When it comes to investing, whether you’re looking to outperform the market or generate a steady income, dividend-paying stocks should be a key part of your portfolio. While it’s common knowledge that dividend stocks provide regular payouts, there are additional benefits to investing in companies that prioritize distributing profits to shareholders.
According to data from Hartford Funds and Ned Davis Research, over a 50-year period ending in 2023, dividend-paying stocks in the S&P 500 index outperformed non-dividend-paying stocks by a significant margin. On average, dividend payers in the index delivered a 9.17% annual return, compared to just 4.27% for non-dividend payers.
If you’re nearing retirement or looking to boost your passive income, companies like Pfizer (NYSE: PFE) and Ares Capital (NASDAQ: ARCC) offer attractive opportunities. Both companies provide ultra-high dividend yields that are well above the average yield of S&P 500 stocks, making them appealing options for income-seeking investors.
1. Pfizer:
Pfizer, a pharmaceutical giant, currently offers a substantial 5.5% dividend yield and has a track record of increasing its dividend annually for the past 15 years. With a pipeline of recently approved drugs and a strong global sales force, Pfizer is positioned to continue growing its dividend payouts in the future. The company’s revenue growth, excluding COVID-related sales, has been promising, with products like Padcev showing significant potential for future growth. Investors can expect steady dividend raises in the coming years as Pfizer continues to introduce new drugs to the market.
2. Ares Capital Corporation:
Ares Capital is a business development company (BDC) that appeals to income-seeking investors due to its high dividend yield and tax-advantaged structure. The company’s dividend payout has increased by 14.3% over the past five years and currently offers a 9.2% yield. With a focus on providing financing to mid-sized businesses, Ares Capital benefits from high-interest rates and a diverse portfolio of senior secured loans. The company’s expert underwriting practices have resulted in a low percentage of non-accrual loans, indicating a solid track record of credit quality. Adding shares of Ares Capital to a diversified portfolio can provide investors with a reliable income stream and potential for long-term growth.
In conclusion, investing in ultra-high-yield dividend stocks like Pfizer and Ares Capital can be a strategic move for investors looking to build wealth and generate passive income. With a focus on companies with strong track records of dividend growth and sustainable business models, investors can take advantage of the benefits of dividend investing while positioning themselves for long-term financial success.