When looking for dividend paying stocks there are a few things to consider. Of course, you want a company that has an attractive dividend yield, and anything above 2% to 3% is generally considered good enough. However, high return isn’t everything – you also want to make sure the company has a history of steady profit growth. Rising profits provide a company with stability, which not only allows them to pay consistent dividends, but also to increase those payouts consistently.
These characteristics are ideal for dividend-paying stocks, and that’s why Arbor Real Estate Trust (NYSE: ABR), Cincinnati Financial (NASDAQ: CINF), and United Bankshares (NASDAQ: UBSI) are all great dividend paying stocks that you can trust to pay you year after year.
Arbor Realty: A High Yield REIT
Arbor Realty is a real estate investment trust (REIT) focused on the multi-family housing industry with 81% of its total loan portfolio consisting of these loans. The multi-family housing space has high barriers to entry, which gives Arbor Realty a competitive advantage and ensures stable income.
Multi-family loans tend to be less cyclical than single-family homes, which can fluctuate depending on market conditions. During a recession, individuals are less likely to take out mortgages for single-family units. However, housing is still in need, and these people would be more likely to turn to multi-family rental housing. This is why multi-family dwellings tend to withstand recessionary conditions better than single-family dwellings.
Not only that, but multifamily loans are protected against prepayment. This means that you don’t see a big refinance rush in the space when rates are lowered. As a result, profits do not fluctuate as widely as single-family real estate companies.
Arbor Realty has done a good job growing its loan portfolio, which has grown 29% on a compound annual basis since 2015. This strong portfolio growth has resulted in growth in net interest income of 15% compounded annually and 29% of earnings compounded with net income. since 2015. With its blazing growth rate, Arbor Realty has been increasing its dividend payout for nearly a decade in a row and paying investors a 7.1% return to boot, making it a dividend-paying stock. high yield you can trust.
Cincinnati Financial: a king of dividends
Insurance companies are another good source of income from stocks. This is because insurance is a relatively simple business – businesses underwrite policies, and if they manage risk properly, they make an underwriting profit. With these excess profits, companies put money to work in the financial market to generate some form of investment income. Insurance companies can be a cash cow and a great source of return in your portfolio, which is why Warren Buffett has often called the insurance industry Berkshire Hathawayis the “most important sector”.
Cincinnati Financial is a P&C insurer that has increased its dividend payments for 61 consecutive years. This makes it a member of the exclusive Dividend Kings share group. A Dividend King is a company that has increased its dividend payout for at least 50 years in a row, and only 27 companies currently hold the stock.
The insurer has managed to increase its dividends for so many years thanks to its management of capital and the writing of profitable policies. Last year, the company posted a combined ratio of 98.1%. The combined ratio is an important measure of profitability in the insurance industry; anything less than 100% means you are making a subscription profit. Over the past five years, Cincinnati Financial has achieved an average combined ratio of 96.1%.
As a result, it has seen its earned premiums increase at a compound annual growth rate of 6.2%, above its industry average. The continued growth in premiums coupled with profitable underwriting makes Cincinnati Financial another trustworthy income security that is earning investors a solid 2.1%.
United Bankshares: the unrecognized income share
United Bankshares is not a dividend aristocrat, but it is not for lack of increasing its dividends. The regional bank has increased its dividend for 47 consecutive years. The only reason it is not included in the Dividends Aristocrats is because it is not an S&P 500 company, which makes this regional bank a mainstay of dividends under the radar.
Last year, he increased his net profit by 11.1% despite the pandemic. This was boosted by its mortgage banking business, as well as its expansion into the Carolinas with the purchase of Carolina Financial.
In the first quarter of this year, interest income increased 14% from last year to $ 206 million. The bank benefited from a drastic reduction in provisions for credit losses as well as income from mortgage banking activities. This allowed net income to rise 166% from last year to $ 107 million.
United Bankshares has also done a remarkable job of increasing net interest income and net income over the past decade, achieving compound annual growth rates of 10% and 14%, respectively. Not only that, but it is earning a solid 3.7% dividend yield, making it another solid dividend stock you can trust.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.