In this article, we take a look at 15 most profitable dividend stocks. If you want to see more most profitable dividend stocks, go directly to 5 Most Profitable Dividend Stocks.
Dividend stocks are stocks of companies that pay dividends.
Many dividend stocks pay a dividend quarterly as a way to return excess capital back to shareholders. Companies can also use stock repurchases as another way to return excess capital back to shareholders. For those you interested check out 15 Companies That Are Buying Back Their Stock.
When company profits rise, many companies tend to pay slightly higher dividends. When company profits decrease, many companies also decrease or even suspend their dividends.
Considering the change in tax laws for stock repurchases beginning in 2023 given the Inflation Reduction Act of 2022, dividends could be slightly more attractive. As a result, some companies might be more inclined to return slightly more capital back to shareholders through dividends than stock repurchases.
Jones Day describes the effect of the Inflation Reduction Act of 2022, “U.S. (and in certain instances, non-U.S.) corporations, whose stock is traded on an established securities market, that undertake share repurchases of more than $1 million in the aggregate per tax year, will be subject to a 1% share excise tax on the value of any share repurchase unless such share repurchase is taxed as a dividend (other exceptions and exclusions may apply).”
While the Inflation Reduction Act of 2022 could affect dividend payments slightly, the largest determination of how much capital companies return through dividends will still likely be how much the companies make in profits in the near term and how much excess capital management of companies think they have.
If there is a possibility of an economic slowdown or even a recession in the future, many companies may not raise their dividends even if their profits increase. If the economic slowdown or recession occurs, many companies will likely cut or even suspend their dividends.
In terms of the possibility of an economic slowdown or a recession, the probability will depend on economic developments and how much further the Federal Reserve raises interest rates.
Although inflation has cooled from their 2022 highs late last year, the Federal Reserve has indicated that it will raise rates further. If the U.S. central bank raises interest rates too much, there is potential for an economic slowdown or even a recession. If that happens, demand will soften for a lot of companies and company profits could decline.
Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of leading stocks across many different sectors.
Methodology
For our list of 15 Most Profitable Dividend Stocks, we used the Fortune 500 list to find the most profitable American companies and we then filtered the list to find the stocks that paid dividends and that were profitable according to YCharts in terms of net income for the trailing twelve months.
Because we used YCharts data, the net income may not be the same as adjusted profit.
For some stocks, the trailing twelve months isn’t the same time period as it for others given some stocks have not reported their fourth quarter earnings results yet.
15 Most Profitable Dividend Stocks
15. Intel Corporation (NASDAQ:INTC)
Net Income (TTM) as of December 31, 2022: $8.014 billion
Dividend Yield as of 2/14: 5.10%
Intel Corporation (NASDAQ:INTC) is a leading semiconductor company with a dividend yield of 5.1% as of 2/14. While Intel Corporation (NASDAQ:INTC)’s previous dominance of semiconductors for the PC market in the past had made it a great dividend stock, the company has faced increasing competition of late. As a result, Intel Corporation (NASDAQ:INTC) has lost market share for semiconductors to competitors and for full year 2022, the company’s sales fell 20% year over year on a GAAP basis. On an adjusted basis the company’s sales declined 16% year over year and full year adjusted EPS was $1.84. For the future, Intel Corporation (NASDAQ:INTC) plans to invest tens of billions into R&D and capital projects to try and regain its competitiveness.
14. Goldman Sachs Group, Inc. (NYSE:GS)
Net Income (TTM) as of December 31, 2022: $11.26 billion
Dividend Yield as of 2/14: 2.69%
Goldman Sachs Group, Inc. (NYSE:GS) is the preeminent Wall Street investment bank in terms of prestige and the bank ranks #14 on our list of 15 Most Profitable Dividend Stocks given its net income of $11.26 billion in 2022. For full year 2022, Goldman Sachs Group, Inc. (NYSE:GS)’s net sales were 20% lower than a strong 2021, given lower net sales in the company’s Asset & Wealth Management business and lower net revenues in the Global Banking & Markets business. For full year 2022, Goldman Sachs Group, Inc. (NYSE:GS) returned $6.37 billion of capital to common shareholders including $3.2 billion in common stock dividends and $3.5 billion in common share repurchases.
13. Wells Fargo & Company (NYSE:WFC)
Net Income (TTM) as of December 31, 2022: $13.18 billion
Dividend Yield as of 2/14: 2.47%
Wells Fargo & Company (NYSE:WFC) is one of the big four American banks with substantial scale. In Q4, the company reported earnings of $0.67 per share versus $1.38 for Q4 2021 as higher interest rates were a headwind for the bank’s mortgage business. Nevertheless, Wells Fargo & Company (NYSE:WFC) CEO Charlie Scharf said, “Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we are making to improve returns. Rising interest rates drove strong net interest income growth, credit losses have continued to increase slowly but credit quality remained strong, and we continue to make progress on our efficiency initiatives.” As of 2/14, Wells Fargo & Company (NYSE:WFC) had a dividend yield of 2.47%.
12. Citigroup Inc. (NYSE:C)
Net Income (TTM) as of December 31, 2022: $14.84 billion
Dividend Yield as of 2/14: 3.95%
Citigroup Inc. (NYSE:C) is one of the big four American banks with net income of $14.8 billion and revenue of $75.3 billion for 2022. For the year, Citigroup Inc. (NYSE:C) returned around $7.3 billion in capital to shareholders in the form of common dividends and share repurchases and the bank’s markets revenue rose 7% year over year, driven by fixed income growth of 13% year over year.
11. The Home Depot, Inc. (NYSE:HD)
Net Income (TTM) as of October 31, 2022: $17.10 billion
Dividend Yield as of 2/14: 2.39%
Leading home improvement retailer The Home Depot, Inc. (NYSE:HD) ranks among the most profitable companies in the United States with net income of $17.10 billion for the trailing twelve months as of October 31, 2022 according to YCharts. Despite the higher interest rates which have been a headwind for the housing market, The Home Depot, Inc. (NYSE:HD) comparable sales for Q3 fiscal 2022 rose 4.3% and comparable sales in the United States increased 4.5%. Given strong growth, The Home Depot, Inc. (NYSE:HD) has increased its annual dividend for 13 consecutive years with shares currently yielding around 2.39%.
10. Johnson & Johnson (NYSE:JNJ)
Net Income (TTM) as of December 31, 2022: $17.94 billion
Dividend Yield as of 2/14: 2.79%
Johnson & Johnson (NYSE:JNJ) is a healthcare conglomerate with a net income of $17.94 billion in 2022 and a dividend yield of 2.79% as of February 14. Despite the higher inflation, Johnson & Johnson (NYSE:JNJ) had adjusted EPS of $10.15 in 2022, up from $9.80 per share in 2021. In terms of the future, analysts expect Johnson & Johnson (NYSE:JNJ) to earn $10.51 per share in 2023, $10.89 per share in 2024, and $11.28 per share in 2025.
9. UnitedHealth Group Inc. (NYSE:UNH)
Net Income (TTM) as of December 31, 2022: $20.12 billion
Dividend Yield as of 2/14: 1.34%
UnitedHealth Group Inc. (NYSE:UNH) is a healthcare insurance giant whose sales rose 13% year over year to $324.2 billion in 2022 with double digit growth at both Optum and United Healthcare. UnitedHealth Group Inc. (NYSE:UNH) also had net income of $20.12 billion and full year adjusted net earnings of $22.19 per share. As of 2/14, UnitedHealth Group Inc. (NYSE:UNH) has a dividend yield of 1.34% and a forward P/E ratio of 17.43.
8. Verizon Communications Inc. (NYSE:VZ)
Net Income (TTM) as of December 31, 2022: $21.26 billion
Dividend Yield as of 2/14: 6.47%
Verizon Communications Inc. (NYSE:VZ) is one of the largest telecommunication companies in the United States with a dividend yield of 6.47% as of February 14. Verizon Communications Inc. (NYSE:VZ) has raised its annual dividend for 18 straight years and and analysts expect the company to earn $4.73 per share in 2023, $4.77 per share in 2024, and $4.85 per share in 2025. Verizon Communications Inc. (NYSE:VZ) currently pays an annual dividend per share of $2.61 per share.
7. Bank of America Corporation (NYSE:BAC)
Net Income (TTM) as of December 31, 2022: $27.53 billion
Dividend Yield as of 2/14: 2.47%
Bank of America Corporation (NYSE:BAC) ranks #7 on our list of 15 Most Profitable Dividend Stocks given its net income of $27.53 billion in 2022. As one of the big four American banks, Bank of America Corporation (NYSE:BAC) has substantial scale that provides it with a competitive advantage.
Ariel Investment commented on Bank of America Corporation (NYSE:BAC) in a Q3 2022 investor letter,
We initiated three new positions in the quarter. We added leading financial institution Bank of America Corporation (NYSE:BAC) which serves individual consumers, small and middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other financial and risk management products and services. The current company was formed through various mergers including NationsBank, FleetBoston, US Trust, Countrywide Financial, and Merrill Lynch with the legacy commercial bank to form a national banking powerhouse and bulge bracket investment firm. As one of the ‘Big Four’ U.S. banks it enjoys scale driven cost advantages and economies of scale which provide meaningful competitive advantages and potential for strong returns in the largely commoditized banking industry. A survivor of the financial crisis, BAC has emerged with a solid capital base and stands to benefit from a rising interest rate environment.
6. Pfizer Inc. (NYSE:PFE)
Net Income (TTM) as of December 31, 2022: $31.37 billion
Dividend Yield as of 2/14: 3.75%
Pfizer Inc. (NYSE:PFE) is a pharmaceutical giant with a net income of $31.37 billion in 2022 and a dividend yield of 3.75%. Given its strong business, Pfizer Inc. (NYSE:PFE) has raised its annual dividend for 12 straight years. For 2023, Pfizer Inc. (NYSE:PFE) sees adjusted diluted EPS of $3.25 to $3.45 which more than covers the annual dividend of $1.64 per share.
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Disclosure: None. 15 Most Profitable Dividend Stocks is originally published on Insider Monkey.
