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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 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%. The first four stocks have outperformed the broader market, represented here by the iShares Russell 1000 ETF (IWB), while the last stock has underperformed. IWB has provided a total return over the past 12 months of 48.9%. This market performance number and all data below is as of April 29, 2021.
- Forward Dividend Yield: 13.14%
- Payout Ratio: 37.71%
- Price: $57.08
- Market Cap: $7.7 billion
- 1-Year Total Return: 197.6%
OneMain Holdings is a financial services holding company focused on consumer finance. 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 1,500 branches throughout the U.S. and provides a digital platform that allows customers to apply for products online. On April 26, 2021, OneMain raised its minimum quarterly dividend by 56% to $0.70 per share. The dividend is payable on May 13, 2021, to investors who hold qualifying shares in the company at the end of May 6, 2021.
- Forward Dividend Yield: 11.35%
- Payout Ratio: 0.00%
- Price: $59.23
- Market Cap: $9.4 billion
- 1-Year Total Return: 59.9%
Sensata Technologies is a global industrial technology company that develops sensors and sensor-based solutions. Its products, which include motor protectors, circuit breakers, position sensors and encoders, pressure sensors and switches, and inverters and chargers, are used in a wide range of industries, including the transportation, construction, healthcare, energy, and telecom sectors. Sensata Technologies confirmed on April 1, 2021, that it had completed the previously announced acquisition of telematics and data insight provider Xirgo Technologies Intermediate Holdings LLC for $400 million.
- Forward Dividend Yield: 8.59%
- Payout Ratio: 22.14%
- Price: $17.96
- Market Cap: $9.4 billion
- 1-Year Total Return: 56.3%
AGNC Investment is an internally-managed real estate investment trust (REIT) that primarily invests in agency residential mortgage-backed securities (RMBS) on a leveraged basis. It finances its holdings through collateralized borrowings structured as repurchase agreements (repos). A repo is a type of financial instrument whereby one entity acting as a borrower sells a financial security to another entity acting as a lender and simultaneously agrees to repurchase that security at a later date and at a slightly higher price.
- Forward Dividend Yield: 7.63%
- Payout Ratio: 0.00%
- Price: $2505.10
- Market Cap: $102.8 billion
- 1-Year Total Return: 74.1%
Booking Holdings is an online travel company based in Norwalk, Connecticut, that provides travel and restaurant reservation and related services through the websites of its subsidiaries. The company operates six consumer brands—Booking.com, priceline, agoda.com, Rentalcars.com, KAYAK, and OpenTable—and is active in more than 220 countries and territories worldwide.
- Forward Dividend Yield: 7.44%
- Payout Ratio: 0.00%
- Price: $61.74
- Market Cap: $47.2 billion
- 1-Year Total Return: 32.6%
Las Vegas Sands is a global integrated resort developer and operator. The company owns and operates eight properties in three locations: The Venetian Resort Las Vegas and Sands Expo and Convention Center in Las Vegas; The Venetian Macao, Sands Macao, The Londoner Macao, The Plaza Macao & Four Seasons Hotel Macao, and The Parisian Macao, all located in Macao; and the Marina Bay Sands in Singapore. Las Vegas Sands announced on March 3, 2021, that it had reached an agreement to sell its Las Vegas properties, including The Venetian Resort Las Vegas and the Sands Expo and Convention Center, to affiliates of Apollo Global Management Inc. (APO) for approximately $6.25 billion.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
