The first quarter earnings season has reached a crescendo. Among the companies that have reported recently are a handful of dividend-paying companies that offer dividend yields above 4% at recent prices.
Some investors seek stable, predictable cash flows, while others insist on rapid dividend growth. Read on to see how these stocks have something to offer everyone.
CVS Health
Actions of CVS Health (NYSE:CVS) recently tanked about 16% after the company issued a downward revision to its guidance. At its recently beaten price, the stock offers a dividend yield of 4.7% and a very good chance of receiving much more in the future.
CVS Health’s dividend has exploded 142% over the past 10 years. and it is in a better position today to generate consistently growing profits than it was a decade ago. In addition to the retail pharmacy chain we all know, CVS Health has the largest pharmacy network in America. management of pharmaceutical services business. It also owns Aetna, a leading health insurance benefits management company.
CVS Health’s vertically integrated business means it can directly provide many benefits for which it is also compensated. In recent years, CVS Health has become more integrated by acquiring physician groups such as Signify Health and Oak Street Health.
Higher-than-expected medical utilization trends increased CVS Health’s outbound spending in the first quarter. The company also takes into account changes to the Medicare Advantage rating system, which will reduce incoming payments from the government.
CVS Health is a dip buy because the issues weighing on earnings this year are temporary. Fortunately, its relatively unique position at the intersection of primary care, pharmacy services, and benefits management provides an enduring advantage that will most likely allow it to continue growing its dividend at a rapid pace for another decade.
Ares Capital
Ares Capital (NASDAQ:ARCC) is the largest business development company (BDC) in the United States. These tax-efficient entities are popular among income-seeking investors because they must distribute at least 90% of their profits to investors in the form of dividends.
At recent prices, Ares Capital offers a staggering 9.2% yield. The dividend distribution has not increased linearly, but it has increased by 20% over the last three years.
BDCs exist because large U.S. banks are generally unwilling to lend to mid-sized businesses, regardless of their ability to generate cash and pay their bills. As a result, Ares Capital can charge well-managed businesses interest rates for secured loans that are often higher than the rates individuals receive for unsecured loans. In the first quarter, Ares reported an average yield of 12.4% on its debt-related securities.
Ares Capital probably won’t have the fastest dividend growth in your portfolio, but it has a good chance of continuing to meet its dividend obligations and increasing its payout over the long term. As one of the most established BDCs in America, its borrowing costs are relatively low compared…
