Investing in high-yield stocks with solid dividend payouts and a history of dividend growth can help investors collect regular passive income for decades. These companies typically have relatively resilient business models, consistent earnings growth, and a commitment to rewarding shareholders with regular and growing dividend payments.
In this context, Pfizer (PFE), Ares Capital Corporation (ARCC), and BCE (BCE) emerge as top choices. Each of these companies boasts a solid track record of paying and raising dividends, with yields exceeding 5%. They not only provide reliable income, but also have the potential to increase their dividend payouts further.
Let’s dive deeper to see why these high-yield stocks are compelling investments for those seeking growing dividend income.
#1. Pfizer (PFE)
Investors can rely on the shares of Pfizer (PFE), a leading biopharmaceutical company, for steady income. The company’s capital allocation strategy revolves around increasing its dividend, reinvesting in the business, and repurchasing shares after reducing debt.
In December 2023, Pfizer announced an increase in its quarterly cash dividend, marking the 15th consecutive year of dividend hikes.
Pfizer's dividend payouts are well-supported by a robust revenue base. The company has five products with sales exceeding $1 billion, demonstrating its strong market position. Moreover, the activist investor target has an impressive pipeline of 113 development projects, which will bolster its growth trajectory in the coming years.
The company has initiated a manufacturing optimization program aimed at reducing costs across its production network. The first phase of this program, which focuses on operational efficiencies, is expected to generate approximately $1.5 billion in savings by the end of 2027. These savings will help maintain healthy profit margins and support even higher dividend payouts.
In the first half of 2024, Pfizer paid $4.8 billion to shareholders via dividends. Moreover, it offers a high yield of over 5.7%.
Analysts have a “Moderate Buy” consensus rating on Pfizer stock. With its commitment to maintaining and growing dividends, alongside initiatives to streamline operational expenses and reduce costs, Pfizer is a compelling choice for those seeking a dependable income stock.
#2. Ares Capital Corporation (ARCC)
Ares Capital Corporation (ARCC) is a top player in the specialty finance space. It focuses on direct loans and strategic investments in private middle-market companies in the U.S. This market remains underserved, providing ARCC with great growth potential.
Further, its portfolio is highly diversified across multiple asset classes and industries. Also, the company consistently delivers solid credit and investment performance. These attributes help Ares to grow its earnings and support its dividend payouts.
Over the past 15 years, Ares Capital has maintained and increased its dividends, reflecting its focus on rewarding its shareholders. Further, it currently offers a high yield of over 9%, which makes it a top stock for collecting passive income.
Ares Capital’s focus on the underserved private middle market is a key growth driver. The demand for funding in this segment remains high due to the absence of large traditional lenders and regulatory constraints. This scarcity of funding sources opens up significant opportunities for ARCC to expand.
ARCC stock has a “Moderate Buy” consensus rating, and its high dividend yield and history of dividend growth make it a reliable choice for investors seeking steady income.
#3. BCE (BCE)
With its high yield of over 8% and solid dividend distribution and growth history, BCE (BCE) is an attractive stock for steady income.
BCE is Canada’s largest communications company. As the market leader in several key areas, including local phone services, broadband, and wireless operations, it has built a solid competitive position in the industry. This dominance gives BCE a reliable income stream, helping to support its generous dividend payouts.
BCE seeks to deliver shareholder returns through dividend growth. Earlier this year, the company increased its dividend by 3.1%, bringing the total annual payout to $3.99 per share. This marked the 16th consecutive year of dividend growth, which shows BCE’s strong financial health and commitment to rewarding shareholders.
It’s worth noting that BCE has been able to cut expenses while maintaining its market-leading position, allowing it to offset challenges from competitors and economic headwinds. These cost savings boost profitability, enabling BCE to generate the earnings required to sustain its high dividend payouts.
Moreover, the company has been evolving and expanding into tech services and digital media. BCE is tapping into fast-growing markets by offering cloud services, security solutions, and advertisement solutions.
Analysts have rated BCE as a “Moderate Buy.” The stock's high yield, strong dividend growth history, and focus on growing dividends make it an attractive option for generating passive income.
