Cap: $134.6 million
- 1-Year Total Return: 2.9%
Philip Morris International is a holding company that, through subsidiaries, licenses, makes, distributes, and sells branded cigarettes and tobacco products to customers in markets worldwide outside of the U.S.
- Forward Dividend Yield: 5.50%
- Payout Ratio: 67.93%
- Price: $20.36
- Market Cap: $5.7 billion
- 1-Year Total Return: -2.2%
TFS Financial Corp. is a bank holding company. Through subsidiaries, the company provides retail consumer banking services including mortgage lending and deposit gathering. The company operate mainly in the states of Ohio and Florida. As of September 30, 2020, it had total consolidated assets of $14.6 billion. The company's board of directors declared on February 25 a quarterly cash dividend of $0.28 per share, payable on March 23, 2021, to shareholders of record as of March 9, 2021.
- Forward Dividend Yield: 5.48%
- Payout Ratio: 45.58%
- Price: $43.76
- Market Cap: $10.2 billion
- 1-Year Total Return: -6.9%
Gaming and Leisure Properties is a self-administered and self-managed REIT engaged in the acquisition, financing, and ownership of casinos and other entertainment facilities. The company also leases properties to gaming operators through triple net lease arrangements. On February 23, the company announced that its board of directors declared a cash dividend of $0.65 per share of common stock. The dividend is payable on March 23, 2021 to shareholders of record as of March 9, 2021.
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