David Jagielski, The Motley Fool
·4 min read
If you want to earn a good return in the markets without taking on too much risk, you may want to consider loading up on dividend stocks. These investments are typically underpinned by companies with strong financials. And they can provide you with not only long-term stability but also some recurring income over the years.
Three stocks that pay you more than the S&P 500 average yield of 1.5% and are relatively safe investments for the long haul are Southern Company (NYSE: SO), Coca-Cola (NYSE: KO), and Bank of America (NYSE: BAC).
Southern Company: 4%
A utility business often makes a great income-generating investment. The ongoing need for heating and power makes it a relatively resilient type of business to invest in. There's good recurring revenue to rely on, and while there may be fluctuations -- due to weather, for example -- the overall financial performance should be relatively stable.
Southern's net income has totaled $3.1 billion through the first nine months of 2023, down around 14% year over year. But the utility says warmer weather played a role; last quarter, which ended in September, earnings of $1.4 billion were much more stable and down by just 3%.
Serving 9 million customers and being a top utility company in the country, Southern can make for an excellent income investment to hang on to in your portfolio. In most years, the company's profit margin has easily exceeded 10% of revenue.
The stock's 4% dividend yield is tops on this list. The company has also increased its payout for 22 straight years.
Coca-Cola: 3.1%
Coca-Cola is one of the best dividend stocks you can own. There are plenty of reasons to consider it for your portfolio.
It is one of Warren Buffett's top investments, so you know the stock already comes pre-vetted by one of the world's best investors. The business's products are known across the globe. Coca-Cola also has pricing power, without which its business wouldn't be growing organically at a rate of at least 10% amid inflation in 2023.
This a rock-solid investment to hang on to due to its simplicity and strong margins -- Coca-Cola has reported a $10.8 billion profit on revenue of just over $45 billion over the trailing 12 months. That means $0.24 of every dollar has been flowing through to its bottom line during that time. It's an impressive margin that suggests the business is in great shape.
To cap it off, this is also a Dividend King, with Coca-Cola having increased its payouts for 61 consecutive years. And there's little reason to doubt that the soft drink giant will continue to raise its payouts in 2024 and beyond.
Bank of America: 2.8%
Another Buffett stock is Bank of America; it holds the No. 2 spot in the Berkshire Hathaway portfolio, behind only Apple. Being one of the top financial institutions in the country, Bank of America's success will be closely linked to the overall success of the country, making it a great way to "bet on America," something Buffett thinks investors shouldn't hesitate to do.
At around 30%, Bank of America has reported even stronger profit margins than Coca-Cola over the past four quarters. Economic conditions could worsen in the months ahead, but in the long run, Bank of America remains a stellar dividend stock to buy and hold for the long term. The company has made it through plenty of adversity over the years, including the financial crisis that took place around 15 years ago.
The stock's modest payout ratio of just 25% also means the bank isn't overextending itself with respect to its dividend, which adds a layer of safety for investors. Trading at right around its book value, Bank of America's stock is also attractively priced for long-term investors.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
3 High-Yielding Dividend Stocks to Buy and Hold for Years was originally published by The Motley Fool
