Healthcare giant Johnson & Johnson (NYSE: JNJ) pays a nice dividend. Based on its latest quarterly payout, the stock yields about 2.3%. That may not seem all that high, but it's a lot better than the S&P 500's anemic 1.75% yield.
If you're not content with Johnson & Johnson's dividend, there are plenty of fatter ones available. Three of our Foolish investors think Enbridge (NYSE: ENB), International Business Machines (NYSE: IBM), and American Eagle Outfitters (NYSE: AEO) are good bets if you want a bigger payout than Johnson & Johnson is willing to offer.
Image source: Enbridge
A fast-growing option with a solid payout
Matt DiLallo (Enbridge): Canadian oil pipeline giant Enbridge has been an excellent income stock to own over the long term. Not only has it paid a dividend for more than 64 years but it has upped the payout in each of the last 23 years, growing it by an 11.7% compound rate over the past two decades. That growth will continue in 2018 since it has already announced a 10% increase that will boost its yield to 5.3%, which trounces Johnson & Johnson's current rate.
More importantly, that payout is on a rock-solid foundation. For starters, 96% of Enbridge's cash flow comes from stable long-term, fee-based contracts or other arrangements that enable it to generate very predictable cash flow. Meanwhile, the company plans to return about 62% of 2018's cash flow to investors via the dividend, which is among the lower payout ratios in its peer group. Finally, Enbridge has a solid balance sheet, which should strengthen in the coming years from the planned sale of some noncore assets.
Even with those sales, Enbridge expects to raise its dividend by a 10% annual rate through 2020. That's because it has 22 billion Canadian dollars ($17.7 billion) of higher-return expansion projects currently underway, which should grow cash flow by a 10% compound annual rate over that time frame. That combination of a high growth rate and a higher current yield makes Enbridge a stock that income seekers should seriously consider.
A high-yield tech stock
Tim Green (International Business Machines): As a dividend stock, IBM looks like a home run. The stock yields 3.7%, trades for around 11.5 times adjusted earnings guidance for 2017, and is on the cusp of returning to revenue growth. The dividend eats up just 43% of that adjusted earnings guidance, leaving room to continue the 22-year streak of dividend increases even if earnings growth remains sluggish.
IBM will enjoy a few tailwinds this year that could propel the stock higher, icing on the cake for dividend investors. The company's latest mainframe system, which began shipping in September, will provide a revenue boost in the first half of the year. Its new POWER9 processor could provide a boost as well. And if the U.S. dollar continues to weaken against other currencies, IBM's mostly international revenue base will benefit from the currency translation effects.