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One thing that gets a lot of attention from investors (and rightly so) is a stock’s dividend payout ratio. This shows how much of a company’s profits are paid out as dividends. Generally, the higher this ratio, the more unsustainable the dividend.
However, this is not always the case. Companies may be moving on from one bad financial report. Alternatively, a number of non-cash items may weigh on earnings in a given quarter, causing the payout ratio to be unusually high. Still, payout ratio is a good metric to keep an eye on when evaluating dividend stocks.
3 stocks with higher yields S&P500 The average dividend payout ratio is 1.4%, but the payout ratio is still low. CVS Health (NYSE:CVS), JP Morgan Chase (NYSE:JPM)and exxon mobil (NYSE:XOM). Let’s take a closer look at these dividend stocks and why they’re good additions to your portfolio.
1. CVS Health
Healthcare company CVS Health pays a dividend with a yield of 3.5%. NNot only is CVS a high-yield stock, it’s also a fairly safe income investment to include in your portfolio. His payout ratio is less than 40%, so investors don’t have to worry about CVS the same way they do about its rivals. walgreens boots alliancecut its dividend earlier this year. CVS has a broader business that extends beyond just pharmacy retail and into health insurance through Aetna, which could provide investors with much greater stability and diversification over the long term.
For the final three months of 2023, CVS reported revenue of $93.8 billion, an increase of 11.9% compared to the same period last year. The company’s adjusted earnings per share for the quarter totaled $2.12, compared to adjusted earnings of $2.04 in the year-ago period.
Rising costs in the health care industry are making investors wary of stocks like CVS Health. However, with CVS Health stock trading at just 9 times forward earnings and a price-to-earnings ratio (PEG) of just over 1, CVS Health stock is a bargain for investors looking to buy and hold. There is a possibility that .
2.JP Morgan Chase
JPMorgan Chase & Co., a major bank, is facing headwinds due to tough economic conditions. Mergers and acquisitions have slowed significantly, leaving people with less money to spend and invest, resulting in a more bearish outlook for the future. JPMorgan reported net income of $9.3 billion for the final quarter of 2023, down 15% from a year earlier as it increased its allowance for credit losses in anticipation of a possible recession in the near future.
But even with profits down, what’s encouraging is that the stock’s payout ratio remains fairly low at just 25% of profits. This leaves plenty of room for the dividend to remain safe (and continue to grow) even if JPMorgan’s financial situation deteriorates, providing investors with a good cushion in the event of economic distress. will be given.
JP Morgan stock has a yield of 2.3%, making it a relatively safe long-term investment. Trading at less than 2 times book value and a P/E ratio of less than 11 times, this stock isn’t an expensive buy either.
3. ExxonMobil
ExxonMobil, a major oil and gas producer, has benefited from rising oil prices in recent years. And although commodity prices have come down a bit recently, the industry is still in better shape than it has been in years past. ExxonMobil and other oil and gas companies are working to improve efficiency and cut costs to better position themselves to deal with falling oil prices. And with oil prices above $75 per barrel, conditions for the industry still look positive.
The proof is in the company’s latest financial report. ExxonMobil’s net income for the final three months of 2023 totaled $7.6 billion, down more than 40% (the company recorded a $2 billion impairment charge related to a “regulatory hurdle” in California). . But that’s no cause for concern considering how well the company was doing a year ago. ExxonMobil’s earnings per share for the quarter totaled $1.91. If the company averages this over his four quarters, the payout ratio will be just around 50%. The current dividend payout ratio is 41%, but ultimately it depends largely on oil prices. The yield is 3.7%, the highest on this list.
ExxonMobil has successfully increased its dividend during countless business cycles and economic events for decades. For investors, this stock could be one of the most resilient and safest dividend investments to buy and hold for the long term. It also trades at a forward price/earnings ratio of 11 times, making it a pretty cheap stock to own.
Should you invest $1,000 in CVS Health right now?
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JPMorgan Chase is an advertising partner of The Motley Fool’s Ascent. David Jagielski has no position in any stocks mentioned. The Motley Fool has a position in and recommends JPMorgan Chase. The Motley Fool recommends his CVS Health. The Motley Fool has a disclosure policy.
3 High Dividend Stocks with Payout Ratios Under 50% was originally published by The Motley Fool.
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