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Income investors rely on dividend stocks to provide both the cash they need for their immediate needs as well as the potential for future capital appreciation that they crave. But just because a company is successful doesn't mean that it will choose to share its bounty with its shareholders through dividends. It takes a commitment from company management to build a meaningful dividend policy, and many stocks have adopted dividends that return billions of dollars to their investors. Below, you'll find the five dividend stocks that have paid the most to shareholders over the past 12 months.
The 5 top dividend stocks
Data source: FactSet Research.
It's no surprise that all five of these dividend stocks are among the largest, most important companies in the corporate world. Yet the composition of the list is just a small example of broader trends hitting the income-investing universe. Let's take a closer look at some of those trends.
1. The rise of technology dividend stocks
The technology sector has never been known for its dividends, instead usually featuring high-growth companies that choose to plow as much cash as possible back into their businesses. Even now, technology stocks rank dead last among S&P 500 sectors, with a dividend yield of about 1.5%.
However, as low as dividends are on the list of priorities for the average technology company, they've become more important in recent years. With the exception of the energy sector, tech stocks have the biggest positive disparity over their 10-year average dividend yield, which rests closer to 1%. Microsoft didn't even pay a regular dividend until 2003, and Apple only starting making dividend payments in 2012 after a long hiatus that began in the mid-1990s. Now, they not only are leaders in the dividend world but also have boosted their payouts dramatically in recent years. As technology stocks mature, you can expect even higher dividends.
2. Some things never change
On the other hand, some companies are well-known for their dividends. The telecom business involves massive capital investment in network infrastructure that then slowly pays off free cash flow for decades, and AT&T has capitalized on its past network expenditures to provide the money it needs to finance its massive dividend. The telecom giant has the smallest market cap on this list, but its yield of nearly 5% ranks at the top, and that's not likely to change in the near future.
ExxonMobil has also routinely been among the top dividend payers, and even the energy bust in 2015 didn't put a dent in its dividend income. Alone among these stocks, Exxon's dividend payout exceeds its annual earnings on a GAAP basis, reflecting the difficulties in the energy industry that have accompanied the plunge in crude oil prices. Nevertheless, Exxon remains committed to sustaining its dividend growth, and strategic moves like asset sales have the potential to keep the oil giant streamlining its operations to focus on the best growth prospects it has.
3. Bouncing back from dividend disaster
Finally, General Electric's placement on this list shows that a dividend cut doesn't have to be fatal for a stock. GE took a huge hit during the financial crisis, having extended itself too far into the financial side of the business with its GE Capital unit. To preserve capital, General Electric slashed its dividend by more than two-thirds, stunning dividend investors by ending the stock's reign as a member of the prestigious Dividend Aristocrats.
Since 2009, however, General Electric has bounced back, both in terms of stock price and dividend payouts. The company now pays out more than double what it did during the depths of the crisis, having made numerous boosts to its quarterly payout over those years. Thanks to its ability to diversify and move back to its industrial roots, GE is once again treated dividend investors well and trying to build up a new reputation for dependability.
Dividends are important to investors who like the combination of income and growth they provide. These five companies have what it takes to keep paying dividends well into the future, and the diversity they offer makes them a compelling group of stocks to consider.
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Dan Caplinger owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of ExxonMobil, General Electric, and Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.