Want Over $3,000 in Annual Dividends? Invest $20,000 in Each of These 3 Stocks

David Jagielski, The Motley Fool

Thu, Nov 21, 2024, 2:33 AM 5 min read

Generating thousands of dollars of recurring income can be a great way to make you less reliant on employment income or retirement benefits. If you have savings that you can afford to invest in stocks, there are multiple high-yielding dividend investments to consider right now. While many investors have been focusing on growth stocks and hype surrounding artificial intelligence, dividend stocks have been on the back burner of late, which could make now an advantageous time to invest in them.

Three dividend stocks that can be excellent options for the long term are Bristol Myers Squibb (NYSE: BMY), Kraft Heinz (NASDAQ: KHC), and Enbridge (NYSE: ENB). By investing $20,000 into each of these stocks, you can potentially earn more than $3,000 in annual dividends.

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1. Bristol Myers Squibb

Healthcare giant Bristol Myers Squibb pays a dividend that yields 4.3% -- far higher than the S&P 500 average of just 1.2%. If you invest $20,000 into the stock, that will generate approximately $860 in dividends over the course of a full year.

Investors have been concerned about the company's many patent cliffs involving its top drugs. But the stock trades at a heavily discounted 8 times its estimated future earnings, and the company has recently been accumulating approvals for new drugs (such as Cobenfy and Breyanzi) and bolstering its long-term growth prospects. So it may be an overblown situation at this point, making Bristol Myers Squibb a potentially undervalued dividend stock to buy and hold. Many drugs in the company's "growth portfolio" have generated growth in excess of 30% through the first nine months of the year.

Bristol Myers Squibb has generated free cash flow of more than $13.8 billion over the trailing 12 months, which is more than enough to cover its cash dividend payments totaling $4.8 billion during that time frame. Over the long haul, this is a dividend stock I'd feel comfortable holding on to, given the company's track record for continuous innovation and drug development.

2. Kraft Heinz

Another underrated dividend stock to hold today is Kraft Heinz. Strong brands and fairly stable earnings make this an ideal dividend investment to buy and hold. At 5.1%, its yield is higher than Bristol Myers Squibb's, and it can generate even more income for you -- $1,020 based on a $20,000 investment.

While Kraft Heinz has encountered some choppiness in its earnings of late due to nonrecurring impairment charges, its overall cash flow looks solid. The company pays around $480 million in cash dividends per quarter and normally generates more than that in free cash flow, which suggests that the payout is in no danger. In the trailing 12 months, Kraft Heinz's free cash flow has totaled $3 billion, versus $1.9 billion in cash dividends paid.

Kraft Heinz isn't much of a growth stock these days, but it has been stable. It has generated at least $26 billion in revenue in each of the past four years, and its operating income has been north of $5 billion in three of those years. If your priority is a good dividend stock, Kraft Heinz should be a top option to consider.

3. Enbridge

The highest-yielding dividend on this list belongs to Enbridge, whose payout tops 6.2%. Investing $20,000 in the stock would put you on a path to collecting roughly $1,240 per year in dividends. When adding that to the other stocks listed here, your total annual dividend income from these three investments would total approximately $3,140. Enbridge has also been increasing its dividend payment for 29 straight years, making it probable that your recurring income will also rise over the long haul.

The Canada-based pipeline company recently completed acquisitions of multiple U.S. natural gas utilities, which will bolster its long-term growth prospects. Management says these utilities "are a perfect fit within Enbridge's existing low-risk business model, offer reliable cash flow, and come with embedded quick-cycle growth opportunities."

Enbridge is a good, stable stock to own. It says it should finish at the high end of the guidance it provided for the year for earnings before interest, taxes, depreciation, and amortization (EBITDA), and its distributable cash flow numbers (which it uses to evaluate its dividend) are in line with last year's performance. This is one of the safer oil and gas stocks to buy and hold.

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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 Enbridge. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.

Want Over $3,000 in Annual Dividends? Invest $20,000 in Each of These 3 Stocks was originally published by The Motley Fool

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