Do you need income you can reliably count on today, tomorrow, next year, and a decade from now? Not every dividend stock necessarily fits this bill.
Here’s a closer look, however, at four names that do.
Image source: Getty Images.
1. McDonald’s
You know it as a fast-food restaurant chain. But that description isn’t entirely accurate. McDonald’s (MCD -0.13%) is mostly a real estate company. It just so happens that its tenants are the franchisees operating approximately 95% of the 45,699 McDonald’s restaurants spread all over the world. Their rent payments account for roughly two-thirds of every dollar they pass along to the parent company, and nearly one-third of the company’s total revenue. Royalties on franchisees’ restaurants’ sales make up most of the remainder of the companywide top line.
And that’s no meaningless detail. These rent rates are market-based, meaning they rise as the economy grows and ordinary inflation raises the price of… well, everything. The cost of its owned real estate, however, doesn’t change.
This has been a point of contention with its franchisees to be sure; other fast-food restaurant chains’ franchisees typically own their own buildings. By and large, though, operators are willing to pay these ever-rising costs simply because the McDonald’s brand is so well loved and so reliably marketable.
Today’s Change
(-0.13%) $-0.34
Current Price
$263.57
Key Data Points
Market Cap
Day’s Range
$261.85 – $265.97
52wk Range
$261.85 – $341.75
Volume
4.7K
Avg Vol
4.5M
Gross Margin
57.31%
Dividend Yield
2.79%
More important to income investors, this business model has now allowed McDonald’s to raise its per-share dividend payment for 49 consecutive years, leaving it just one year shy (and just a few months away) from becoming dividend royalty.
2. Oneok
Oneok (OKE -0.09%) isn’t a household name. There’s a pretty good chance, however, that your household regularly depends on its service. Oneok owns and operates approximately 60,000 miles’ worth of natural gas and crude oil pipelines — mostly in the U.S. Midwest — getting both from where they’re extracted, refined, or processed to where they’re eventually consumed.
It’s an ideal business model for driving dividends, too, even within the always-volatile energy industry. Unlike integrated outfits Chevron or ExxonMobil, pipeline companies simply charge a flat fee for the amount of gas or oil that’s pushed through their pipes; the price of that gas or oil has no bearing on profitability. The only thing Oneok needs is for the nation to continue consuming plenty of both — which it is. The U.S. Energy Information Administration reports consumers are still burning both products as much as ever.
Oneok’s history confirms it, too. Not only has this energy name been paying a quarterly dividend like clockwork for years, but it has also nearly doubled its per-share payment over the course of the past decade, in line with its annual dividend growth target of 3% to 4%.
3. Realty Income
With nothing more than a passing glance, it would seem real estate investment trust Realty Income‘s (O +0.06%) brick-and-mortar retailing focus is a liability. The industry is suffering a so-called retail apocalypse.
Realty Income is largely sidestepping the headwind, though. With resilient tenants including Dollar General, Home Depot, Tractor Supply, and 7-Eleven, since 2013 this REIT has consistently maintained occupancy rates at or above 98%.
Today’s Change
(0.06%) $0.04
Current Price
$65.03
Key Data Points
Market Cap
Day’s Range
$65.00 – $65.63
52wk Range
$55.86 – $67.94
Volume
1.5K
Avg Vol
6M
Gross Margin
49.68%
Dividend Yield
4.98%
That’s not the only part of the thesis for owning a stake in Realty Income, though. The other part — and arguably the more important part — is that this REIT has not only paid a monthly (yes, monthly) dividend every month for the past 56 years, but has also raised this dividend payment every quarter for the past 28 years.
The kicker: Realty Income is easing its way into the artificial intelligence data center industry, announcing last month it had entered into a joint venture with Cloud Capital and an unnamed institutional investor to establish its first footprint in a business that Global Market Insights expects to grow at an average annual pace of 12.1% through 2035.
Newcomers will be plugging into this ticker while its forward-looking yield stands at 5%.
4. Verizon
Finally, add Verizon (VZ +1.15%) to your list of money-printing machines while its yield is a solid 6.5%. There’s always a trade-off for unusually strong dividend yields like this one. In this case, the trade-off is the lack of revenue growth that will ultimately limit any capital appreciation from the stock itself. Pew Research says 98% of adults living in the United States already own a mobile phone, for perspective, meaning customer growth within this saturated market is largely limited to the nation’s population growth.
The thing is, this trade-off is still well worth it. Not only is this stock’s outstanding yield well above the average for companies of its caliber, but it’s also built to last, and grow.
For better or worse, Americans are essentially addicted to their cell phones, with Review.org reporting that we look at our phones’ screens an average of 186 times per day whether or not we need to. With this habit now well formed, it’s unlikely the vast majority would be willing to give up this constant connection to the rest of the world anytime soon, if ever. We’ll pay whatever monthly fee is necessary to keep our phones connected to our service provider’s network.
In other words, Verizon’s 19-year streak of annual dividend increases is likely to continue being extended indefinitely.
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