When it comes to dividends, it's hard to beat ExxonMobil (NYSE: XOM). The company's current yield is a hefty 3.9%, and it has consistently increased its annual dividend for 35 consecutive years.
But not all investors are interested in investing in the oil giant. The good news is that there are plenty of other companies that pay their investors handsomely. We asked three Motley Fool writers for a few of such companies, and they came back with Kinder Morgan (NYSE: KMI), BP (NYSE: BP), and Verizon Communications (NYSE: VZ). Here's why.
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This dividend is about to increase 60%
Maxx Chatsko (Kinder Morgan): It's been several quarters now since investors were prepped to expect a stepwise increase in distributions handed out by leading North American pipeline operator Kinder Morgan. While the current quarterly payout rewards investors with a healthy $0.50 per share, management is expected to announce an increase to $0.80 per share beginning with the next distribution. That would bump the annualized dividend yield from 3.3% to 5.2% at the current share price -- comfortably ahead of ExxonMobil.
Better yet, Kinder Morgan shares have performed terribly thus far in 2018, which is a bit surprising. The company met its multiyear goals for cleaning up the balance sheet by divesting non-core assets and slashing the formerly lofty distribution. But with growth projects coming online and North American energy production volumes increasing (and likely for good), the fee-based business is poised to deliver healthy and predictable cash flows for the foreseeable future.
That said, there are some things for investors to keep in mind. Despite the progress deleveraging, Kinder Morgan is still a relatively expensive pipeline stock when ranked by debt, although it's undervalued relative to cash flow per share. Additionally, the company recently announced it may walk away from its biggest growth project. While the line in the sand was aimed at providing certainty and freeing up capital currently pledged to the much-delayed extension, canning the project would certainly push back growth projections several quarters or years.
Nonetheless, investors looking for income and the potential for considerable income growth over the long haul may find the current share price to be a great opportunity. If Kinder Morgan isn't near the top of your watchlist for dividend stocks, then it deserves more attention -- and maybe even a spot in your portfolio.
Stick with big energy
Dan Caplinger (BP): You don't have to stray from the largest energy companies in the world in order to find a stock that pays better dividends than ExxonMobil. BP has promising assets across the globe, and its current yield of 5.6% is well above the 4% its larger rival offers right now.
Many people know BP from its role in the Gulf oil spill in early 2010, and it's taken a long time for the oil giant to make strides toward restoring its broken reputation in the aftermath of that disaster. For dividend investors, the event was painful as well, as the dividend was suspended for three quarters in 2010 and then came back at only half of its previous level thereafter.
Over the ensuing years, though, BP was able to boost its payout back upward as it handled claims, paid damages, and sought to move forward. Moreover, unlike most foreign companies, BP accommodates shareholders by making regular quarterly dividend payments in fixed amounts, eschewing the more common practice internationally of having two semiannual payments of unequal size.
Those who've invested in BP up until now haven't been entirely happy with its performance, but the company has new projects coming up to speed. That has many people more excited about BP's prospects, and its strong dividend makes it even more attractive for those looking to capitalize on a possible rebound for energy.
The telecom with a staggering yield
Chris Neiger (Verizon): Verizon doesn't have the long history of dividend increases that ExxonMobil can claim, but it does pay its investors a strong 4.95% yield and boasts 11 consecutive years of raising its annual dividend.
Verizon earns the vast majority of its revenue from its wireless business, and competition from T-Mobile and AT&T has caused some headaches for the company in the recent past. Sales in Verizon's fourth quarter were up just 1.7% year over year to $23.8 billion, but the company has been able to grow its customer base by adding 1.2 million retail postpaid connections in the fourth quarter. That number included a net increase of 647,000 smartphone customers, which proves that Verizon is still holding its ground even as its competitors close in.
The company is looking beyond its wireless business for more growth as well, specifically from its in-car telematics, Internet of Things (IoT), and its Oath media business. Telematics sales reached $230 million in the fourth quarter, IoT revenue jumped 17%, and sales from Oath were up 10% from the year-ago quarter, to $2.2 billion.
Verizon is also trying to position itself as a leader in 5G wireless technology. The company said it's already conducted the world's largest, successful pre-commercial 5G trial and is testing the new tech in a handful of U.S. cities this year. The company's management is confident that it will be able to use this tech across mobile, residential broadband, and IoT devices in the next two years.
Verizon's shares have been flat over the past 12 months and have failed to keep pace with the S&P 500's 15% gains. But its shares are trading at just 10.5 times the company's forward earnings, making the company's stock far less expensive than many companies in the tech and telecom sector. Verizon's stock is slightly beaten down right now, but the company's sky-high yield may certainly be a draw for many investors.
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Chris Neiger has no position in any of the stocks mentioned. Dan Caplinger has no position in any of the stocks mentioned. Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Kinder Morgan and Verizon Communications. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.