In today’s thriving business environment, numerous companies are generating significant profits. Many opt to share a portion of these earnings with their investors through dividend payments. In the second quarter, American corporations distributed a substantial $161.5 billion in dividends, marking an 8.6% rise compared to the same period last year.
Anyone has the opportunity to benefit from this dividend income. By purchasing shares in a company that distributes dividends, you can secure your share of the profits. Let’s explore some of the leading options for dividend investing.
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Leading the Dividend Charge
Microsoft, a tech industry giant, took the top spot among U.S. dividend payers last quarter. The creator of the Windows operating system, Xbox, and various other technological innovations rewarded its investors with an impressive $5.6 billion in dividends during the quarter. This was the largest payout among U.S. companies and the seventh largest worldwide.
Investing in Microsoft stock is open to anyone. With shares priced at just over $400 each, owning a single share entitles investors to receive dividends of $0.75 per share each quarter, totaling $3.00 annually. This translates to a dividend yield of approximately 0.7% at the current share price, meaning a $1,000 investment in Microsoft stock could yield around $7 in annual dividend income.
Microsoft has consistently increased its dividend over the years, providing investors with a 10% raise last September. The tech leader has boosted its payout annually for over a decade, and with its strategic investments in high-growth areas such as cloud computing and artificial intelligence (AI), it is well-positioned to continue this trend.
New Entrants to the Dividend Scene
While Microsoft boasts a long history of dividend payments, other tech giants are relatively new to the arena. Alphabet and Meta Platforms, titans in search and social media, respectively, have recently introduced dividends. In February, Meta Platforms, the parent company of Facebook, declared a quarterly dividend of $0.50 per share, while Alphabet, Google’s parent company, launched its inaugural quarterly dividend of $0.20 per share in April. Together, these companies distributed nearly $4 billion in dividends during the second quarter.
Although their current dividend yields are modest—Meta’s at about 0.4% with its share price exceeding $500, and Alphabet’s slightly higher at roughly 0.5% with shares around $150—these companies are expected to compensate for their low yields with substantial growth. Like Microsoft, they may achieve double-digit annual dividend growth in the future, fueled by investments in cutting-edge technologies such as AI.
A Robust Income Stream
For those aiming to boost their dividend income, numerous high-quality companies offer attractive dividend yields. For instance, many real estate investment trusts (REITs) currently provide yields around 4%, significantly higher than the average stock yield of under 1.5%.
Realty Income stands out as an excellent REIT choice for dividend income. Specializing in freestanding retail, industrial, and gaming properties, it has distributed over $14.1 billion in dividends since its inception, including $2.1 billion last year. This year, it is on track to pay approximately $2.5 billion in dividends.
The REIT issues monthly dividends of $0.263 per share, totaling $3.156 annually. With shares priced in the $60s, investors can enjoy a dividend yield of about 5%, translating to roughly $50 in annual dividend income for every $1,000 invested.
Realty Income’s dividend stream is poised to grow steadily. Since going public in 1994, the REIT has increased its dividend 126 times, including for the past 107 consecutive quarters. Its payout has risen at a compound annual growth rate of 4.3% during this period. With a robust balance sheet and significant growth potential (given the trillions of dollars in global commercial real estate), it is well-equipped to enhance investor income annually.
Companies generate substantial profits each year and often share these with shareholders through dividends. By opening a brokerage account and investing in dividend-paying stocks, you can tap into this income stream. Over time, as these companies raise their dividends and you acquire more shares, your income stream can grow, potentially leading to a more comfortable retirement.
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