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. These 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 even those dividends may be cut in order 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 5 dividend stocks in the Russell 1000 by forward dividend yield, excluding companies with payout ratios that are either negative or in excess of 100%. The stocks below are split with regard to performance relative to the Russell 1000, with two outperforming and three underperforming. The Russell 1000 provided a total return over the past 12 months of 66.1%, as of March 24, 2021. All data below is as of March 24, 2021.
- Forward Dividend Yield: 7.48%
- Payout Ratio: 84.42%
- Price: $8.02
- Market Cap: $3.5 billion
- 1-Year Total Return: 75.5%
Equitrans Midstream is one of the largest natural gas companies in the U.S.. It provides gas gathering, gas transmission, pipelines and storage systems, as well as a range of water pipelines and services. Equitrans is focused on the Appalachian Basin area, with assets in Pennsylvania, Ohio, and West Virginia.
- Forward Dividend Yield: 6.27%
- Payout Ratio: 45.58%
- Price: $41.49
- Market Cap: $9.7 billion
- 1-Year Total Return: 100.1%
Gaming and Leisure Properties is a REIT that acquires, finances, and develops casinos and other entertainment facilities. The company also leases properties to gaming operators through triple net lease arrangements. In late February, the company declared a cash dividend of $0.65 per share of common stock payable in March.
- Forward Dividend Yield: 5.96%
- Payout Ratio: 42.93%
- Price: $12.75
- Market Cap: $2.2 billion
- 1-Year Total Return: 57.1%
Brandywine Realty Trust is a REIT that owns, leases, develops, and manages primarily suburban office properties. It also has an ownership interest in and operates a commercial real estate management services company. In late February, Brandywine announced a quarterly cash dividend of $0.19 per common share payable in April.
- Forward Dividend Yield: 5.84%
- Payout Ratio: 86.79%
- Price: $28.42
- Market Cap: $21.9 billion
- 1-Year Total Return: 41.9%
PPL Corp. is an energy and utility holding company. Through subsidiaries, the company generates electricity and markets wholesale and retail energy. The company has 10 million customers in the U.S., primarily in the south and east coasts. PPL announced on March 18 that it planned to sell its U.K. utility business to National Grid PLC (NGG) for £7.8 billion (roughly $10.8 billion). In a separate transaction, PPL will acquire National Grid’s Rhode Island utility business, The Narragansett Electric Company, for $3.8 billion. The move will transform PPL into a purely U.S.-focused energy company. The first transaction is expected to close within four months, and the second within a year.
- Forward Dividend Yield: 5.74%
- Payout Ratio: 68.17%
- Price: $11.84
- Market Cap: $5.5 billion
- 1-Year Total Return: 35.5%
New York Community Bancorp is the parent company of New York Community Bank, which has hundreds of branches across 8 divisions. The company provides a range of financial services for both individual customers and businesses. It also produces multi-family loans for portfolio in New York City.
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