Three Dividend Paying Giants of the S&P 500

Author: Finscreener

Estimated read time: 3 minutes

Publication date: 4th Aug 2021 10:54 GMT+1


An equity investment portfolio should be well-diversified. It means you need to hold a combination of blue-chip, growth, and dividend stocks that will help you beat the broader indexes such as the S&P 500.

While it’s easier said than done, dividend stocks remain attractive to investors as they provide investors to derive a steady stream of recurring income as well as benefit from long-term capital gains.

Investors should note that a dividend payout is not guaranteed, and the company can roll back or entirely suspend these payments at any time. Further, a high dividend yield may also be a value trap if the stock continues to remain rangebound or deliver negative returns over time.

Here, we look at three stocks part of the S&P 500 that have attractive dividend yields.

 

Chevron

One of the largest energy companies in the world, Chevron (NYSE: CVX) provides investors with a tasty dividend yield of 5.3%. The energy sector was decimated in 2020 due to the ongoing pandemic that drove fuel demand lower at an accelerated pace. However, the reopening of several economies has allowed the energy stocks to mount a comeback.

In the last 12-months, Chevron stock has gained 21% in market value. In the last five years, it has gained over 25% after adjusting for dividends.

In May 2021, Chevron increased its quarterly dividend payout to $1.34 per share, up from $1.29 per share. Its dividends have increased at an annual rate of 4.6% since August 2016.

Despite being part of the highly volatile energy sector, Chevron has increased dividends for 34 consecutive years. Its low debt to capital ratio of 25% allows the company to generate predictable cash flows due to lower interest payments, making a dividend cut unlikely.

 

PPL Corp.

A utility holding company, PPL Corp. (NYSE: PPL) delivers electricity and natural gas in the U.S. and the U.K. It operates via three primary business segments that include Kentucky Regulated, U.K. Regulated, and Pennsylvania Regulated.

PPL serves 425,000 electric and 332,000 natural gas customers in Louisville as well as 536,000 electric customers in central, southeastern, and western Kentucky. It also provides electric delivery services to 1.4 million customers in Pennsylvania and operates electricity distribution networks in the U.K.

PPL is part of the highly regulated utility sector which is considered recession-proof. It does not have to contend with competition but rates are generally monitored and controlled by the government. Growth investors might avoid PPL but this stock provides you with predictable earnings and cash flows.

PPL stock offers investors a dividend yield of 5.9% and it has generated less than 10% in dividend-adjusted returns in the last five years.

 

Dow Inc.

The final stock on my list is Dow Inc. (NYSE: DOW), a company with an enterprise value of $61 billion and a dividend yield of 4.5%. Dow Inc. is a chemicals company with a diversified base of operations and a presence in several countries.

In case the global economy recovers going ahead, Dow Inc is well poised to benefit from it as it will benefit from demand for packaging, coating, performance materials as well as specialty plastics products.

In the first quarter of 2021, Dow Inc. explained demand and pricing improved across multiple operating segments and this trend is likely to continue in the near term. The company aims to reduce costs by $300 million each year and its capacity expansion for the materials solutions business will hold it in good stead if the macro-economic recovery continues.

After adjusting for dividends, Dow Inc.'s stock has returned over 20% in just over two years.


Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.