Dividend stocks are companies that pay out a portion of their earnings to a class of shareholders on a regular basis. These companies usually are well established, with stable earnings and a long track record of distributing some of those earnings back to shareholders. These distributions are known as dividends, and may be paid out in the form of cash or as additional stock. Most dividends are paid out on a quarterly basis, but some are paid out monthly, annually, or even once in the form of a special dividend.
While dividend stocks are known for the regularity of their dividend payments, in difficult economic times even those dividends may be cut in order to preserve cash. One useful measure for investors to gauge the sustainability of a company’s dividend payments is the dividend payout ratio. The ratio is a measure of total dividends divided by net income, which tells investors how much of the company’s net income is being returned to shareholders in the form of dividends versus how much the company is retaining to invest in further growth.
If the ratio exceeds 100% or is negative (meaning net income is negative), this indicates the company may be borrowing to pay dividends. In these two cases, the dividends are at a relatively greater risk of being cut.
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Below, we look at the top 5 dividend stocks in the Russell 1000 by forward dividend yield, excluding companies with payout ratios that are either negative or in excess of 100%. Each of the dividend stocks listed below significantly underperformed the Russell 1000’s total return over the past 12 months of 19.7%, as of December 21, 2020.1 All data below is as of December 22, 2020.
Lumen Technologies Inc. (LUMN)
- Forward Dividend Yield: 10.08%
- Payout Ratio: 86.56%
- Price: $9.92
- Market Cap: $10.9 billion
- 1-Year Total Return: -17.7%1
Lumen Technologies, formerly known as CenturyLink, is an integrated communications company that offers services including local and long-distance voice, broadband, Ethernet, colocation, hosting, data integration, video, network, information technology, and more.
Brookfield Property REIT Inc. (BPYU)
- Forward Dividend Yield: 8.86%
- Payout Ratio: 63.63%
- Price: $15.01
- Market Cap: $587.3 million
- 1-Year Total Return: -10.0%1
Brookfield Property is a real estate investment trust (REIT) that owns, develops, builds, manages, and leases various commercial properties. Among the company’s portfolio of properties are restaurants, malls, entertainment facilities, and parking areas. On November 6, the board of directors declared a quarterly dividend of $0.3325 per share on its Class A Stock payable on December 31, 2020, and a quarterly dividend on the 6.375% Series A Cumulative Redeemable Preferred Stock of $0.39844 per share payable on January 1, 2021.2
New York Community Bancorp Inc. (NYCB)
- Forward Dividend Yield: 6.65%
- Payout Ratio: 82.59%
- Price: $10.22
- Market Cap: $4.7 billion
- 1-Year Total Return: -8.3%1
New York Community Bancorp is a holding company with multiple banking subsidiaries, including Queens County Savings Bank, Roosevelt Savings Bank, Atlantic Bank, and others. Through these subsidiaries, New York Community Bancorp offers a full range of banking products and services to businesses and consumers. The company primarily serves customers in the New York City metropolitan area.
Brandywine Realty Trust (BDN)
- Forward Dividend Yield: 6.50%
- Payout Ratio: 43.84%
- Price: $11.69
- Market Cap: $2.0 billion
- 1-Year Total Return: -20.2%1
Brandywine Realty Trust is a REIT that owns, manages, leases, acquires, and develops urban, downtown, and suburban office properties primarily on the East Coast and in Texas. Its services include asset management, development and construction, investment, marketing and leasing, and property management. On December 8, the board declared a quarterly cash dividend of $0.19 per common share and OP Unit payable on January 20, 2021. The quarterly dividend is equivalent to an annual rate of $0.76 per share.3
TFS Financial Corp. (TFSL)
- Forward Dividend Yield: 6.41%
- Payout Ratio: 66.57%
- Price: $17.47
- Market Cap: $4.9 billion
- 1-Year Total Return: -6.8%1
TFS Financial is a holding company engaged in retail consumer banking, mortgage lending, and similar services through its subsidiaries. The company’s businesses include originating and servicing residential real estate mortgage loans and attracting retail deposits. Its main business is retail consumer banking.
The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors.
Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
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By Nathan Reiff.
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Related Terms
How Determining the Dividend Rate Pays off for Investors The dividend is the percentage of a security’s price paid out as dividend income to investors. more
Special Dividend A special dividend is a non-recurring distribution of company assets, usually in the form of cash, to shareholders. more
Dividend Yield Definition The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. more
Dividend Payout Ratio Definition The dividend payout ratio is the measure of dividends paid out to shareholders relative to the company’s net income. more
Dividend Clientele Dividend clientele refers to a group of shareholders that have a common preference for a company’s dividend policy. more
Dividend Definition A dividend is the distribution of some of a company’s earnings to a class of its shareholders, as determined by the company’s board of directors. more