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Dividend stocks are companies that pay out a portion of their earnings to a class of shareholders on a regular basis. These companies usually are well established, with stable earnings and a long track record of distributing some of those earnings back to shareholders. The distributions are known as dividends and may be paid out in the form of cash or as additional stock. Most dividends are paid out on a quarterly basis, but some are paid out monthly, annually, or even once in the form of a special dividend. While dividend stocks are known for the regularity of their dividend payments, in difficult economic times, those dividends may be cut to preserve cash.
One useful measure for investors to gauge the sustainability of a company’s dividend payments is the dividend payout ratio. The ratio is a measure of total dividends divided by net income, which tells investors how much of the company’s net income is being returned to shareholders in the form of dividends versus how much the company is retaining to invest in further growth. If the ratio exceeds 100% or is negative (meaning net income is negative), this indicates the company may be borrowing to pay dividends. In these two cases, the dividends are at a relatively greater risk of being cut.
Below, we look at the top five dividend stocks in the Russell 1000 by forward dividend yield, excluding companies with payout ratios that are either negative or in excess of 100%. Just one of the stocks on our list below – New Residential Investment Corp. (NRZ) – has outperformed the broader market, represented by the iShares Russell 1000 ETF (IWB). IWB has provided a total return of 36.5% over the past 12 months. This market performance number and all statistics below are as of Oct. 27, 2021.
- Forward dividend yield: 10.13%
- Payout ratio: 40.6%
- Price: $8.69
- Market cap: $12.6 billion
- 1-year total return: 34.6%
Annaly Capital Management is a diversified capital management company that invests in and finances residential and commercial assets. Its investments include agency mortgage-backed securities (MBS), residential real estate, and middle market lending. The company has about $94 billion in total assets. On Sept. 9, the company’s board announced a common stock cash dividend of $0.22 per common share for the third quarter 2021. This dividend is payable Oct. 29, 2021 to common shareholders of record on Sept. 30, 2021.
- Forward dividend yield: 8.72%
- Payout ratio: 43.8%
- Price: $16.51
- Market cap: $8.7 billion
- 1-year total return: 28.0%
AGNC Investment is an internally-managed mortgage real estate investment trust (REIT) that primarily invests in agency MBS on a leveraged basis. It finances its holdings through collateralized borrowings structured as repurchase agreements (repos). On Oct. 7, AGNC declared a cash dividend of $0.12 per share of common stock for October 2021. The dividend is payable on Nov. 9 to common shareholders of record as of Oct. 29, 2021.
- Forward Dividend Yield: 8.64%
- Payout Ratio: 54.3%
- Price: $11.57
- Market Cap: $5.4 billion
- 1-Year Total Return: 58.1%
New Residential Investment is a mortgage REIT. It provides capital and services to the mortgage and financial services industries. The company invests in assets with stable, long-term cash flows. Its investment portfolio includes mortgage servicing-related assets, non-agency securities, residential loans, and other related investments. On Oct. 11, New Residential announced that it had entered into a definitive agreement to acquire Genesis Capital LLC, a business purpose lender focused on developers of new construction and related projects, for an undisclosed sum. Genesis is anticipated to originate roughly $2 billion of loans in 2021. The terms of the transaction were not disclosed in the press release. The deal is expected to close in Q4 2021.
- Forward dividend yield: 5.74%
- Payout ratio: 72.7%
- Price: $19.69
- Market cap: $5.5 billion
- 1-year total return: 27.3%
TFS Financial is a federally chartered stock holding company that conducts its principal activities through its wholly owned subsidiaries. It offers retail consumer banking services, including mortgage lending, deposit gathering, and other types of financial services. It had total consolidated assets of $14.6 billion as of Sept. 30, 2020.
Southern Copper Corp. (SCCO)
- Forward dividend yield: 5.59%
- Payout ratio: 60.9%
- Price: $64.38
- Market cap: $49.8 billion
- 1-year total return: 31.0%
Southern Copper is an integrated copper producer. It produces copper, molybdenum, zinc, lead, coal, and silver. The company operates mining, smelting, and refining facilities in Peru and Mexico, and conducts exploration activities in Chile.
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