Generating some extra dividend income is never a bad idea, especially now when costs are rising.
You might think that investing in the stock market today is a bad idea given all the turmoil and uncertainty ahead, but the stocks listed here all have fairly robust and stable businesses. They have been performing well over the past 12 months, and they can be among the safest investments to be holding right now.
Verizon Communications (NYSE: VZ), Toronto-Dominion Bank (NYSE: TD), and Dominion Energy (NYSE: D) offer high yields and a lot of safety and stability in the long run. Here's a look at how investing $16,000 in each of these stocks can generate $2,600 in annual dividends for you, and why they are worth hanging on to for years.
1. Verizon Communications
A big motivation for investing in Verizon stock today is for its dividend, which yields 6.2%. That's a far higher rate than the 1.5% that the S&P 500 currently averages. Investing $16,000 into the telecom stock would generate close to $1,000 in annual dividend income.
Over the years, the telecom giant hasn't generated much growth, but its results have been good enough to not only sustain its payout but to also grow it. Last year, its free cash flow totaled nearly $19 billion, far higher than the $11.2 billion it paid out in dividends.
Last September, the company increased its dividend for an 18th consecutive year, in a clear sign that management isn't overly concerned with its operations and the ability to continue to support the payout.
And in the past 12 months, the stock has climbed by 11%, which is a pattern that could continue, especially if interest rates come down and investors seek high-yielding investments. With a low beta, stable numbers, and a high dividend, Verizon can be a solid stock to buy and hold if your priority is to collect an excellent payout.
2. Toronto-Dominion Bank
Canadian-based Toronto-Dominion Bank, also known as TD Bank, yields a fairly attractive rate of 5% -- sufficient to produce $800 in annual dividends from a $16,000 investment. While it's not as high as Verizon's yield, it's still fairly high for the top bank stock. This is also going to be an investment that's primarily suitable for dividend seekers rather than growth investors.
TD's growth in the U.S. market will be limited for the foreseeable future due to an agreement it reached with regulators last year after it violated money laundering laws, resulting in a historic $3 billion fine. It's a blow to TD's near-term earnings and growth opportunities, but that shouldn't dissuade investors from relying on it for solid dividend income.
The company has been paying a dividend since 1857 and is one of the more stable income-generating investments you can hold for the long term. TD Bank has faced a lot of adversity for decades and yet it remains one of the top banks in North America. It trades at around 1.4 times its book value and can be a stable option to hang on to. In the past year, the stock has risen by 7%.
3. Dominion Energy
Utility company Dominion Energy rounds out this list of solid dividend stocks. It yields around 5%, and like TD Bank it can generate $800 in dividend income from a $16,000 investment over the course of a full year. That puts the total annual dividend income from these stocks, when investing $16,000 in each of them, at around $2,600.
Dominion is a compelling income stock because of its stability and recurring income. Millions of consumers rely on its electricity and natural gas services every day.
There may be variations in its results due to weather, but its performance is fairly stable. Last year, Dominion reported $14.5 billion in operating revenue, up slightly from $14.4 billion in the previous year. Impairment charges did weigh on its operations, but its overall operating income totaled $3.2 billion (down from $3.4 billion) and represented 22% of its top line.
This is a high-margin business that has a lot of recurring revenue; it can make for a fairly safe and ideal investment to buy and hold for the long term. In the past 12 months, Dominion's stock is up 10%.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Dominion Energy and Verizon Communications. The Motley Fool has a disclosure policy.
