Sure, sometimes I’ll take a bet on a penny stock or a technology company that I think might triple in value. But the truth is, I like the bedrock of my portfolio to be steady dividend payers.
Think about it, if a company is a dividend payer, it has to have that money to pay out to shareholders. And if that company has been paying dividends for many consecutive years in a row, it’s not going to want to decrease those payments or cancel them unless it has to.
Some companies didn’t have strong enough balance sheets to get through the tough times caused by the pandemic. But companies that are still paying a dividend on this side of a tough year are the ones that I want to have in my portfolio ... and I want to make this bonus money work even harder for me.
You might remember a similar word problem from your grade school days: Your rich uncle Ted comes to visit. He’s always good for putting some spending money in your pocket.
This time he gives you two options. You can take a crisp $100 bill today. Or, you can take a payment for the next 30 days, starting with a single penny and doubling every day. Which would you choose?
After crunching some numbers, any logical person would take the second option. The compounding penny turns into a whopping $5,368,709 ... and the $100 is just $100.
It’s been said that Albert Einstein claimed that compounding is the “most powerful force in the universe.” And it’s one of my favorite tools as an investor.
A dividend reinvestment plan (DRIP) can do just that. In the past, I’ve actually gone through companies such as Computershare to get a specific DRIP account.
But recently, I learned that I could do the same thing in my TD Ameritrade account with no commissions.
I check a box, and when a dividend is issued, partial shares are bought for me automatically and are shown in my position. Then, the next time that dividend is issued, my base position is larger. Then, it continues to compound over time.
Since I love this strategy, I keep my eye on dividend payers. Right now, in the middle of earnings season, I’m seeing a lot of these companies announce record numbers in their quarterly releases.
So today, I wanted to head over to the Weiss Ratings stock screener to see which dividend payers had the highest ratings.
I decided I was going to search for companies that had a dividend yield of at least 1% and were traded on one of the major U.S. stock exchanges.
Let’s take a look at the top three.
First up, we’ve got Arthur J. Gallagher & Co. (NYSE: AJG). Gallagher is a global leader in insurance, risk management and consulting services. The company has been around since 1927 and currently operates in more than 150 countries.
The company announced that it would be paying its next dividend of 48 cents to shareholders on record by June 3. Prices are currently trading around $148.46, which makes a 48-cent quarterly dividend equal to an annual yield of 1.3%.
Arthur J. Gallagher & Co has had a Weiss “Buy” rating since 2016. Shares are up 32.2% in the past six months and 73% in the past year.
Next up, we’ve got Williams-Sonoma, Inc. (NYSE: WSM). You’ve probably heard of this brand, and you might even have some of its products in your kitchen. The company has been around for over 50 years and continues to design and develop exclusive collections of kitchen tools and cookware.
The company will pay its next dividend of 59 cents on May 27 to those that were on record as of April 22. This dividend is 6 cents more than the last quarterly payment in February. There’s nothing better than a company that consistently increases its dividend.
Based on current prices of around $171.78, that 59 cent dividend comes out to around 1.3%. Share prices are also up 97% over the past six months and 171% over the past year!
Last up is Abbott Laboratories (NYSE: ABT). Abbot creates breakthrough products in diagnostics, medical devices, nutrition and branded generic pharmaceuticals. The company has over 109,000 employees in over 160 countries.
The company will pay its next dividend of 45 cents on May 16 to those on record as of April 14. Based on recent prices around $118.39, that’s a dividend yield of 1.3% as well.
Abbott Labs has held a “Buy” rating since the beginning of 2019. Shares are up 6% over the past six months and 28% over the past year.
Remember: These are just the top three in my screener. They’re currently 468 “Buy”-rated stocks that have a dividend yield of at least 1%.
You may want to head over to the dividend screener and use a higher dividend yield. The higher the dividend, the faster your money can grow through compounding that dividend.
Best,
Kelly Green
