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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%. Dividend stocks, as measured by the S&P 500 Dividend Aristocrats Index, have outperformed the broader equity market. The index has provided a total return of 18.1% over the past year, above the Russell 1000’s total return of 11.7%. Only one of the dividend stocks below has outperformed the broader market. These market performance numbers and all statistics below are as of Jan. 26, 2022.
- Forward dividend yield: 11.38%
- Payout ratio: 47.6%
- Price: $7.73
- Market cap: $11.2 billion
- 1-year total return: 1.8%
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 Dec. 14, Annaly Capital announced it had promoted Ilker Ertas to chief investment officer, effective immediately. Ertas will oversee all of Annaly’s investment strategies including capital allocation, growth initiatives, and overall portfolio operations. He was previously Annaly’s head of securitized products.
- Forward dividend yield: 9.60%
- Payout ratio: 56.0%
- Price: $15.00
- Market cap: $7.9 billion
- 1-year total return: 0.8%
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). The company declared a monthly common stock dividend of $0.12 for January 2022. The dividend is payable on Feb. 9 to shareholders of record as of Jan. 31, 2022.
- Forward Dividend Yield: 8.55%
- Payout Ratio: 56.4%
- Price: $10.53
- Market Cap: $4.9 billion
- 1-Year Total Return: 16.4%
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 Dec. 20, New Residential Investment announced that it had completed the acquisition of business purpose lender Genesis Capital LLC and a related loan portfolio. At the time of the announcement, Genesis was expected to originate roughly $2 billion of loans in 2021. The acquisition is expected to help Genesis to accelerate its growth in the U.S. housing market, especially in the build-to-rent space sector. The terms of the acquisition were not disclosed.
- Forward dividend yield: 6.38%
- Payout ratio: 69.9%
- Price: $17.71
- Market cap: $5.0 billion
- 1-year total return: -2.5%
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 $14.1 billion as of Sept. 30, 2021.
- Forward dividend yield: 6.20%
- Payout ratio: 84.9%
- Price: $43.25
- Market cap: $10.3 billion
- 1-year total return: 11.8%
Gaming and Leisure Properties owns and leases casinos and entertainment facilities. It has a portfolio of 51 gaming and related assets in 17 states. The company most recent reported results for Q3 2021, ended Sept. 30. Net income grew by 17.3% year-over-year (YOY) while total revenue declined by 2.9%. The company’s net income for the quarter benefited from the sale of Hollywood Casino Perryville operations in July 2021.
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