Traders thrive on asset volatility, be it stocks or Bitcoin and altcoins. But what about people who want to avoid such daily anxiety and unpredictability? This is when the invest-and-forget approach comes in the form of dividend stocks.
But not just any dividend stocks. Investors must be confident that they can “forget” about them after investing. This translates to companies’ unique competitive advantages that are unlikely to be disrupted. At the same time, their dividend yields have to be high to outpace the inflation rate.
These three dividend stocks fit the bill for investors who value relatively safe passive income over the long haul.
1. Enbridge – 6.03% Dividend Yield
This pipeline infrastructure company headquartered in Canada has paid shareholders dividends for nearly 70 years. Over the last 29 years, Enbridge (NYSE:ENB) has grown its dividend at an average compound annual growth rate (CAGR) of 10%. This makes it a dividend aristocrat stock.
It is safe to say that Enbridge is a critical cog in modern civilization, as the company maintains a vast network of crude oil/natural gas pipelines across North America.
In turn, this business model yields predictable cash flows. So much so that in 2023, Enbridge acquired three US gas utilities to solidify its market position.
Enbridge projects sustained growth across the entire North American continent. Image Credit: Enbridge (November investor presentation).
Enbridge announced another 3% common share dividend increase in early December, from an annualized $3.66 to $3.77 per share, which goes into effect on March 1st, 2025. Likewise, the company projected $19.4 – $20 billion EBITDA guidance for 2025, compared to reaffirmed $18.3 billion for 2024.
On February 14th, Enbridge is scheduled to report its Q4 2024 earnings. In November’s Q3 report, the company announced the completion of all planned US utilities, such as PSNC, and acquired 15% interest in DBR gas system to bolster growth.
2. Verizon Communications – 7.07% Dividend Yield
Alongside the distribution of energy, another layer for modern civilization to function is telecommunication infrastructure. Verizon (NYSE:VZ) fulfills this role as an almost dividend aristocrat stock. The “almost” part should be removed within a year. Reminder: dividend aristocrat stocks have to increase their dividend payouts consecutively for 25 years.
Relative to competitors in the communications services sector, Verizon holds 11.53% market share, neck and neck with AT&T at 11.89%, while Comcast (NASDAQ:CMCSA) is trailing at 10.39%. In October 2024, Verizon made a big move in expansion by acquiring Frontier Communications worth $20 billion, at $38.50 per share in cash. This was to broaden Verizon’s fibre optic internet footprint, alongside wireless.
That month, Verizon released its latest Q3 2024 earnings showing relatively flat $33.3 billion revenue, while increasing wireless service revenue year-over-year.
Image credit: Verizon (Q3 2024)
Verizon ended the quarter with a $14.5 billion free cash flow, leaving the telecom giant with a 2.5x debt to adjusted EBITDA ratio. Moving forward, the company aims to cut costs, expand 5G Ultra Wideband and utilize AI technology to remove unnecessary expenditures.
Verizon’s annual dividend payout per share is $2.71. At present, VZ stock is priced at relatively cheap below the 52-week average of $41.17 per share. Verizon’s next earnings report is scheduled for January 24th.
3. Ares Capital Corporation – 8.35% Dividend Yield
Next to energy and telecommunications, what do businesses need to grow? Finance. This is where Ares Capital (NASDAQ:ARCC) comes in with direct lending to middle-market companies. Ares doesn’t issue new shares to raise lending capital, making it a closed-ended specialty finance firm.
Rather, Ares generates cash flows from paid interest and dividends from its own investments. In other words, exposure to Ares is equal to exposure to a broad spectrum of reputable companies across different sectors, from IT and health care to insurance, retail, media and energy infrastructure.
In November, Ares released its Q3 2024 earnings report, showing 13% annualized shareholder return. This significantly outperforms the S&P 500 index as well as the big players in the banking sector.
ARCC’s stock cumulative returns since inception in November 2004. Image credit: Ares Capital
As of September 2024, Ares holds $5.8 billion in available liquidity, which is 1.6x greater than its unfunded investment commitments. Against its BDC (Business Development Company) peers, Ares is the largest publicly traded one, having yielded on average 400 bps greater 5-year returns than the peer average.
Ares pays $1.29 annual dividend per share. At present, ARCC stock is priced at $23.18, which is slightly over the 52-week average of $20.97 per share. Ares announced its Q4 2024 report for February 5th.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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