These 7 Dividend Stocks Pay $96 Billion to Shareholders Annually
There are countless investment strategies for making money on Wall Street. However, buying dividend stocks has historically been one of the most successful methods.
According to a report published 10 years ago by J.P. Morgan Asset Management, a division of JPMorgan Chase (NYSE: JPM), income stocks have historically outperformed companies that do not pay dividends. Between 1972 and 2012, companies that started paying and growing dividends had an average annual return of 9.5%. In contrast, the annual return of non-dividend stocks during the same 40 years was only 1.6%.
But not all dividend stocks are the same. The following 7 companies may not necessarily make investors’ mouths water with their yields, but the actual dollar amount they invest in paying dividends is certainly impressive. These 7 dividend stocks combined pay approximately $96 billion to shareholders annually.
- Microsoft: $20.24 Billion in Annual Dividends The company with the highest nominal dollar dividend payout in the U.S. is the tech stock Microsoft (NASDAQ: MSFT). While Microsoft’s 1.1% yield is not remarkable, the basic annual dividend of $2.72 per share, combined with 7.44 billion shares outstanding, translates to an annual dividend payout exceeding $20 billion.
- ExxonMobil: $14.81 Billion Historically, big oil has always been an excellent source of dividend income. Global energy giant ExxonMobil (NYSE: XOM) continues this tradition by paying approximately $14.81 billion in dividends to shareholders annually.
It’s no secret that ExxonMobil has been benefiting from surging oil prices. The ongoing Russian invasion of Ukraine, which shows no clear end in sight, raises questions about Europe’s energy supply demand. Combined with three years of reduced capital investment due to the COVID-19 pandemic, this results in limited supply and an environment with above-average oil prices.
ExxonMobil’s payouts are further protected by its integrated operating model. While it generates a significant portion of profits from exploration and natural gas, it also operates chemical plants and refineries (downstream assets). This downstream segment, while not as high-margin as exploration, acts as a perfect hedge against falling oil prices. When oil prices decline, demand for petroleum products often increases.
- Apple: $14.55 Billion Apple (NASDAQ: AAPL) is one of the highest dividend-paying stocks globally in nominal dollars. Had the company not repurchased over $550 billion in common stock over the past 10 years, it might have claimed the top spot on this list.
Apple’s payment stability stems from its massive operating cash flow (which totaled $109.2 billion in 2022). This cash flow reflects the ongoing success of its physical product portfolio (iPhone, iPad, and Mac) and the growing potential of its subscription services segment. Services are a higher-margin business for Apple and will play a key role in minimizing sales volatility tied to iPhone replacement cycles in the coming years.
Apple also boasts an incredibly loyal customer base that trusts its brand. According to Interbrand, Apple has held the title of the world’s most valuable brand for 10 consecutive years. Interbrand’s brand valuation takes into account the financial performance of branded products and services, the role the brand plays in purchase decision-making, and the ability to maintain customer loyalty.
- JPMorgan Chase: $11.76 Billion Similar to big oil, financial stocks are known for steady dividends and strong capital return programs, particularly during economic expansions. Among bank stocks, JPMorgan Chase pays the highest dividend, amounting to $11.76 billion annually to shareholders.
We are currently seeing an intriguing time for bank stocks. When a recession looms, the Federal Reserve typically lowers interest rates to stimulate loan activity. However, as the Fed has been 100% focused on curbing historically high inflation, the rate hikes have instead led to higher earnings for bank stocks. In 2022, JPMorgan Chase recorded net interest income of $67.1 billion, an increase of $14.4 billion from the previous year.
JPMorgan Chase has made steady progress in encouraging customers to bank online or via mobile apps. As of the end of December, the bank had 49.7 million active mobile customers, an increase of 4.2 million from the previous period. The more people use online banking, the more flexibility JPMorgan Chase gains in branch consolidation and improving operational efficiencies.
- Johnson & Johnson: $11.75 Billion While controversial, no healthcare stock rewards shareholders like Johnson & Johnson (NYSE: JNJ). Better known as J&J, the company has increased its dividend for 60 consecutive years and is one of only two publicly traded companies with the highest credit rating (AAA) from S&P Global, the other being Microsoft.
There are two key reasons behind Johnson & Johnson’s impressive dividends. First, healthcare stocks are naturally defensive. Since we can’t control when or if we get sick, there will always be demand for prescription drugs and medical devices.
- Chevron: $11.54 Billion If it wasn’t clear from the outset, large oil stocks are famous for hefty dividends. Chevron (NYSE: CVX) has increased its annual dividend for 36 consecutive years and now pays more than $6 per share, totaling over $11.54 billion annually.
Among large energy stocks, Chevron’s payout is especially safe considering its strong balance sheet. Rising oil and gas prices allowed Chevron to reduce its net debt from $25.7 billion last year to $5.4 billion. This low debt ratio of just 3.3% gives the company the financial flexibility to raise dividends and conduct a $75 billion share buyback program.
Like ExxonMobil, Chevron’s integrated operating structure plays a key role in its continued success. High energy commodity prices favor its high-margin exploration segment, but Chevron’s ownership of transmission pipelines, refineries, and chemical plants allows the company to generate predictable cash flow in almost any economic environment.
- Verizon Communications: $10.96 Billion The seventh dividend stock on this list is telecommunications giant Verizon Communications (NYSE: VZ). With a 6.8% yield, Verizon has the highest yield on this list, paying nearly $11 billion annually to shareholders.
Even though Verizon’s best growth periods are behind it, a few catalysts are helping to moderately increase its profits and dividends. The first is the ongoing rollout of 5G wireless infrastructure. Upgrading wireless networks is costly and time-consuming, but these investments are paying off as consumers increase data usage.
Another notable catalyst is broadband growth. After investing heavily in the 5G mid-band spectrum, Verizon achieved its best quarterly broadband net additions in over a decade, adding 416,000 net additions in Q4. Broadband is not only a steady cash flow driver but also a great incentive for promoting service bundles.
