Would you like to improve your passive income stream but don't have a lot of extra cash to throw around? If so, I have great news: These days, $100 is all it takes to acquire a share of three top dividend-paying stocks.
Pfizer (NYSE: PFE), Hercules Capital (NYSE: HTGC), and Verizon Communications (NYSE: VZ) offer an average yield of about 7.6% at recent prices. They might not have the fastest-growing payouts you've ever seen, but they are reliable. Plus, the yields they offer are so high that they don't need to rise quickly to produce market-beating gains.
1. Pfizer
With products that many of us can't live without, pharmaceutical companies tend to pay dividends that are relatively reliable. Pfizer has raised its payout every year since 2009, but a market concerned about slowing sales is pressuring its stock price lower. At recent prices, the pharma company offers a 5.9% dividend yield.
Sales of its COVID products have collapsed a lot faster than expected, but the company isn't a one-trick pony. If we exclude those sales, second-quarter revenue rose 14% year over year.
Before sales of coronavirus products dried up, Pfizer reinvested heaps of the profits into its next generation of growth drivers. For example, it acquired a cancer therapy developer called Seagen in late 2023.
One of the therapies Pfizer acquired from Seagen, Padcev, was approved last December by the Food and Drug Administration to treat patients newly diagnosed with advanced-stage bladder cancer. With Padcev leading the charge, second-quarter sales of Seagen products soared 55% year over year to an annualized $3.4 billion.
With a lot more than just Seagen products to push earnings higher, investors can be relatively confident about steady dividend growth from this stock over the long run.
2. Hercules Capital
Hercules Capital is a business development company that makes heaps of minor investments in a variety of technology and life sciences businesses. It's structured as a business development company (BDC), which means it can legally avoid income taxes by returning at least 90% of profits to investors as dividends.
Since getting started in 2003, this financier has plowed more than $20 billion into over 650 companies. Many of the equity stakes Hercules Capital owns end up worthless, but more than enough succeed to make up the difference. The BDC has been raising its quarterly dividend since 2009.
At recent prices, the quarterly dividend offers an 8.7% yield, but there's more. With equity positions in heaps of technology and life sciences businesses, Hercules' cash flows are as volatile as unpredictable tech stock prices. To smooth things out, it offers a supplemental dividend. If the current supplemental dividend remains unchanged, investors who buy this stock at recent prices will receive a 10.3% yield.
At the end of June, Hercules Capital's portfolio was worth $3.6 billion, or about 66% more than it was five years earlier. With a portfolio that keeps getting larger and more diverse, a dividend payout that keeps rising for another 15 years isn't an unreasonable expectation.
3. Verizon
Verizon operates the largest of three 5G networks in the U.S. market. Shares of the telecom offer a 6.5% yield at recent prices and probably a lot more by the time you retire. Last September, it raised its payout for the 17th consecutive year.
Fewer people are in a hurry to upgrade their smartphones these days. Declining equipment sales limited total second-quarter revenue growth to 0.6% year over year.
Verizon is offsetting the effect of longer smartphone upgrade cycles with quickly growing broadband subscriptions. The company added 391,000 new broadband subscribers in the second quarter.
Now that its 5G network is mostly complete, capital spending in the first half of 2024 fell by $2 billion year over year. This allowed trailing 12-month free cash flow to rise by 6.3% year over year and reach $8.5 billion in the first half of 2024.
Over the past year, Verizon covered its dividend commitment with a little less than 80% of the free cash flow its operations generated. With steadily rising cash flows driven by mobile and broadband internet subscriptions, investors can look forward to rising dividend payouts from this company for at least another decade.
Should you invest $1,000 in Pfizer right now?
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
3 Reliable Dividend Stocks With Yields Above 5% That You Can Buy With $100 Now was originally published by The Motley Fool