Top 13 Dividend Paying Stocks (as of April 4, 2022 market open)
Here are 13 dividend paying US-listed stocks that meet or exceed our stringent criteria.
By Jeffrey Cohen April 5, 2022, on our website
Dividend paying stocks are investments in companies that pay out cash (sometimes additional shares) to shareholders on a regular basis. Dividends are typically paid out quarterly or monthly. Past payments are not guarantees or even assurances of future payments, as they depend on the the best use of cash for the company.
In this article, we discuss 13 dividend paying, US-listed stocks with greater efficiency and higher dividend yields than the S&P 500 Index ETF (SPY). These are companies with positive net income whose stock has passed our data validation criteria. Only 13 stocks meet this stringent criteria out of ~4,000 US-listed stocks analyzed on April 2, 2022 with a full-year of data.
In other words, these are the ‘best of the best’ dividend paying stocks that compare favorably to a broad, diversified US stock index like the S&P 500. It does not guarantee that you will make money, but it reduces your risk relative to your expected return while paying out dividends.
Investing in stocks with the earnings power and history of paying dividends or distributions to shareholders is a way to build a repeatable income stream. This income stream grows in two ways: 1) the companies grow their earnings and ability to pay larger dividends, and 2) you invest in more shares over time.
Not all investors want that income stream as it triggers a tax liability for most income earners in the current year. The ‘catch’ with dividend paying stocks is that their share price reflects the fact that they pay out earnings as opposed to reinvesting them to grow their businesses. Some investors prefer capital gains forms of income to potentially reduce, and control, their tax liabilities.
Our list of high quality, dividend paying stocks have 5 attributes:
1. Pay a dividend higher than a highly diversified portfolio (like the S&P 500 Index ETF)
2. Positive net income (profitable)
3. Liquid, trade every day, and pass our data validation
4. US listed stocks
5. More efficient (higher expected return for lower historical price variance) than S&P 500 Index ETF
Item five is based on our Chicago Quantum Net Score for each individual stock. This is a proprietary algorithm that compares the relative level of reward for risk.
As an investor, you have many choices on how to invest your savings and earn an income stream. You can:
- Deposit your money into a bank account and earn interest, with the principal amount insured by the FDIC.
- Buy a US Government bond or bill that pays interest periodically and returns principal on the maturity date. This is considered a ‘risk free’ investment.
- Buy a municipal bond and earn interest, and a return of principal, with the potential for tax savings. These bonds are not considered ‘risk free’ investments as municipal projects may not generate enough income to cover future payments.
- Buy a bond which provides you a higher level of security on the assets of a company for repayment, in return for interest payments and a return of principal at a later date. Not all bonds are repaid in full if companies cannot repay their debt.
- Buy a preferred stock which has a higher security or priority on dividend payments from a company. In return, you receive interest payments only, and would sell the investment at the end of your investment period (e.g., retirement).
- Buy a stock which has dividend income potential and the chance for capital gains (or losses) as stock prices change.
Our bank accounts pay ~0.6% interest. Government bonds pay between 0% and ~3% interest. Municipal bonds typically pay less than Government or Corporate bonds of the same risk level to account for potential tax savings. Corporate bonds pay from 1% to 10% interest. Preferred stocks can pay up to 10% dividends when earnings are sufficient to fund the payments. Dividends typically range from 1% to 5%, with anomalies raising those rates at times to 15% or more.
Let’s look at three recent examples of companies that have stopped paying dividends.
- Boeing (BA) stopped paying dividends after COVID 19 and the 787 MAX crises to conserve cash while they wait for their commercial aircraft division to recover.
- The GEO Companies (GEO) stopped paying dividends once President Biden was elected as he mandated the Federal Government Department of Justice to stop using private prisons. The company planned for a business downturn and conserved cash.
- Maquerie (MIC) sold a portion of its business, as did AeroCentury (ACY), and returned a portion of the cash received to shareholders in a one-time dividend.
How to invest in dividend-paying stocks
Step 1: Do your due diligence on the stock and ensure the overall valuation of the company is right for you. This requires reading research and government SEC filings, completing a financial evaluation of the company, and working hard to understand their future prospects.
Step 2: Figure out where to hold the investments. Dividends are taxable when paid, so they trigger an immediate tax liability. Certain types of accounts, like IRA or retirement accounts, may have tax advantages.
Step 3: Figure out your purchase price target and watch the stock to see if/when it reaches your buying price.
Step 4: Monitor your investment for significant changes in business conditions, or conditions with the specific company’s strategy and operations.
US Advanced Computing Infrastructure, Inc. is a quantitative analyst that analyzes all US Listed stocks that trade that day. It applies a set of proprietary algorithms and uses a proprietary ‘solver’ compute platform to provide information and insight (like the Top x Dividend Paying Stocks) for clients on a fixed-price basis.
For more information, please review our brochure on our website at https://www.chicagoquantum.com, and contact Jeffrey Cohen at Jeffrey@quantum-usaci.com.
View our presentation of this content on YouTube (in the style of a David Letterman Top 10 list): https://youtu.be/Famgm9SSe9I