Many stocks don't offer particularly high yields. The stocks in the S&P 500, for instance, average a yield of just 1.3%. That's not a terribly exciting rate of return on dividends for income investors. It would mean you have to invest around $77,000 in S&P 500 stocks to expect to collect just $1,000 in dividends over the course of a full year.
The good news, however, is that there are quality stocks that pay yields of well over double that rate, and they aren't risky or expensive investments, either. If you want a much-better-than-average dividend income, three stocks you'll want to consider for your portfolio today include Bristol Myers Squibb (NYSE: BMY), Target (NYSE: TGT), and Suncor Energy (NYSE: SU).
Here's why these three dividend payers can be excellent options for income-seeking investors.
1. Bristol Myers Squibb
A top healthcare company you can invest in today is Bristol Myers Squibb. It has a diverse business which is beginning to be a whole lot safer of late. Investors have been concerned about the company's future as it loses patent protection for key drugs, but the company has been investing in its drug development pipeline, and that appears to be paying off.
In September 2024, the Food and Drug Administration (FDA) approved Cobenfy, a drug to treat schizophrenia that analysts believe could generate a whopping $7.5 billion in revenue at its peak. Earlier in the year, the FDA also expanded the use case for the cancer drug Breyanzi (to treat another form of blood cancer), which is a blockbuster treatment that can generate around $2 billion at its peak.
Investors have been hesitant to buy shares of Bristol Myers due to its patent cliffs and high debt load, but the company's focus on growth suggests it is moving in the right direction, and it may be a safer option than it appears to be at first glance. Trading at less than 9 times its projected earnings next year (based on analyst expectations), the stock could be a great buy. Its high dividend yield of 4.2% only sweetens the deal, as this can also be a great source of recurring income for your portfolio.
2. Target
Consumers have been scaling back on discretionary purchases due to rising costs over the past year, which has made investors bearish on Target. But discretionary spending won't stay down forever, and neither will this top retail stock. Share prices of Target have declined by 34% in the past three years, but at a forward price-to-earnings (P/E) multiple of just under 15, it can make for an underrated investment to add to your portfolio right now.
During the company's past three quarters, Target's revenue has been flat, but it has been able to grow its earnings by more than 8% over that stretch. It may be facing some near-term headwinds, but that's largely due to broader economic conditions, which is why I wouldn't be too worried about the stock in the long run.
Target is a Dividend King, having raised its payouts for more than 50 consecutive years. Its 2.9% dividend yield is well above average, and with a stable business and an excellent track record, it's likely that the dividend income you'll collect from this stock will rise over time. This is another good stock you can buy and hold right now.
3. Suncor Energy
Another solid dividend stock to consider for your portfolio is energy company Suncor. The Canadian-based company is a big player in the oil and gas industry, and investing in it can help to diversify your holdings. While there can be some volatility in the business due to commodity prices, Suncor has been a reliable investment, rising by nearly 40% in value over just the past three years.
Over the trailing 12 months, it has generated 9.6 billion Canadian dollars ($6.67 billion) in operating profit on revenue totaling CA$54.8 billion ($38.08 billion). And its numbers can get even better as the business has been investing in its operations through a "disciplined capital program" with the aim of increasing production and lowering costs. Despite its robust numbers and promising outlook, the stock is only trading at a forward P/E of 14, making it yet another good value buy. Suncor also provides investors with a solid payout as the stock yields 4.1%.
Together, the dividend stocks listed here can help you build up a strong mix of diverse, income-generating investments to build your portfolio around.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb and Target. The Motley Fool has a disclosure policy.
