Two High-Yield Dividend Stocks Perfect for Investment with a $500 Budget
Regardless of your investment preferences, be it growth stocks, value stocks, or dividend stocks, price shouldn't be the sole factor guiding your investment decisions.
Dividends can offer a fantastic way to boost your earnings over time while giving you additional capital to reinvest or keep in your portfolio. These kinds of investments can be found across various sectors and industries.
If you're looking for two high-dividend stocks worthy of consideration for your portfolio and have $500 to invest, keep reading.
1. Johnson & Johnson
Johnson & Johnson (JNJ -1.74%) is one of the world's largest pharmaceutical companies, leveraging its size to generate positive investor returns frequently. This company is among a select few with a track record of not only disbursing but boosting its dividend payments for over half a century.
When it comes to Johnson & Johnson, the healthcare giant has increased its dividend every year for an astonishing 62 years in a row. As of this writing, the stock offers a yield of approximately 3.2%, significantly higher than the 1.3% average yield for companies listed on the S&P 500. With a projected forward annual dividend payout of $4.96 per share, investors can anticipate a substantial income.
Johnson & Johnson also boasts a payout ratio of 80% of earnings. With its multiple businesses generating $20 billion in free cash flow and $25 billion in operating cash flow over the last 12 months, it's safe to assume the company's financial stability is robust enough to continue providing dividends to its investors.
It's essential to acknowledge that J&J is dealing with ongoing talc-related litigation that has been a concern for quite some time. Although the legal outcomes are pending and could potentially result in significant settlement damages for the company, J&J has already set aside adequate funds to meet these obligations and maintain its commitment to shareholders.
Johnson & Johnson reported net sales of $22.4 billion during the third quarter of 2024, a 5% increase compared to the same period in the preceding year. The company also earned net earnings of $2.7 billion on that amount. Both its innovative medicine and medtech segments grew net sales by around 5% and 6%, respectively, during the same period. Investors seeking a reliable income stock to purchase and hold for an extended period may want to consider J&J as a no-brainer buy.
2. United Parcel Service
United Parcel Service (UPS -0.84%) has displayed unwavering loyalty in paying a dividend every year since the company's initial public offering (IPO) in 1999. The company has consistently elevated that dividend throughout the years. Its projected forward annual dividend rate is currently $6.52 per share.
The current yield for UPS is barely shy of 5% at the time of this writing, nearly four times higher than the average yield for companies listed on the S&P 500. This elevated yield has become increasingly desirable due to UPS' underwhelming share price performance recently. Decreases in package volume, increased operating and labor costs, and economic challenges have negatively impacted the business.
It's essential to mention that UPS has consistently increased its dividend every year for the last 15 years, maintaining a payout ratio well above 90% of earnings. The company has also generated $4 billion in free cash flow during the past 12 months.
While UPS has experienced some challenges recently due to unfavorable macroeconomic circumstances, these are transitory factors that do not indicate any underlying problems with the company. The business has relied on strategic cuts in costs to offset these challenges, including the increased adoption of automation, the shutdown of certain locations, and the reduction of its workforce.
Slowly but surely, it appears that the situation is improving as these changes and potential improvements in the economic landscape take effect. During the third quarter of 2024, UPS reported revenue of $22.2 billion, a 5.2% increase compared to the revenue it generated during the same quarter in the previous year. The company also reported an impressive revision in earnings according to generally accepted accounting principles (GAAP), with profits increasing by 37% from the same quarter the previous year to $1.5 billion.
Despite the cyclical nature of UPS' industry and business, its dividend history is solid, and the company has consistently rewarded its shareholders through the years. For investors with a minimum five-year buy-and-hold horizon, this business could be a suitable choice for stock acquisition.
After considering the potential high dividends, both Johnson & Johnson and United Parcel Service could be excellent options for investors seeking to boost their earnings through finance and investing. Johnson & Johnson, with its yearly dividend increase streak of 62 years, offers a 3.2% yield, significantly higher than the S&P 500's average. Meanwhile, UPS, despite recent challenges, maintains a yield nearly four times higher than the S&P 500's average, at close to 5%. In the context of finance and money management, investors may find these high-dividend stocks appealing and could consider allocating some of their funds towards these investments.
