In this blog, I’m going to share the top dividend stocks that pay more than $500 per month.
I’ve been really getting into dividends, especially when the market has been trending over tech stocks, value stocks, and stable companies.
Many of these stable companies will pay a dividend, and I really value the passive income generated from owning these dividend-paying stocks.
If you’re looking to increase your own passive income streams, then dividend stocks could be a good way to do that. Before we get into the list, let’s get some basics.
- Why companies pay dividends
- What you can expect from dividends
- Downsides to avoid.
So why do companies pay dividends? When companies make a profit, they need to do something with that profit. They usually have a few different options, like
- They could reinvest their money, so for example, if you’re a growing startup and you earn some profit, you could actually just reinvest that into your business to create better products and hopefully get more market share.
- The other option companies have when they make a profit is to pay some of that profit back to their shareholders in the form of a cash dividend payment. Just by owning dividend-paying stock, you usually get paid a cash dividend every quarter, and if you compound these dividends over time, the effects can be pretty amazing.
Companies can also do things with their profits, like share buybacks or reducing the debt on their balance sheet.
Don’t fall in Dividend Trap:
Here, everyone looks for the company with the highest dividend yields, like over 10%, and just invests in that, but you’re going to want to be a little bit careful of that because that’s what’s known as a dividend trap.
I think companies that pay over a 5-6% dividend yield should be looked at a little bit closer because that kind of tells you that they’re not reinvesting their money into the business; perhaps they’re paying too much out in dividends to their shareholders. or the company’s stock price has fallen so much that the dividend now looks like a larger percentage of their entire stock price.
Note: I’m not saying all high-yielders are bad stocks, but anytime you see a dividend yield over 5–6%, you should do some more research.
1. JPMorgan Chase
The first stock in my portfolio that’s a big dividend-paying company is JPMorgan Chase. This is one of the biggest financial companies out there, and they’re paying right now a 3–3.5% dividend yield on their stock. For every share of JP Morgan, you’re going to get paid about $4 annually for owning that share.
So, 3.5–4% isn’t really that high of a yield, but it is higher than the benchmark of the S&P 500, which is around 1.7%.
The reason I like JP Morgan so much is that they have a large amount of cash on their balance sheet.
They basically have 1.7 trillion dollars in liquid assets, of which 700 billion are cash.
So that means if you’re a shareholder, you’re going to feel pretty secure knowing that JP Morgan isn’t going to go bankrupt.
I think JPMorgan is well positioned in the financial sector, especially in a rising interest rate environment.
I really value security when it comes to a dividend-paying portfolio because if the company goes out of business, they’re not going to be paying you a dividend.
So in the case of JP Morgan, they did not go bankrupt in the 2008 crisis like some other financial institutions out there, like Lehman Brothers.
2. PepsiCo: –
PepsiCo sells different soft drinks and beverages, but they also own Gatorade and Frito-Lay, which is a consumer package company that sells different types of potato chips.
Their dividend right now is $4.60 for every share that you own, resulting in a 2.73% dividend yield, which is pretty close to JP Morgan.
You’re probably wondering why you own Pepsi over Coke, and that’s definitely a valid question because Coke is a comparable company with a very great dividend, but in my opinion, I think I like Pepsi a little bit more because of its diversification of products.
If you really think about it, Coke sells beverages, which is great, but Pepsi does sell consumer packaged goods like chips, and it actually accounts for about 20% of their revenue according to their financial report, which is a really good thing because if you’re looking for more growth, then there’s probably going to be more growth opportunities for a company that has more diverse products.
Pepsi is also one of those stocks where it benefits them to have some pricing power, and basically, they have pricing power because consumers will always demand their goods, almost no matter what, as long as they’re not raising the prices too crazily.
Another great thing about Pepsi is that they’re here for your entire lifetime as well.
Pepsi and Coke have been mainstays for quite a long time, and they’re so big and so large, and the demand for their products is so good that I don’t think they’re going anywhere.
3. AbbVie: –
AbbVie is actually a biopharmaceutical company that owns a portfolio of drugs in different sectors like oncology, immunology, and neuroscience.
The stock currently pays a 4.33% dividend yield, which amounts to about $5.64 per share that you own every single year.
You might not have heard of AbbVie before, but I guarantee that you’ve probably seen a commercial for their most notable drug, Humira.
It’s a drug that reduces pain and swelling caused by arthritis, so different types of arthritis like rheumatoid arthritis, Crohn’s disease, and other skin disorders can be treated by Humira.
It is one of the most successful drugs ever, and it regularly tops the best-selling drugs list every single year. In 2019, the sales of Humira alone were over $19 billion for that single drug.
AbbVie is well positioned in their sector because they have leading patents on a bunch of different drugs and they continue to invest in their research and development programmes, which means that they’re going to diversify their product line.
I think that this is going to give them a strong economic move because right now their operating cash flow is around $22.9 billion every single year in the most recent year, and having AbbVie in my portfolio is giving me some more diversity in my overall stock holdings.
If you own 100 shares of AbbVie, you’re going to get $564 in dividends every single year.
4. Kraft Heinz:
Before they make all your favourite condiments and consumer food staples such as ketchup, mustard, mayonnaise, and A1 steak sauce, Kraft Heinz sells a ton of them.
With net sales of 26 billion dollars just last year, they have a pretty strong dividend with a 4.62% dividend yield, which comes out to around $1.60 per share that you own.
This stock’s basically been trading flat the entire year, which I think is fine compared to the S&P 500, which is down about 17%, and it’s also a stock that Warren Buffett still continues to hold in his portfolio today.
I think it’s always great to own a company that relies on the consumer food staple product as their main product because food is not going anywhere and even in tough economic times people still have to eat, so no matter what their products are going to be in demand.
5.Exxon Mobil Corp: –
Actually, Exxon Mobil is controversial because it’s not necessarily a green option, and oil is not something that we’re hopefully still relying on in the next 30 or 50 years.
But for now, fossil fuel dependency is still pretty big, and if you were to invest in Exxon this year, energy is actually one of those sectors that has been outperforming this year, so it would have probably benefited your portfolio quite well.
Refined oil products like petroleum, gasoline, and heating oil products are currently going for a premium on the market, and with the Ukraine-Russia War still going on and ending nowhere in sight, I don’t think energy prices are coming down.
Exxon is now ranking in the profits, and they pay their shareholders a 3.78% dividend yield, which amounts to $3.52 per share per year that you own.
The great thing about Exxon is that they’re up 50% in their stock till now versus a stock like Google, which is actually down 30%, so as you can tell, energy is doing really well and tech is getting crushed. I
f we really think about the entire supply chain as a whole, oil is used in almost everything, from delivering your food on trucks to maybe even harvesting your crops with the machines that they use.
I think holding Exxon as a diversification measure in your portfolio is a good one.
Now there are some risks to Exxon as well, which is that governments are shifting more towards green energy, so depending on how long that takes, we could see a threat to Exxon, but still, the dependence on fossil fuels is not just going very fast.
6. Johnson & Johnson:
Johnson & Johnson is a stock that Warren Buffett still holds today, and that’s for good reason.
They pay a dividend yield of 2.7%, which is in line with JPMorgan Chase, and that comes out to about $4.52 per share annually.
I think it’s one of those stable companies that’s going to do well because of what it offers.
If you didn’t know, Johnson and Johnson’s most popular brands include products like Tylenol, Listerine, Band-Aid, Rogaine, Vino, and Zyrtec.
The company is pretty much immune to any economic downturns; it’s not like we’re in a depression, or maybe if inflation is high or interest rates are high, doctors are still going to be prescribing Johnson & Johnson products to their patients.
The other thing about Johnson & Johnson is that they are a dividend aristocrat, which means they’ve been paying dividends to their shareholders for the past 50+ years and they continue to increase them as well.
Johnson & Johnson is a value stock that is going to do well in any type of environment.
They’re up about 1% this year, so that means they’re outperforming the S&P 500. They also have a bunch of cash on their balance sheet.
Even in the worst of recessions, I think Johnson & Johnson will survive.
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