Contents
- Do Dividend Stocks Provide Reliable Passive Income?
- Why Do Some People Think Dividend Stocks Are a Bad Idea?
- Top 13 Dividend stocks
- Should You Invest in Dividend Stocks?
- If You Had to Pick One Stock, What Would Be a Good PEG Ratio?
- What Is a Dividend-Adjusted PEG Ratio, or PEGY Ratio?
- How to Calculate the PEGY Ratio?
- Is It Possible to Earn $1,000 a Month Through Dividends?
Do Dividend Stocks Provide Reliable Passive Income?
Passive income is optimal when planning for retirement. Investments in dividend-paying stocks represent ownership in profitable companies. This indicates that the company is able to generate consistent profits and distribute those profits to its shareholders. So, they are a less risky choice for retirees. Dividend stocks not only provide investors with a reliable source of income but also have the potential to appreciate in value. Therefore, dividend stocks provide a double advantage.
Stocks that pay a dividend are a great way to build a passive income stream that can last a lifetime. While it is possible to live only off dividends, doing so is challenging. You’ll need a sizable investment portfolio to generate enough money to support your living costs. But if you put in the time and effort every month, you can definitely reach your target.
Why Do Some People Think Dividend Stocks Are a Bad Idea?
Nonetheless, investors should be aware that dividend-paying stocks often appreciate at a slower rate than other stock types. The double taxation of dividends has been a point of criticism for those who avoid dividend stocks. In addition to your personal income tax on dividends earned in a given tax year, the company will also pay its share of the corporate tax liability.
Top 13 Dividend stocks
As of March 3rd, 2023
| Symbol | Company Name | Security Price | Dividend Yield | P/E | PEGY Ratio |
|---|---|---|---|---|---|
| AIG | American International Group Inc | 59.91 | 2.13% | 4.6 | 0.26 |
| CNQ | Canadian Natural Resources Ltd | 59.75 | 4.23% | 5.8 | 0.32 |
| EQH | Equitable Holdings Inc | 32.00 | 2.51% | 7.1 | 0.68 |
| XOM | Exxon Mobil Corp | 111.77 | 3.27% | 8.4 | 0.28 |
| GPK | Graphic Packaging Holding Co | 24.50 | 1.64% | 14.5 | 0.47 |
| HIG | Hartford Financial Services Group Inc. (The) | 76.70 | 2.20% | 14.1 | 0.95 |
| MPC | Marathon Petroleum Corp | 131.57 | 2.31% | 4.7 | 0.05 |
| PFG | Principal Financial Group Inc | 86.40 | 2.97% | 4.6 | 0.47 |
| RJF | Raymond James Financial Inc. | 106.73 | 1.58% | 14.9 | 0.83 |
| SU | Suncor Energy Inc. | 35.18 | 4.45% | 6.3 | 0.44 |
| TD | Toronto-Dominion Bank (The) | 65.26 | 4.34% | 7.9 | 0.59 |
| UNM | Unum Group | 44.90 | 2.94% | 6.9 | 0.54 |
As of February 9th, 2023
| Symbol | Company Name | Security Price | Dividend Yield | P/E | PEGY Ratio |
|---|---|---|---|---|---|
| AIG | American International Group Inc | 59.91 | 2.13% | 4.6 | 0.26 |
| CNQ | Canadian Natural Resources Ltd | 59.75 | 4.23% | 5.8 | 0.32 |
| EQH | Equitable Holdings Inc | 32.00 | 2.51% | 7.1 | 0.68 |
| XOM | Exxon Mobil Corp | 111.77 | 3.27% | 8.4 | 0.28 |
| GPK | Graphic Packaging Holding Co | 24.50 | 1.64% | 14.5 | 0.47 |
| HIG | Hartford Financial Services Group Inc. (The) | 76.70 | 2.20% | 14.1 | 0.95 |
| MPC | Marathon Petroleum Corp | 131.57 | 2.31% | 4.7 | 0.05 |
| PFG | Principal Financial Group Inc | 86.40 | 2.97% | 4.6 | 0.47 |
| RJF | Raymond James Financial Inc. | 106.73 | 1.58% | 14.9 | 0.83 |
| SU | Suncor Energy Inc. | 35.18 | 4.45% | 6.3 | 0.44 |
| TD | Toronto-Dominion Bank (The) | 65.26 | 4.34% | 7.9 | 0.59 |
| UNM | Unum Group | 44.90 | 2.94% | 6.9 | 0.54 |
Should You Invest in Dividend Stocks?
Putting your money into stocks that pay dividends can be a smart move. Stocks that pay dividends have traditionally outperformed the S&P 500 and been less volatile. This is due to the fact that dividend stocks offer a higher total return due to the combination of a steady stream of income from dividends and the potential for capital appreciation. Over time, this return on investment can add up.
If You Had to Pick One Stock, What Would Be a Good PEG Ratio?
A PEG ratio that is less than 1 is considered optimal. A PEG ratio above 1.0 is generally seen as undesirable because it indicates that the stock is overpriced. Meanwhile, a PEG ratio below 1.0 is seen favorably because it indicates that the stock is undervalued.
What Is a Dividend-Adjusted PEG Ratio, or PEGY Ratio?
When dividends are taken into consideration, the popular PEG ratio is referred to as the PEGY (price/earnings to growth and dividend yield) ratio.
PEGY was developed to facilitate the consideration of dividend yields and future earnings potential when evaluating a stock. Its principal purpose, like that of the PEG ratio, is to help investors find bargains among potentially promising companies.
How to Calculate the PEGY Ratio?
The PEGY ratio is found by dividing the price-to-earnings ratio (P/E) by the sum of the projected rate of earnings growth and dividend yield.
The formula looks like this:
PEGY = P/E รท (projected rate of earnings growth + dividend yield)
PEGY Example
The dividend yield for U.S. Bancorp (USB) is 3.87%, the growth forecast for the next three to five years is 3.8%, and the P/E ratio is 13.2. PEGY is calculated to be 1.71 as a result.
The projected growth rate over the next three to five years for Unum Group (UNM) is 9.18%, and the dividend yield is 3.09%. UNM has a P/E of 6.4. As a result, the PEGY ratio is 0.52.
Under these conditions, an investment in Unum Group would be preferable to one in US Bancorp. This is because Unum Group’s PEGY is less than 1, making the stock cheap relative to its true value.
Is It Possible to Earn $1,000 a Month Through Dividends?
Investing in a diversified portfolio of companies that together yield at least $12,000 annually in dividends is necessary if you want to get $1,000 in dividends each month. You’d need a portfolio worth $300,000 ($300,000 x 4% = $12,000) to generate that much net income based on a 4% annual dividend return.