When many people think of making money from stocks, they automatically think of a company's stock price increases. That makes sense; it's straightforward and easy to comprehend: buy a stock for one price, sell it for a higher price, and make money. Simple enough.
Despite not getting the attention of capital gains, dividends can also be a great way to build wealth. It's often a less stressful way to make money from stocks, too. You don't have to worry about stock price movements -- which are typically unpredictable and irrational -- you just need patience and trust that you'll receive your quarterly (and sometimes monthly) payouts.
The following two companies are great options if you're looking for consistent passive income that you can rely on long-term. They each have high dividend yields and businesses that have stood the test of time.
Image source: Getty Images.
1. Altria Group
Altria(NYSE: MO) itself may not be the biggest household name, but some of the brands it owns -- such as Marlboro, Black & Mild, and Copenhagen -- surely are. It's the country's largest tobacco company, holding a 46.9% market share in cigarettes alone.
Altria recently announced a dividend increase, marking its 55th straight year of doing so. It's one of a small batch of companies to get the esteemed title of Dividend King (companies with at least 50 years of dividend increases).
Altria's current quarterly dividend is $1.02, with a forward yield of around 8.1%. It's routinely one of the highest yields you'll find from an S&P 500 stock. Even with its stock rising 20% this year, its yield remains near the top.
MO Dividend Yield Chart
As the tobacco leader, Altria has felt the effects of declining smoking rates, with U.S. adult smoking rates at a historical low. Its volume has taken a hit, but the addictive nature of tobacco products has afforded Altria pricing power to offset this a bit.
By no means is "just raise prices anytime volume falls" a sustainable strategy in the long term, but it does buy Altria some time as it tries to become less reliant on cigarettes. It's admittedly had some missteps in its smoke-free segment (see: the Juul disaster), but its new product, NJOY, has been picking up steam.
In the latest quarter, NJOY consumables shipment volume increased by 14.7% from the previous quarter, and its NJOY device shipments increased by 80%. Those numbers helped boost its retail share by 1.3 share points to 5.5%. The retail share seems small, but it's progress for a product that's only been in Altria's portfolio since June 2023.
Altria's net earnings in the first half of this year were over $5.9 billion, while it paid out $3.4 billion in dividends during that span. If the five decades-plus of consecutive dividend increases weren't reassuring enough, its payout ratio should comfort investors that it doesn't have to worry about overcommitting to its dividend.
With a dividend yield of around 8%, investors could expect to receive around $80 annually in dividend payouts.
2. AT&T
AT&T(NYSE: T) has had its fair share of struggles over the past few years, but this year has seen a noticeable turnaround in its stock. Its stock price is up over 26% (through Oct. 8), marking its most impressive stretch in quite some time.
Part of AT&T's recent success has been its refocus on its core telecom business. It recently sold its 70% stake in DIRECTV, marking the end of a painful attempt at entering the media and entertainment industry. In retrospect, these ambitions did nothing but land AT&T in deep debt and took its focus away from what really mattered.
One of the biggest events from AT&T's media attempts was its having to cut its dividend by almost half in early 2022 to free up cash flow. Its quarterly dividend dropped to $0.28 after the cut and remains there today. Even so, it has an impressive yield of around 5.1%.
Since AT&T has begun refocusing on its telecom business, both its postpaid phone subscribers and Fiber subscribers have grown. In its latest quarter, AT&T gained 1.6 million postpaid phone subscribers, with the average revenue per user (ARPU) increasing to $56.42. It gained 1.1 million Fiber customers, with ARPU increasing by $2.30 to $69.
AT&T's payout ratio is just over 64%, which is on par with its historical average, minus a couple of years during the COVID-19 pandemic.
T Payout Ratio Chart
AT&T's financials are returning healthy, and it's paying down some of its huge long-term debt. There were some concerns that another cut to the dividend could be in the works, but AT&T's free cash flow ($4.6 billion in the latest quarter) shows the company can sustain it and possibly even consider an increase in the future.
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
