Healthy dividend stocks have the potential to:

  • Offer a plump income stream in both good times and bad times.
  • Provide much-needed diversification to growth-oriented portfolios.
  • Outperform the S&P 500 over the long haul.

Here’s a look at three stocks with oversized dividends. Remember, you don’t have to start big. These days, you can build a passive income portfolio just by using your spare change.

JPMorgan Chase (JPM)

Let’s start with a bank stock.

With inflation running hot, people are concerned about interest rate hikes from the Fed. But as it turns out, banks typically do well in a rising interest rate environment.

Banks lend money at higher rates than they borrow, pocketing the difference. When interest rates increase, the spread for how much a bank earns widens.

JPMorgan Chase is the largest U.S. bank, with a whopping $3.7 trillion in assets. The stock had a strong rally in early 2021 but later gave up some of the gains. Year to date, it’s down around 14%.

The latest financials didn’t cheer up investors. In Q4 of 2021, JPMorgan produced $3.33 per share in earnings, down from the $3.79 per share earned in the year-ago period.

Dividend checks, on the other hand, remain plentiful. In June of 2021, the bank announced an 11% increase to its quarterly dividend rate to $1 per share.

It currently yields 2.9%, which is higher than what’s offered at Goldman Sachs (2.4%), Bank of America (2%) and Wells Fargo (2%), but below Morgan Stanley (3%).

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Walgreens Boots Alliance (WBA)

Despite being one of the essential service providers, Walgreens hasn’t been a market darling. The company’s shares have tumbled more than 40% in the last five years.

Dividends, however, have only increased. In July of 2021, Walgreens boosted its quarterly payout by 2.1% to about 48 cents per share, marking its 48th consecutive annual dividend increase.

Looking further back, you’ll see that the retail pharmacy giant has paid uninterrupted dividends for more than 88 years.

The company has a growing business to back its rising dividends. In the three months ended Nov. 30, 2021, sales from continuing operations rose 7.8% year over year to $33.9 billion. Meanwhile, adjusted earnings per share grew 53.2% to $1.68.

Today, Walgreens yields 4%, a generous amount compared to competitors like CVS Health (2.1%) and Walmart (1.6%).

Annaly Capital Management (NLY)

For the real yield hunters, Annaly Capital Management deserves a look.

The company is not nearly as well known as the stocks mentioned above, but it offers a staggering annual yield of 12.4%.

Structured as a real estate investment trust, Annaly is a diversified capital manager. The REIT invests in agency mortgage-backed securities, residential real estate, and middle-market lending.

Shares tumbled more than 50% during the pandemic-induced market crash in early 2020. Since then, Annaly has made a strong recovery. While the stock is not quite back to where it was before COVID, the sheer size of its dividend payments make it stand out.

The REIT reported earnings last month. For Q4, earnings available for distribution came in at 28 cents per share, which covered its dividend 1.3 times.

In the earnings conference call, Chief Financial Officer Serena Wolfe said, “we expect earnings to sufficiently cover the dividend for the near term, all things equal.”

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About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

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