Dividend investors rely on the stocks they own to provide the portfolio income they need. Many companies have responded to the increasing appetite for strong dividends by boosting their payouts over the years. Yet only a handful of businesses generate enough cash to be able to return billions of dollars in capital to their shareholders each and every quarter. Among them are Microsoft (NASDAQ: MSFT), JPMorgan Chase (NYSE: JPM), and Chevron (NYSE: CVX), and the dividend histories these companies have enjoyed show just how rewarding their shares have been to long-term income investors.
The tech sector was slow to embrace dividends, but Microsoft eventually found the value in returning capital to shareholders through regular payouts. The huge amounts of cash flow that key products like the Windows operating system and the Office suite of business software produced gave Microsoft more capital than it could reasonably reinvest in its business, and gradually, the company started to dip its toes into the dividend world. Small annual payouts turned into higher quarterly payouts, and Microsoft also supplemented its regular payments with a one-time special dividend back in 2004.
Microsoft has now made regular dividend increases in each of the past 15 years, with its most recent move coming last November -- an 8% increase to $0.39 per share each quarter. That might not sound like much, and Microsoft's yield of 2.1% isn't much higher than the market's overall average. However, just the size of the tech giant translates that modest yield into nearly $12 billion in annual dividends. With prospects for its core products looking as favorable as ever, dividend investors can likely count on Microsoft to make another dividend increase soon.
Bank stocks have a much longer history of using dividends to reward their shareholders, but the financial crisis in 2008 brought favorable streaks of dividend increases to a crashing halt. Nevertheless, JPMorgan Chase has been among the fastest financial institutions to restore its past dividends, and the banking giant's current quarterly payout of $0.50 per share has not only grown in each of the past seven years but also stands well above the $0.38 per share it paid immediately before the financial crisis hit. The bank also said recently that it would make another 12% increase to its dividend to $0.56 per share, and once that goes through, it could send JPMorgan's total annual payments to shareholders close to the $10 billion level.
JPMorgan Chase rewards its shareholders well, but it also has plenty of capital available for its core business needs. The bank only pays out about a third of its earnings in the form of dividends, and that has allowed JPMorgan to consider strategic moves and other internal investments while still retaining a strong reputation as a good income-paying stock.
Chevron looks for more energy
Finally, Chevron also tops the $8 billion mark with its annual dividends. The oil and gas giant has the highest dividend yield of the three companies discussed here, and it also has the longest history of dividend success. For 29 straight years, Chevron has paid larger amounts of dividends annually than the previous year, and it could extend that streak to 30 years if it follows up last November's dividend increase with another upward push to its quarterly payout of $1.08 per share.
Chevron has gone through plenty of turmoil lately, prompting some investors to become nervous about its ability to keep growing its dividend. Indeed, the company waited until the last possible moment to extend its streak last year, and the increase it made amounted to just $0.01 per share, which many saw as a token increase. However, some signs of recovery in the oil market have helped Chevron's stock price to recover past losses, and efforts to maintain exploration activity while also taking advantage of all of the opportunities its diversified business provides have been paying off. All told, Chevron has the staying power to make it through tough times and still pay shareholders the income they want.
In terms of sheer payout, you won't find many stocks that top Chevron, JPMorgan Chase, and Microsoft. The factors that have sent them to the top of this list also have the potential to keep moving them forward in the years to come.
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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool has a disclosure policy.