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. The 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, those dividends may be cut 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 five dividend stocks in the Russell 1000 by forward dividend yield, excluding companies with payout ratios that are either negative or in excess of 100%. Dividend stocks, as measured by the S&P 500 Dividend Aristocrats Index, have outperformed the broader equity market. The index has provided a total return of 10.7% over the past year, above the Russell 1000's total return of 4.4%. Only one of the stocks below—New Residential Investment Corp. (NRZ)—has outperformed the market in that period. These market performance numbers and all statistics below are as of April 21, 2022.
AT&T Inc. (T) has been a longtime member of this list of dividend stocks. However, after decades of raising it every year, the company is cutting its dividend roughly in half due to spinning off its media business. As a result, the new, smaller company will have less cash to give out per share. Also, the shares in the new company that investors will get also are not likely to come with a dividend because that company isn't expected to issue one.
- Forward dividend yield: 13.50%
- Payout ratio: 56.9%
- Price: $6.52
- Market cap: $9.7 billion
- 1-year total return: -15.6%
Annaly Capital Management is a diversified capital management company that invests in and finances residential and commercial assets. Its investments include agency mortgage-backed securities (MBS), residential real estate, and middle market lending. The company has about $89 billion in total assets. On March 17, Annaly announced a Q1 2022 dividend of $0.22 per common share. The dividend is payable April 29 to common shareholders of record as of March 31, 2022.
- Forward Dividend Yield: 9.65%
- Payout Ratio: 56.8%
- Price: $10.36
- Market Cap: $5.0 billion
- 1-Year Total Return: 11.4%
New Residential Investment is a mortgage real estate investment trust (REIT). It provides capital and services to the mortgage and financial services industries. The company invests in assets with stable, long-term cash flows. Its investment portfolio includes mortgage servicing-related assets, non-agency securities, residential loans, and other related investments. New Residential Investment announced common and preferred share dividends for Q1 2022 on March 21. The common share dividend of $0.25 per common share is payable on April 29 to shareholders of record as of April 4, 2022. For cumulative redeemable preferred stock, dividends for Series A, Series B, Series C and Series D shares are payable on May 16 to preferred shareholders of record as of April 18, 2022.
- Forward Dividend Yield: 9.25%
- Payout Ratio: 53.5%
- Price: $10.81
- Market Cap: $11.9 billion
- 1-Year Total Return: -2.5%
Lumen Technologies is a technology and communications company that provides services to consumers and businesses worldwide. It provides an integrated platform that brings together network assets, cloud connectivity, security solutions, and voice and collaboration tools to help businesses utilize their data and adopt next-generation technologies. On March 28, Lumen reported that Chris Stansbury had been appointed chief financial officer, effective April 4. Stansbury was most recently senior vice president and CFO of Arrow Electronics Inc. (ARW). He succeeds Neel Dev as CFO.
- Forward dividend yield: 8.08%
- Payout ratio: 97.0%
- Price: $47.04
- Market cap: $6.2 billion
- 1-year total return: 1.8%
OneMain Holdings is a financial services holding company focused on consumer finance, focusing on consumers with limited access to credit from banks, credit card companies, and other traditional lenders. Through its subsidiaries, OneMain originates and services secured and unsecured personal loans and offers a range of credit insurance products. The company operates a network of 1,400 branches throughout the U.S. and provides a digital platform that allows customers to apply for products online.
- Forward dividend yield: 7.31%
- Payout ratio: 79.4%
- Price: $15.45
- Market cap: $4.4 billion
- 1-year total return: -16.4%
TFS Financial is a bank holding company, including for Third Federal Savings and Loan Association of Cleveland. Through subsidiaries, it provides services including retail consumer banking, mortgage lending, deposit gathering, and other financial services. It has total consolidated assets of roughly $14.1 billion.
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