Finding the best dividend stocks isn’t as easy as buying companies with the highest yield. Like anything in life, if something’s too good to be true, it usually is. In this case, eager investors are sometimes quick to jump on the yield bandwagon, only to discover later that the generous passive income exists for a reason.
To avoid severe disappointments down the road, you should always give the target company’s balance sheet a solid run-through. The best dividend stocks will feature ample amounts of cash, which obviously supports the payout cause. Moreover, anything can happen in the markets, especially at this juncture. Having a cash moat enables firms to pay their shareholders, even when the going is rough.
Additionally, a cash-rich organization allows management greater flexibility for future endeavors. You shouldn’t look at payouts as an ephemeral concept, but rather, a long-term relationship. Ultimately, the best dividend stocks are built for running marathons, not a 40-yard dash.
Here are my picks for the top seven dividend-paying companies with a boatload of cash!
Best Dividend Stocks With Loads of Cash: Garmin
If you’re a tech connoisseur, or live an active lifestyle, you can’t help but love Garmin (NASDAQ:GRMN). Manufacturing highly desirable portable devices, such as smart watches or fitness trackers, Garmin represents a viable alternative to Apple (NASDAQ:AAPL). But now, there’s another reason to appreciate GRMN: it’s one of the best dividend stocks you can buy.
For starters, the company pays out a very solid 3.53% yield, which is considerably better than Apple’s miserly 1.6%. But just as importantly, GRMN is sitting on a hefty cash load of just under $900 million. Better yet, this is $900 million that’s free and clear. Yup, you got it: Garmin is one of those rare electronics companies that have zero debt.
Perhaps one of the major knocks on GRMN stock is that the organization competes in a cutthroat industry. But they’ll be rising to the challenge with aplomb. In the last reporting quarter, Garmin generated $711 million in revenue, up nearly 11% year-over-year.
Best Dividend Stocks With Loads of Cash: CA, Inc.
Based in New York City, multinational firm CA, Inc. (NASDAQ:CA) concentrates on building custom-crafted software for businesses. Such specialization should only increase in popularity as companies seek an edge in their particular industries. Clients include Qantas Airways (OTCMKTS:QUBSF), Toyota (NYSE:TM) and Citrix (NASDAQ:CTXS) to name but a few.
You may want to bet on CA stock simply for its core business. However, CA also happens to be one of the best dividend stocks available, a rarity in the global-software industry. Its dividend yield currently stands at a hair under 2.9%, while it’s sitting on a cash account worth $3.4 billion.
What makes CA stock especially intriguing is that aside from the balance sheet, its financials are rock solid. It has excellent profitability margins relative to the competition. Moreover, CA features very stable and consistent free cash flow.
This is one payout that probably isn’t going anywhere anytime soon!
Best Dividend Stocks With Loads of Cash: Intel
I freely admit that Intel (NASDAQ:INTC) isn’t what most people think about when they consider the best dividend stocks. Typically, these lists feature boring names that only make their presence known every blue moon. Plus, as a cyclical company, critics might argue that Intel’s industry is too unstable.
That said, INTC stock benefits from the semiconductor firm’s position as a moat. It would take an extraordinary Act of God to sink iconic Intel. And for our purposes, Intel is sitting on a mountain of cash worth $3.55 billion at last count. Sure, Apple carries considerably more greenbacks, but Intel is much more generous with their shareholders with a 2.46% yield.
What you’ll find within the details is a rock-solid organization. Intel levers sector-leading profitability margins, along with fairly decent revenue growth. It also features consistently strong free cash flow, giving its faithful shareholders many nights of restful sleep.
Best Dividend Stocks With Loads of Cash: Starbucks
Starbucks (NASDAQ:SBUX) is a controversial idea, which of course is the reason why I’m bringing it to your attention! Jokes aside, what Starbucks is going through is a very serious situation. Over the last few months, the omnipresent barista has been caught in ugly racial-discrimination scandals.
Management’s response was to shutdown all stores for a nationwide sensitivity training. I, however, thought the company was going overboard. In May, I wrote:
“With Schultz opening his restroom doors, he’s now vulnerable to “race trolls.” Anybody of a federally protected class can cause trouble at a Starbucks location, intending to incite a response. When that response comes, the trouble-maker can cry racism and threaten a lawsuit.
That opens Starbucks stock to never-ending liabilities.”
And boy, did SBUX shares get punished! Year-to-date, the famous coffeehouse is down 13%. While more pain could be on the way, this might be a time to go contrarian. Not only do you get an internationally renowned company at a steep discount, you also get the 2.89% dividend yield.
Oh yeah … Starbucks is sitting on $2.14 billion in cash.
Best Dividend Stocks With Loads of Cash: Popular Inc
Popular Inc (NASDAQ:BPOP) is a regional banking firm that primarily serves Puerto Rico and the Virgin Islands, although it does have a limited presence in the mainland U.S. While most investors may look toward the major banks, regional institutions’ advantage is their core knowledge of their markets. Additionally, they’re not as encumbered with foreign concerns.
As one of the best dividend stocks, BPOP has a 2.21% yield. While not the highest amount in the world, Popular Inc is sitting pretty on a hefty $7.26 billion cash account. If worse comes to worst, BPOP has the capacity to payout its shareholders.
It really shouldn’t come down to that. In the last reporting quarter, Popular generated $507 million in total revenue, up 6% from the year-ago level. Additionally, its free cash flow standing is very consistent year-to-year.
Best Dividend Stocks With Loads of Cash: Gilead
Gilead (NASDAQ:GILD) really needs no introduction. One of the biggest names in the bio-pharmaceutical industry, it routinely makes headlines. And while several investors speculate on GILD for its capital-return potential, it’s also one of the best dividend stocks around.
For one thing, shareholders enjoy a robust 3.32% yield, which exceeds most other companies in this sector. We also have the fact that for three years, GILD has largely disappointed the markets. Current speculators believe that this year is the turnaround. They could be right, given that shares appear to have hit bottom last summer.
And a standout metric supporting Gilead’s case is its cash account, a beautiful sight at $7.64 billion.
That said, GILD stock has been fairly choppy this year. Also, its cash has steadily declined over the past three years. I wouldn’t consider it a red flag but its generous yield does carry some risk. Still, the bottom line for me is that Gilead is one of the top bio-techs you can buy that provides a healthy payout.
Best Dividend Stocks With Loads of Cash: AT&T
No list of best dividend stocks, irrespective of specific subcategories, is complete without AT&T (NYSE:T). Where else are you going to get an iconic company that’s virtually guaranteed to remain in business, and still payout a whopping 6.32% yield? And a cash account nearing $49 billion? “Fuggedaboutit!”
But I have reasons for putting T stock at the bottom of my list. Yes, you can build an elevator to the moon with its on-hand cash, but its debt level is enormous. At nearly $134 billion, the cash-to-debt ratio is not something you can sweep under the rug. Consider that four years ago, AT&T held $76 billion in debt.
Of course, we were all talking extensively about the AT&T-Time Warner (NYSE:TWX) merger. Ultimately, it’s a net positive for the telecom giant, but the company has spent a lot of money on this deal. I’m not just talking about the merger itself, but also the legal process surrounding it.
While I think AT&T can still maintain its status as one of the best dividend stocks, you should keep a closer eye than usual.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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