Dividends are a fantastic way to create passive income, and are a prudent piece of any portfolio. The appeal of dividend stocks is they offer two potential routes for income generation. For one, you have the dividends, which are an indication of a financially strong business that can return value to shareholders. The second of course is the potential for the company's stock to gain value over time. In this article, we'll look at three dividend focused investments that have offered strong payouts over time.
Verizon
In an indispensable industry, with tough barriers to entry, Verizon (VZ -0.10%) makes a compelling dividend play at 6.4%. Even with slower growth, Verizon's free cash flow leaves plenty of capital for the company to continue paying its current dividend.
The communications company has had rather static revenues over the last five years, but continues to bring in solid earnings. The wireless and broadband pieces of the business are growing, while Verizon's more central business is facing slow -- if any -- growth.
Overall, Verizon has consistently strong cash flow, finishing 2023 with $18.71 billion in free cash flow. For the quarter ended March 31, Verizon had free cash flow of $2.71 billion versus $2.33 billion the year prior. The company certainly could use a little boost in terms of top-line growth, but this 6.4% dividend seems safe.
Try an ETF
The S&P 500 High Dividend ETF (SPYD -0.57%) holds 80 companies from the S&P 500. This exchange-traded fund offers a more diversified approach to seeking dividend yields. Think companies like data storage specialist Iron Mountain, e-commerce platform Best Buy, and investment group Morgan Stanley.
With a yield over 4.5%, this is a good option for investors who aren't entirely sure about investing in individual equities. Bear in mind here that this fund won't be beating the S&P 500 anytime soon. Its five-year return is a little over 5%. This one is solely based on collecting that dividend.
Coca-Cola
Tried and tested Coca-Cola (KO -0.19%) has been a stalwart dividend source for a long time. Warren Buffett loves Coca-Cola, and the beverage company has decent growth figures that will keep that 3% dividend alive, while also creating potential for the stock to gain traction. As of the first quarter of the year ended March 29, Coca-Cola's net operating revenues were up 3% year over year to a reported $11.3 billion, while earnings per diluted share were up 3% to $0.74.
Sales growth has been slowing a bit, but is still there, with roughly 7% revenue gains in 2023, and a 12.28% increase in net income. People might look at Coca-Cola and say that sugary soft drinks aren't as popular as they used to be. While that's arguably true, Coca-Cola is diversified over a large portfolio of products these days, and remains committed to its dividend plan, which has increased payouts for shareholders for decades.
With free cash flow of $9.75 billion in 2023, and $158 million in free cash flow in the first quarter of 2024 compared to a decrease of $116 million the year prior, Coca-Cola seems to be moving in the right direction for its commitment to keep its dividend plan going.
