Income-seeking investors love dividend stocks, many of which have attractive yields when compared to bond yields. They might like them even more when they realize how payouts over time have beefed up their portfolios.
The data below shows examples of companies with dividend yields that may have seemed modest five years ago, but now provide high levels of income to investors who’ve remained faithful for five years.
The Best Buy example
To illustrate this, imagine you purchased shares of Best Buy Co.
five years ago and you decided not to reinvest your dividends. You paid $33.48 a share for Best Buy on April 27, 2016. At that time, the company was paying a quarterly dividend of 23 cents a share for a yield of 2.75%.
Fast-forward to April 27, 2021, and shares of Best Buy closed at $118.35 for a five-year gain of 253%. And that’s a gain, not a total return, because in this example you haven’t reinvested dividends. Meanwhile, the quarterly dividend had increased to 70 cents a share, making for a yield of 2.37%, based on the most recent closing price.
But your dividend yield, based on what you paid for your shares in 2016, would be a fat 8.36%.
And this sort of performance might be more common than you realize.
Highest dividend yields on shares bought five years ago
If we begin with the S&P 500
and eliminate any company that doesn’t pay a dividend now, didn’t pay one five years ago or wasn’t part of the index five years ago, we are left with 356 companies. If we limit the list to companies whose share prices (adjusted for splits) have at least doubled over the past five years, we are down to 139.
Among those remaining 139 companies, here are the 20 with the highest current dividend payouts relative to the prices you would have paid if you had purchased them five years ago.
So that is the second-right-most column on the table, “Dividend yield on shares held for five years.” There is a lot of data here, so you will have to scroll the table to see it all:
Note: Gains are not total returns, because the table assumes dividends weren’t reinvested.
Notable examples include Lam Research Corp.
which makes equipment used in semiconductor manufacturing. The stock has risen nearly eightfold over the past five years. And if you had held the stock for five years, the current dividend would make for a yield of 6.42% based on what you had paid for them back in April 2016. That’s a fine example of growth and income.
Another technology company has an unusual set of data for this group. Seagate Technology PLC
had a very high dividend yield of 9.22% five years ago — the stock was clobbered during 2015. But if you had bought the stock on April 27, 2016, your five-year gain would be 245% and the dividend yield based on what you paid for the shares would be 9.80%.
Shares of Texas Instruments Inc.
have risen 217% over five years. If you had bought the shares at the start of that run, your dividend yield based on the current payout and the price you paid for the stock would be 6.81%.
Also of note are bank stocks, which many investors find boring:
If you had bought shares of Morgan Stanley
five years ago, your stock would have nearly tripled, and your dividend yield, based on what you paid for the shares, would be 5.09%.
For JPMorgan Chase & Co.
your gain would be 170% and your dividend yield, based on what you paid for the stock five years ago, would be 5.62%.
Shares of Regions Financial Corp.
have risen 121% over the past five years. If you had bought them five years ago, your dividend yield based on the price you paid for the shares would be 6.47%.
For Fifth Third Bancorp
your five-year gain would be 110% and the dividend yield based on what you paid for the stock would be 5.77%.
Finally, shares of PNC Financial Services Group Inc.
are up 106% for five years. If you held the stock that long, your dividend yield based on the price you paid would be 5.17%.