Dividend-Paying Stocks with Above-Average ReturnsDividend-Paying Stocks with Above-Average Returns While the broader S&P 500 index may not offer satisfactory dividend yields, several world-class companies within it provide investors with solid return prospects and superior yields. 1. Coca-Cola (KO) * Share prices are at all-time highs, offering a 3% dividend yield. * Iconic brand with significant global growth opportunities. * Double-digit revenue growth in the second quarter, driven by international markets. * Strong earnings growth, leading to new stock price highs. * Dividend has been increased for 62 consecutive years. 2. Blackstone (BX) * $10,000 investment 10 years ago would be worth $68,000 today with dividends reinvested. * Current dividend yield of 2.3%. * World’s largest alternative asset manager with $1.1 trillion in assets under management. * Steady dividend growth over the past decade. * Opportunities in data center infrastructure for artificial intelligence (AI) provide significant growth potential. These companies demonstrate the ability to deliver strong operating performance while offering attractive dividend yields. Their history of dividend increases and robust financial results make them compelling dividend stocks for long-term investors.
These companies offer good return prospects and above-average returns.
The S&P 500 includes world-class companies with solid return prospects, but investors seeking income may not be satisfied with the index’s current average yield of 1.3%, the lowest in more than 20 years.
Some of the best companies in the index are delivering solid operating performance while also offering better dividend yields. Here are two such stocks that have what it takes to reward investors for years to come.
1. Coca Cola
Coca Cola (KO 1.48%) Share prices are reaching new heights, yet the stock still offers a tempting 3% dividend yield. This is one of the most iconic brands in the world, and it continues to show that it has significant growth opportunities for years to come.
Coke’s adjusted revenue grew 15 percent year-over-year in the second quarter. The only region to see a decline in unit sales was North America. The strength Coke is seeing in international markets such as Asia Pacific, India and Latin America suggests the brand has plenty of room to reach new customers globally.
The double-digit revenue growth translates into strong bottom line growth. Adjusted earnings per share grew 17% year-over-year on a constant currency basis, which explains why the stock is hitting new highs. If consumer purchasing power improves and demand for units increases in North America, that could further benefit the stock.
Coca-Cola’s growth reflects the strength of its brand. Price increases drove most of the company’s revenue growth last quarter, while inflation continues to weigh on sales. It shows that many consumers are so attracted to the brand that they’re willing to pay a little more, and explains why famed investor Warren Buffett has held a large stake in the company for more than 30 years.
These solid financial results should bolster Coca-Cola’s dividend, which has seen it raise its payout for 62 consecutive years. It recently raised its quarterly dividend by 5% in the first quarter, bringing the quarterly payment to $0.485 per share. The company paid out 73% of its trailing earnings as dividends over the past year.
Coca-Cola’s history of dividend increases and strong corporate performance make it a dividend stock you’ll want to hold forever.
2. Blackstone
If you’re looking for a dividend stock with an above-average yield and room for a lot of growth, Black stone (BX 1.41%) might be what you’re looking for. A $10,000 investment in the stock 10 years ago would be worth $68,000 today with dividends reinvested, and the stock currently pays a dividend yield of 2.3%.
Blackstone is the world’s largest alternative asset manager. It generates revenue and profits by raising capital from investors and investing in lucrative opportunities, such as infrastructure, private equity and real estate. It ended 2023 with more than $1 trillion in assets under management, and the billions of dollars that continue to flow into alternative assets are a huge tailwind for the firm.
Blackstone’s total assets under management grew 7% year-over-year to $1.1 trillion in the first quarter, driven by $39 billion in investor inflows. The company reported distributable earnings of $1.3 billion, or $0.98 per share. Its dividend policy is to pay shareholders approximately 85% of distributable earnings, meaning the dividend can fluctuate with the company’s earnings performance. There have even been years when it has declined, but over time the dividend has increased as the company has grown.
Over the past year, the total dividend was $3.36 per share, up from $1.92 in 2019. While the dividend has declined in some years, Blackstone has paid a dividend every year since 2007. The opportunities management sees to grow the assets should lead to further increases over the long term.
The buildout of data center infrastructure for artificial intelligence (AI) is a major opportunity. Blackstone is positioning itself as the largest investor in AI infrastructure, with $55 billion in data centers and $70 billion in future pipeline development.
The stock price has risen more than 35% over the past year and is expected to reach further highs in the long term as more investor capital moves into private equity opportunities.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Blackstone. The Motley Fool has a disclosure policy.
