Many investors are concerned about the stock market’s valuation right now. The extreme level of concentration among a small group of businesses also adds to the fears that a correction is coming. An income-driven strategy might appeal to these investors in today’s environment.
There are a lot of dividend stocks out there. While the size of the checks they send shareholders gets the attention, there’s always more to the story. Here’s the yearly dividend income that $10,000 generates from stocks that offer three very different yields.
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Mastercard: 0.52% dividend yield
The first business on this list is Mastercard (NYSE: MA). It might be the highest-quality company of these three, as indicated by its durable revenue growth and jaw-dropping Q3 operating margin of 59.8%. However, income investors aren’t lining up to buy the financial stock. It offers a tiny 0.52% dividend yield. If you buy $10,000 worth of shares, you’d make $52 in yearly income.
It’s hard to overlook the growth trajectory, though. In the past decade, Mastercard’s dividend went from $0.19 per share quarterly to $0.87, resulting in a huge 358% gain. Given that the business seems to consistently post double-digit diluted earnings-per-share growth every year, investors can bank on the payout continuing to increase in the future.
Consequently, the yield rises over time compared to the cost basis. Let’s assume that the dividend is hiked at the same pace in the next decade. If you buy the stock today and wait 10 years, the dividend yield explodes from the current 0.52% to a projected 2.38%. Furthermore, investors will probably benefit from meaningful capital appreciation as well.
Coca-Cola: 2.21% dividend yield
Coca-Cola (NYSE: KO) is definitely a better dividend stock than the credit card giant. The leading beverage enterprise pays investors a healthier 2.21% dividend yield. With $10,000 allocated to the stock, you’d capture $221 in annual passive income.
This company is a Dividend King. It has increased its quarterly payout in 64 straight years. That’s a mind-boggling streak. The track record clearly shows how successful Coca-Cola has been for such a long period of time, as it has successfully dealt with wars, recessions, bear markets, and a pandemic. Coca-Cola’s durability is its most compelling trait.
