7 Large-Cap NASDAQ Dividend Stocks Investors Should Consider
By: Ned Piplovic,
Despite individual portfolio strategies to achieve their specific financial goals, most income investors seek equities that have similar characteristics, such as the seven NASDAQ dividend stocks featured in this article.
Some of the criteria that income investors target are fairly obvious. Dividend yield above a certain value and number of consecutive dividend hikes are probably most common.
While these two measurements provide an incomplete picture of a stock’s dividend worthiness, both quickly can reduce the number of stocks from several thousand to just a few dozen potential candidates.
However, these two indicators have some shortcomings and should not be used as sole determinants for choosing investments. While a high or increasing dividend yield is desirable, it does not indicate whether the yield increase resulted from rising dividend payouts or a declining share price. Therefore, the total return measurement will provide additional information about whether the share price rose to complement the rising dividend for upsized returns, declined to offset dividend income growth or cancelled out the dividend income growth to cause a loss for shareholders.
Additionally, investors should review the company’s dividend payout ratio to make sure that the company can support its rising dividend distributions in the future. Investors should look for low dividend payout ratios of 50% or less. While some companies will have extremely low payout ratios, most companies with sustainable dividend growth programs will have a payout ratio between 30% and 50%.
In addition to the measurements mentioned above, investors can consider a company’s Price to Earnings (P/E) ratio, Debt to Equity ratio and percentage of shares held by investing institutions versus the portion held by individual investors. However, very few companies will meet all the desired criteria and investors rely on a combination of quantitative measurements, as well as subjective factors and estimates about company’s initiatives and perceived operational efficiencies.
The companies on this list have been selected with dividend investor’s Dividend Screener. All picks trade their shares on the NASDAQ exchange, have market capitalizations of at least $10 billion, have current dividend yields of more than 3% and have boosted their annual dividend at least for the last five consecutive years. Additionally, the list excludes mutual funds.
While some of the criteria feature wide ranges, the current dividend yields of all seven NASDAQ dividend stocks are in a narrow range between 3.03% and 3.79%, with a simple average yield of 3.38%. Similarly, all but one company’s portion of shares held by institutions was between 62.2% and 69.4%. Only one company incurred a total loss over the past 12 months but provided its shareholders with double-digit-percentage total returns for the past three and five years.
The other six stocks provided positive total returns across all three categories. The simple average total return across all seven equities are 13.3% over the last 12 months, 36.4% over the past three years and 65.3% over the past five years.
Below is the list of the seven NASDAQ dividend stocks investors should consider, ranked by their current dividend yield, shown lowest to highest.
7 Large-Cap NASDAQ Dividend Stocks: #7
Cisco Systems, Inc. (CSCO)
Cisco’s current yield is 3.03%, with seven consecutive years of annual dividend hikes and a share price increase of 28% over the past 12 months. The combined total return on shareholders’ investment is 40.8% over the last 12 months, 66.5% over the past three years and 85.2% over the past five years. The next ex-dividend date will occur in the first week of October 2018.
7 Large-Cap NASDAQ Dividend Stocks: #6
iShares Trust (DVY)
The iShares Trust’s current dividend of 3.1% is identical to the equity’s five-year average yield and follows nine consecutive years of rising annual dividends. While experiencing a 15% drop during the first quarter of 2018, the share price recovered almost all those losses and closed on Aug. 8 one cent shy of the $100 mark for a 7.2% gain over the past year. The rising dividend and asset appreciation combined for total returns of 11.3%, 43% and 67% over the past one, three and five years, respectively. The company’s next ex-dividend date will be in late September 2018.
7 Large-Cap NASDAQ Dividend Stocks: #5
Xcel Energy, Inc. (XEL)
Xcel Energy’s current yield is 3.22% and the company has boosted its annual dividend over the past 15 consecutive years. After rising steadily for almost a decade, the company’s share price fell almost 16% between November 2017 and mid-June 2018. However, the share price recovered and closed on August 8, 2018, merely 2.4% lower than it was one year earlier. Despite losing some ground with the share price, the dividend income was high enough to avoid a total loss over the trailing 12 months with a 1% total return. However, the recent share price decline is within the tolerances of the 10-year trend and the company offered a total return of 46% over the past three years, as well as an 81% total return over the past five years. The company’s next ex-dividend date will occur in mid-September 2018.
7 Large-Cap NASDAQ Dividend Stocks: #4
PepsiCo, Inc. (PEP)
PepsiCo’s current 3.25% dividend yield is the median of the group. This company has a record of raising its annual dividend payout for the past 47 consecutive years. As a component of the S&P 500 and with such a long record of dividend hikes, PepsiCo is the seven NASDAQ dividend stocks and one of only 53 companies designated Dividend Aristocrats. The company’s rising dividend helped to keep the total return positive at 1.3% over the past year, despite a 2.8% share price decline over the past 12 months. However, the total return over the past three years was a much more positive 25.5% and the total return was nearly 53% over the five-year period. The company set its next ex-dividend date for September 6, 2018.
7 Large-Cap NASDAQ Dividend Stocks: #3
Huntington Bancshares, Inc. (HBAN)
This security’s current yield is 3.53% and the company boosted its annual dividend for the past eight consecutive years. The share price continued its five-year uptrend and gained 17% over the past 12 months for a total return of 23.6% over that period. Furthermore, the company’s total returns over the three and five years were 47% and 105%, respectively. HBAN is set to go ex-dividend again on September 14, 2018, with a pay date on October 1, 2018.
7 Large-Cap NASDAQ Dividend Stocks: #2
Principal Financial Group, Inc. (PFG)
The Principal Financial Group missed the top spot of this list by a mere four tenths of a percentage point with a 3.76% dividend yield. However, PFG is the only equity in the group to hand its shareholders a double-digit percentage total loss because of a 12% share price decline over the past 12 months. However, the share price performed better over the extended period and the company rewarded its shareholders with a 12.6% total return over the three-year period. Also, the five-year total return came in at more than 50%. The company’s next ex-dividend date will occur on September 5, 2018.
7 Large-Cap NASDAQ Dividend Stocks: #1
Qualcomm, Inc. (QCOMN)
Qualcomm takes the top spot among these seven equities with a 3.79% dividend yield, eight consecutive years of annual dividend boosts and a September 4, 2018, ex-dividend date. While struggling over the longer term, the share price performed very well over the past 12 months with a one-year growth of more than 20%. This share price advancement translated to a total return of nearly 30% over the past 12 months. QCOM is the only equity in the group whose one -year total return outperformed long-term total returns – 15% over three years and 16% over five years.
As evident from variances between the performance indicators of these NASDAQ dividend stocks, no single measurement can identify definitively the best securities to buy. This list is determined by the current dividend yields. The order would have been different based on a different indicator – such as total return over the past 12 months. Ultimately, each individual investor must make the final decision on which investments are best suited for his or her investment portfolio.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.