There are lots of ways to make a lot of money with the stock market. That said, none are more reliable than buying stocks that pay dividends and holding them for a long time.
Long-term dividend stock investors don’t even need to be good at picking winners to assemble a portfolio that performs well. That’s because companies tend to be profitable on a recurring basis before they initiate dividend programs.
A commitment to distribute a portion of profits forces management teams to make careful investments with the earnings they retain. As a result, dividend payers tend to outperform non-dividend-payers by a mile when viewed over long timelines.
From 1973 through 2022, dividend non-payers in the benchmark S&P 500 index delivered a lousy 3.95% average annual return. Dividend-paying stocks in the same index produced a 9.18% average annual return.
In addition to better returns, there’s also an unquantifiable mental health benefit to filling your portfolio with dividend-paying stocks. Investors focused on retirement tend to rely on dividend stocks for recurring income so they’re rarely eager to sell. This makes dividend payers far less likely to exhibit wild price swings when the overall economy is in turmoil.
These three stocks offer an average yield of 7.5% at recent prices, so an investment of about $1,340 spread equally among them will lead to an extra $100 in annual dividend income in the year ahead.
Shares of AT&T (T 0.12%) have been under pressure because old-fashioned landlines and internet connections that rely on telephone lines are rapidly disappearing. As a result, the stock offers a huge 6.6% dividend yield.
Luckily, AT&T’s fiber-optic internet service, AT&T Fiber, and its ongoing 5G rollout are offsetting the losses. In 2023, the company added over 1 million AT&T Fiber subscribers for the sixth year in a row.
AT&T’s expanding 5G network pushed mobility service revenue 4.4% higher last year, and it isn’t the only operating segment reporting gains. Soaring Fiber revenue drove consumer broadband sales 8.1% higher last year.
It took longer than it should have, but AT&T finally launched a fixed wireless service, called AT&T Internet Air, last August. With the new service available in just 35 locations, the company signed up 93,000 subscribers last year. Now that it’s available in 59 locations, don’t be surprised if fixed wireless signups exceed fiber signups in 2024.
Shares of Pfizer (PFE -0.04%) offer an unusually large 6.1% dividend yield at recent prices. The pharmaceutical stock has been under pressure because sales of its COVID-19 products evaporated even faster than expected.
Declining sales of Comirnaty and Paxlovid pushed total revenue down 41% last year, but the worst is already over. Combined sales of Pfizer’s COVID-19 vaccine and antiviral treatment sank to $2.2 billion during the last three months of 2023 if you factor in a $3.2 billion inventory writedown for Paxlovid.
The Food and Drug Administration (FDA) approved nine new drugs from Pfizer last year. Now that Paxlovid and Comirnaty losses are in the rearview mirror, this company’s top and bottom lines could return to growth.
Oncology will continue to be an important area for Pfizer. The company acquired four commercial-stage therapies from Seagen in 2023. One of those drugs, Padcev, recently earned approval to treat newly diagnosed bladder cancer patients.
New cancer patients tend to stay on therapy much longer than folks who already failed one course of treatment. With a new first-line indication, industry analysts think annual Padcev sales could surge to $7 billion at its peak.
Altria Group (MO 0.05%) is the U.S. tobacco company that markets the leading Marlboro brand. Cigarette smoking has been in decline for decades, but the pricing power that comes with such a powerful brand has allowed the company to raise its dividend 58 times over the past 54 years.
Altria Group’s attempt to transition cigarette smokers to e-vapor products hit a snag when the FDA banned the fruity flavors that teens and adults prefer. Altria repositioned by selling its stake in Juul and acquiring NJOY last year. At the moment, NJOY is one of three e-cigarette brands authorized by the FDA and the only one with a replaceable pod-based system.
Altria Group and its peers have had a hard time competing against unauthorized disposable e-vapor products such as Elf Bar. As a result, the stock offers a huge 9.8% dividend yield at recent prices. The FDA has been slow to enforce its flavored e-cigarette ban, but it’s finally started making significant moves in recent months.
In addition to dozens of warning letters to online retailers, the FDA teamed up with Customs and Border Protection to seize 41 shipments of illicit vaporizers last December. Illicit vaporizers might slow down Altria’s pace of dividend raises for another couple of years. Still, it’s only a matter of time before government regulators effectively limit access to illicit e-cigarettes.