At the foundation of many successful investor portfolios, you'll often find companies that provide consistent income. Warren Buffett is a perfect example of one successful investor who benefits from dividend-paying stocks. In his Berkshire Hathaway portfolio, total dividend income is expected to reach $4.6 billion for 2021, led by a trio of holdings made up of Apple, Coca-Cola, and Bank of America, which are responsible for half of that amount.
But those aren't the only dividend-paying companies that can help retirees bring in consistent income. The healthcare and real estate markets are host to three particular companies that have been paying dividends consistently for more than 10 years, and for investors looking to get a monthly -- rather than quarterly -- bank deposit, two of these could be perfect.
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1. UnitedHealth Group is trending toward dividend aristocracy
To be a member of the elite group known as Dividend Aristocrats, a company must have paid a dividend consistently for each of the past 25 years while increasing that dividend annually for those 25 years. Trending toward this elite crowd is UnitedHealth Group (UNH +3.41%), a managed healthcare insurance and benefits services provider that has been paying dividends consistently for 30 years, and has been increasing the annual dividend since 2010. Its most recent dividend payout of $1.45 came on Sept. 21, representing a yield of 1.5%, slightly lower than the average 1.75% provided by S&P 500 healthcare companies.
But don't misjudge this lower-than-average rate. The $1.45 per share issued in September signifies the continued growth the company is experiencing, resulting in a second consecutive quarterly payout at that amount. The previous payout in June took the dividend up to $1.45 from $1.25, which it had been for the better part of 2020, representing a 16% increase in the quarterly dividend. The company also boasts an average 28% increase in the annual dividend since 2010 -- 11 straight years of increases.
An added benefit from investing in UnitedHealth is capital appreciation. Aside from a pandemic-driven drop in 2020, the stock gained a massive 1,025% over the last 11 years. The primary drivers behind this consistent rally include solid revenue growth that averaged 13% annually over the past five years and a 9.7% compound annual growth rate projected for healthcare insurance providers through 2028.
2. Realty Income: 614 consecutive monthly dividends over a 51-year history
Staying in the realm of Dividend Aristocrats brings us to Realty Income Corporation (O +1.27%), a real estate investment trust based on a business model designed to generate revenue and pay monthly dividends to its investors as a result of long-term lease agreements with real estate clients. Realty Income owns 6,761 properties in all 50 states, Puerto Rico, and the United Kingdom. The REIT currently boasts a dividend yield of 4.27% -- in line with the average 4.3% for REITs -- equating to a monthly dividend payout of $0.24 per share for an annual dividend equivalent of $2.88 per share.
When looking at companies that boast a high dividend yield, be aware of the health of the revenue stream, the stability of the stock price, and the amount of cash on hand. An annually growing revenue stream means the company is successfully generating and increasing revenue on a consistent basis. Realty Income succeeds in both of these areas, highlighted by 12% second-quarter growth in revenue on a year-over-year basis and a 15.3% average annual total return on its stock price since 1994 for a 725% gain.
While producing double-digit revenue growth and an average annual return that outpaces the S&P 500 average of 10.8% since 1994, the REIT also touts $231 million in cash and equivalents as of June 30 this year. However, it is worth noting that those funds have declined year over year from a much higher surplus of $824 million at the end of the first half of 2020. This should not impact lease revenue for existing properties, but may limit how many additional properties the company pursues in the near term.
3. SL Green Realty: Manhattan's commercial landlord
SL Green Realty (SLG +3.25%) is similar to Realty Income in that it, too, is a REIT and pays monthly dividends. But SL Green's focus is centered in Manhattan; the company currently holds interests in 77 commercial properties throughout this borough of New York City.
SL Green has paid out dividends consistently since 1997, though up until 2020, it did so on a quarterly basis. Its current monthly dividend is $0.30 per share for 2021, topped off with a stock-share -- not cash -- dividend worth $1.70 paid out in January 2021 to bring the total value of 2021 dividends paid through September to $4.76. This represents a 34% increase over the annual amount paid out in 2020.
A stock-share dividend takes the form of actual shares of stock rather than cash but still holds value based on the stock price. For example, if you own 100 shares and receive a 10% stock dividend, your number of shares increases to 110.
Going back 10 years, the average annual increase in dividends is 32%, but it's worth noting that the growth rate has seen a consistent decline since 2015 to a most recent 4% increase between 2019 and 2020. By comparison, this is slightly lower than the 4.27% rate of Realty Income and lower than the average 4.3% for REITs.
A day at the beach
If you're looking forward to retirement and want to make sure you have a solid portfolio to support the life you want to live, it might be a good idea to follow the lead of an expert investor like Warren Buffett. Dividend stocks form a strong foundation for many successful portfolios. If you prefer a monthly to a quarterly dividend, the REITs highlighted here might provide more of what you're looking for.
If a monthly rather than quarterly dividend is not of concern, it's worth noting that SL Green's stock price has experienced more volatility than Realty Income's or UnitedHealth's. Based on the growth projections, dividend history, and stock price stability, I'd be more inclined to go with UnitedHealth, followed by Realty Income, for a safer play. But all three provide a healthy dividend that is growing year over year and can provide consistent income while you sip a refreshing beverage with your toes in the sand.
