The Appeal of Dividend Stocks and S&P 500 Performance

Dividend-paying stocks tend to be established companies and often outperform non-dividend payers. A study found that from 1973 to 2022:

• Companies that grew or initiated dividends delivered 10.3% annualized returns
• Non-dividend payers returned 3.95% annually
• An equal-weight S&P 500 fund returned 7.7% annually
• Dividend payers were also less volatile

1. Verizon Communications (VZ)

With a recent $180 billion market cap, Verizon offers a 6.6% dividend yield. While the payout growth has slowed, it remains generous.

• Pros: Strong wireless network, potential to expand with Frontier acquisition
• Cons: Substantial debt load raises concerns over dividend safety

2. Citigroup (C)

The banking giant Citigroup, with a $109 billion market cap, recently had a 3.6% dividend yield after a 16% stock price drop.

• Serves 19,000 corporate clients and 100 million retail customers
• Undergoing a turnaround, selling off Mexico consumer business
• Investing more in wealth management and commercial banking

3. CVS Health (CVS)

The stock's 31% drop pushed CVS Health's dividend yield to 4.7%, with a 45% payout ratio.

• Pharmacy and health services divisions performing well
• Health insurance business lagging
• Attractively valued with a forward P/E of 7.8

4. United Parcel Service (UPS)

UPS, with a $111 billion market cap, saw its dividend yield rise to 5.1% after a 21% stock price drop. The delivery giant:

• Employs over 500,000 people, delivering 22 million packages daily
• Faces competition from Amazon's in-house delivery services
• Cost-cutting measures and economic recovery could boost earnings
• Attractive valuation with a forward P/E of 14.1

The Motley Fool's Stock Recommendations

The Motley Fool's Stock Advisor team has identified 10 top stock picks they believe could produce significant returns, not including Verizon. Their recommendations have quadrupled the S&P 500's returns since 2002.

Key Takeaways

• Consider dividend stocks like Verizon, Citigroup, CVS Health, and UPS for high yields
• Evaluate factors like payout ratios, debt levels, and growth prospects
• Diversify with dividend-focused ETFs or The Motley Fool's stock picks