Dividend stocks pay dividends to their shareholders, representing a portion of the company’s profits. Not all companies offer dividends. But those that do allow their board of directors to decide the amount based on the company’s financial health and economic considerations.
Dividends are typically paid out in cash on a monthly, quarterly or yearly basis. In the U.S, the vast majority of companies pay dividends on a quarterly basis. To be eligible for a dividend, an individual must be a shareholder of record on a specified date set by the board.
Stocks bought on or after the ex-dividend date will not qualify for the current dividend, but may do so in the following period. In the U.S., dividends are paid from the company’s after-tax profits and are taxed as ordinary income by the IRS. This taxation applies to shareholders when they receive dividend payments.
The dividend yield, a key metric for investors, is inversely related to the stock’s price. It represents the ratio of the annual dividend payment to the stock’s price. The dividend yield is calculated by dividing the total dividend by the stock’s price and multiplying by 100, resulting in a 10% yield in this example.
Investors should consider not just the dividend yield but also the dividend growth rate, which shows the company’s dividend increase annually over time.
Let’s examine three dividend stocks to consider, with each of them offering a dividend yield of minimum 3%.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is a pharmaceutical leader that offers medical devices and consumer health products. The company exhibits stable growth and a diversified portfolio. Its strong dividend history and robust R&D pipeline make it an attractive investment.
In its Q2 of fiscal year 2024 financial report, Johnson & Johnson posted sales of $22.4 billion, a 4.3% increase year-over-year (YOY). And, operational growth came in at 6.6% while adjusted operational growth was 6.5%. Excluding the Covid-19 vaccine, adjusted operational growth was 7.1%. Net earnings decreased by 12.8% to $4.686 billion, EPS dropped 5.9% to $1.93 and adjusted EPS increased by 10.2% to $2.82.
And for the last quarter, the healthcare giant posted adjusted earnings per share (EPS) of $2.71, slightly above the consensus of $2.65. However, quarterly sales were $21.38 billion, just shy of the estimated $21.39 billion. In terms of guidance, Johnson & Johnson is optimistic. It raised the midpoint for its full-year 2024 operational sales and adjusted operational EPS.
Now, the company expects sales to be between $88 billion and $88.4 billion, with adjusted operating EPS forecasted to range from $10.60 to $10.75. This projection tightens the previous range that had a lower end of $10.55.
Also, management attributed the strong quarter to the continued demand for their pharmaceutical products. And, they highlighted the increase in the full-year guidance midpoint as a reflection of their confidence in the company’s outlook. This bodes well for the dividend outlook.
Medtronic (MDT)
A global leader in medical technology, Medtronic (NYSE:MDT) provides innovative solutions across various healthcare segments. Its strong market position, continuous product innovation and focus on addressing chronic diseases make it a compelling choice.
For the last quarter, Medtronic reported a slight increase in its Q4 revenue. The medical device maker’s adjusted EPS for the quarter came in at $1.46, down from $1.57 YOY, falling short of analysts’ expectations. Total revenue for the quarter was $8.59 billion, marking a marginal increase of 0.5% YOY. The company’s cardiovascular revenue, a closely watched metric, declined 5.6% YOY to $3.13 billion, missing the consensus estimate of $3.17 billion.
Despite the shortfall in the cardiovascular division, Medtronic saw gains in other areas. Looking ahead, Medtronic provided guidance for the full fiscal year 2025, projecting diluted adjusted EPS in the range of $5.40 to $5.50. The company’s dividend yield sits at 3.59%, while the dividend growth rate over the last 12 months was 1.49%.
Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) remains a major player in the energy sector and a standout among dividend stocks. Benefitting from its integrated operations across oil, gas and chemicals, its dividend yield is 3.35% while growth rate is 2.2%.
Recently, the oil giant posted an adjusted EPS of $2.06, compared to the $2.19 average analyst estimate according to Wall Street analysts. Despite the earnings miss, the company maintained its capital expenditure forecast for the year. It projects between $23 billion and $25 billion, aligning closely with the analyst estimate of $23.97 billion.
In addition, Exxon Mobil achieved significant operational milestones. These include gross production exceeding 600,000 oil-equivalent barrels per day in Guyana and advancing to a final investment decision on the sixth major development in the region.
This operational efficiency contributed to robust cash flows. Exxon Mobil generated $14.7 billion in cash flow from operations and $10.1 billion in free cash flow during the quarter. This paves the way for a potential increase in the dividend payout.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
