What are Dividend Stocks? Meaning and List

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Dividend stocks meaning

Dividend stocks are shares that pay stockholders a return on their investment (ROI). This return on investment is mostly in form of cash dividends although some companies may pay in stocks and other forms as well. These dividends are usually paid quarterly or annually. Due to this regular dividend payment, they are also known as income stocks since they serve as an income source for the stockholders.

Even though dividend stocks can be issued by businesses in any industry, they are most often issued by companies in the following sectors.

1. Real estate.
2. Utilities.
3. Energy.
4. Telecommunications.
5. Consumer staples.
6. Finance.
7. Information technology.
8. Healthcare.

Investors seeking to purchase dividend stocks can do so through a stockbroker either online or offline or by investing in a mutual fund or an exchange-traded fund (ETF) or a real estate investment trust (REIT).

Dividend stocks list

1. Coca-Cola Co
2. IBM
3. Great Ajax Corp
4. Mesabi Trust
5. Apple Inc
6. Microsoft Corporation
7. Dell Technologies Inc
8. Harley-Davidson Inc
9. Marriott International Inc
10. Papa John’s Int’l, Inc.
11. Paramount Global
12. Alliancebernstein Holding LP
13. Western Asset Mortgage Capital Corp
14. Ready Capital Corp
15. NEWTEK Business Services Corp
16. Camping World Holdings Inc
17. Annaly Capital Management, Inc
18. FS KKR Capital Corp
19. Southern Copper Corp
20. Altria Group Inc
21. Triton International Ltd
22. Universal Corp
23. AT&T Inc.
24. Verizon Communications Inc.
25. Duke Energy Corp
26. Consolidated Edison, Inc
27. Kimco Realty Corp
28. Kinder Morgan Inc
29. Exxon Mobil Corp
30. Wendys Co

Above is a list of some company stocks that pay dividends. In the table below, we give a closer look at these companies, their share price as well as their dividend yield as listed on the New York Stock Exchange (NYSE) or National Association of Securities Dealers Automated Quotations (NASDAQ)

List of some companies that do not pay dividends

1. Netflix
2. Amazon.com, Inc.
3. Generac Holdings Inc.
4. Tesla Inc
5. Macy’s Inc
6. General Motors Company
7. Nio Inc – ADR
8. Plug Power Inc
9. Block Inc
10. Tilray Inc
11. US Foods Holding Corp
12. Wynn Resorts, Limited
13. Zillow Group Inc
14. Alphabet
15. Meta Platforms Inc
16. Biogen Inc
17. Boeing Co
18. Airbus SE
19. JD.Com Inc
20. Edwards Lifesciences Corp

Listed above are some companies whose stocks do not pay dividends to the stockholders as of July 27^th, 2022.

Characteristics of dividend stocks

1. Low volatility
2. Low risk
3. Regular dividends

As stated earlier, dividend stocks are stocks that pay dividends to the stockholder. Here, we shall look at the two main features of these stocks.

Low volatility

Dividend stocks, unlike penny stocks, have low volatility, which means that upward or downward changes in the price of these stocks are not so abrupt.

Low risk

Due to their low volatility and because these stocks are mostly issued by already established companies, they generally entail less risk compared to other securities.

Regular dividends

The payment of regular dividends is the most prominent feature of this type of stock. Dividends are issued mostly quarterly or yearly.

Types of dividends

1. Interim
2. Special or extra
3. Qualified
4. Cash
5. Stock
6. Liquidating
7. Scrip
8. Stock repurchase
9. Property

Although the return on investment (ROI) on dividend stocks is usually paid as cash, there are several other ways in which they are paid. We shall discuss them below.

Interim dividend

This dividend is usually disbursed quarterly or semi-annually. It is usually paid before the issuing companies’ annual profits have been calculated and before its annual general meeting, hence it often comes from the previous year’s profits. The interim dividend is mostly lesser than the final dividend and is paid in years when the issuing companies have done exceptionally well and garnered excess profits.

Special or extra dividend

As the name implies this type of dividend is not a regular dividend hence it is special or extra because it does not have any effect on the regular dividend that the shareholder is entitled to. The issuing company pays this kind of dividend as a one-off event; usually attached to a specific event such as the sale of assets, large cash inflow, or some other high earnings. The special dividend is usually higher than the regular dividend shareholders receive.

Qualified dividend

This type of dividend is usually from stocks in specific foreign or domestic companies that the stockholder has held for at least sixty to ninety days. Additionally, the qualified dividend is usually taxed between 0% to 23.8% depending on the investor’s adjusted gross income (AGI), taxable income, and net investment income tax (NIIT).

Cash dividend

This is the most common way by which companies pay stockholders. The cash dividend is paid as checks or electronic transfers to the stockholder. The payment is usually quarterly, semi-annually, or annually although there are few instances where the payment is made monthly.

Stock dividend

The stock dividend is generally disbursed when the issuing company does not have liquid cash with which to pay dividends to its stockholders. New stocks are therefore issued as dividends to existing shareholders based on either the cash equivalent they were supposed to be paid or as a percentage of the number of stocks they currently own.

Liquidating dividend

Liquidating dividend is paid when a company decides to seize operations; mostly because they are not generating adequate profits or is unable to cover operational costs or the owners no longer want to operate the business. The dividend is usually paid after all other creditors and lenders have been paid. It is also known as terminal distribution or liquidating distribution.

Scrip dividend

Scrip dividend is a dividend option whereby the issuing company gives the stockholders the option of either receiving their dividends in cash at a future date or in new stocks that have been issued by the same company. Companies mostly offer this type of dividend when there is not enough cash to pay all their stockholders or when they want to increase the company’s outstanding shares. The scrip dividend is also known as a liability dividend or bonus issue or capitalization issue.

Stock repurchase dividend

With the stock repurchase dividend, the issuing company offers to buy back some stocks from the stockholders. The stocks that the company buys back are known as treasury stocks. Usually, the company offers a higher price than the current market price; this serves as an incentive for the stockholders to sell as they get a definite return on their investment.

Property dividend

A property dividend is a physical asset that the issuing company pays its stockholders instead of a cash dividend or stock dividend. The physical asset will usually have a value equal to that of the cash or stock dividend that would have been paid.

The dividend aristocratic companies pay distributions that are above the median payout for its peers.

Characteristics of dividend aristocrats

Some of the factors that could make a company a dividend aristocrat include:

• strong cash flow
• high dividends
• low levels of debt
• stable share prices
• the company should have increased its dividends over the past five years.

However, dividend aristocrat definition excludes companies that have raised their dividends in response to stock price fluctuations. The goal of a dividend aristocrat is to maintain shareholder wealth by increasing payout ratios while also growing earnings. Dividend aristocrats are a valuable resource for investors because they tend to be more stable and tend to pay higher dividends than other companies.

What to look for in dividend stocks

If you’re looking to invest in dividend stocks, there are a few things you’ll want to keep in mind.

1. It’s important to find companies that have a consistent payout policy.
2. Make sure the company is profitable and has enough cash flow to cover its dividend payments. A company that has a strong balance sheet will be able to weather any financial storm without affecting its ability to pay dividends.
3. Review the company’s history of dividend growth to see if it’s likely to continue paying out increases in the future. That is, make sure the company has a history of growing its dividends in line with inflation.
4. Look for companies with strong management characteristics. A good management team is likely to be able to manage cash well and maintain healthy balance sheets.
5. Finally, be sure to compare dividend yields before investing in a stock – different companies pay different rates of dividends.

Frequently asked questions

Conclusion

Dividend stocks are a source of stable income for the stockholder and can be used by them to either reinvest or take care of their living expenses. Since these stocks are generally low risk and have low volatility, their holders tend to enjoy long-term gains from them through the various dividend payments they could get from them. These payments could be quarterly, semi-annually, or yearly.