These seven stocks pay $98 billion in dividends annually.

Over the long term, dividend stocks have run in circles around companies that don’t offer any dividends. These proven companies distribute between $11.2 billion and $22.3 billion in annual dividends to their shareholders.

The stock market accommodates a variety of investment styles. Buying and holding proven dividend stocks for long periods just happens to be one of the more successful strategies.

The power of income investing is certainly exemplified by a study released 10 years ago from the wealth management division of JPMorgan Chase. This study found that public companies that initiated and increased their payouts between 1972 and 2012 produced an annual return of 9.5%. By comparison, companies that did not offer a dividend trotted out an annual return of just 1.6% over the same period.

While most investors tend to focus on returns, some brand-name companies stand out for the sheer size of their nominal dollar payouts. What follows are some of the biggest “donors” on Wall Street. These seven dividend stocks together pay out $98.2 billion annually to their shareholders.

Microsoft: $22.29 billion annual dividend to shareholders

Don’t let Microsoft’s modest 0.9% yield fool you: Tech stock Microsoft is a dividend stock! The company has raised its annual base payout for 14 consecutive years and currently distributes more than $22 billion to its shareholders each year (based on the quarterly payout of $0.75 per share).

The not-so-subtle secret to Microsoft’s success continues to be its blending of the old with the new. Most investors overlook the company’s legacy business (such as its Windows operating system) without realizing that these generally slow-growing segments still generate boatloads of operating cash flow and have well-identified moats. This money allows Microsoft to invest in higher growth initiatives and make revenue-generating acquisitions.

As for the ‘new’, Microsoft has gone all in on cloud services. Its Azure is the world’s number 2 provider of cloud infrastructure services, and it has gained on Amazon, whose Amazon Web Services has the largest market share. Microsoft’s sustained double-digit growth rate and massive cash balance bodes well for its future.

Apple: $15 billion in annual dividends

Another dividend stock that can make income investors scratch their heads is Apple, the largest publicly traded company in the US. Although the company’s dividend yield is a measly 0.6 percent, its quarterly payment of $0.24 amounts to $15 billion in annual dividends to shareholders.

What Apple brings to the table is one of the most trusted and recognized brands. Consumers tend to be very loyal to its products, and the company’s iPhone has absolutely dominated in the US since a 5G-compatible version hit store shelves in the fourth quarter of 2020.

But what it really thrives on is innovation, with CEO Tim Cook currently overseeing the transformation of Apple into a platform company. While it has no intention of abandoning the physical products that endeared the company to consumers (iPhone, iPad and Mac), it is evolving as a company to focus even more on subscription services. This measure should improve the company’s operating margin over time and further increase customer loyalty.

ExxonMobil: 14.52 billion dollars in annual dividends

The energy sector is usually known for high dividends, and oil is certainly no exception. Integrated oil and gas company ExxonMobil, which has increased its annual base payout for 40 consecutive years, is expected to distribute more than $14.5 billion to its shareholders over the next 12 months.

One reason why ExxonMobil has been such a stable payer of revenue seekers is its operational structure. As an integrated energy company, it generates its juiciest margins from drilling. But it also operates downstream assets, such as refineries and chemical plants. If the price of crude oil drops, the demand for downstream products tends to increase. This acts as a hedge to ensure a steady stream of operating cash flow.

Macroeconomic factors have also mostly worked in ExxonMobil’s favor. Since the start of the pandemic, crude oil has been in short supply. This is to say that reduced capital investment by global energy companies, along with Russia’s invasion of Ukraine (which has no clear end date), has limited global oil supplies. This should give a boost to the spot price of crude oil.

JPMorgan Chase: $12.22 billion in annual dividends

Along with energy, financial stocks – specifically bank stocks – are known to return a lot of capital to their shareholders. America’s leading bank by assets, JPMorgan Chase, is expected to distribute more than $12.2 billion in dividends to its shareholders over the next 12 months.

The fuel behind that dividend is interest rates and time. While consumers with credit card debt and new home buyers do not enjoy the cumulative 525 basis point increase in the federal funds rate since March 2022, banks certainly do. Each interest rate increase by the Federal Reserve results in additional net interest income for banks with outstanding variable rate loans.

Time is also a friend of JPMorgan Chase. Although banks are cyclical and therefore prone to credit losses and delinquencies during recessions, downturns in the US and global economies are relatively short-lived. Of the 12 post-World War II US recessions, only three have lasted at least 12 months. That means bank stocks are booming and companies are lending much more often than they are on the defensive.

Chevron: 11.54 billion dollars in annual dividends

Integrated oil and gas stock Chevron has increased its annual base payout in each of the past 36 years, and it is on track to pay shareholders more than $11.5 billion in dividends on an annualized basis.

Chevron benefits from many of the same catalysts as ExxonMobil. Its upstream drilling business thrives on a tight global oil supply, and its integrated operations lead to transparent and predictable operating cash flow.

Being able to forecast operating cash flow at least a year in advance is what gives Chevron’s management and board the confidence to commit capital to new projects and authorize a share repurchase program of up to $75 billion.

Its balance sheet is also untouched. Although ExxonMobil is no slouch, Chevron’s net debt ratio at the end of the June quarter was just 7 percent, giving it superior financial flexibility compared to other major energy companies.

Johnson & Johnson: 11.47 billion dollars in annual dividends

Healthcare stock Johnson & Johnson is known for filling investors’ wallets. J&J has increased its annual base dividend in each of the last 61 years and is expected to pay nearly $11.5 billion to its shareholders next year.

Its revenue mix has been one of the key catalysts driving its dividend growth. For more than a decade, the company has shifted its sales focus to pharmaceuticals. Although branded medicines have limited periods of sales exclusivity, they generate superior margins and provide Johnson & Johnson with exceptional pricing. Continuing to invest in drug research and collaborations can further increase J&J’s operating margin.

The second factor responsible for the company’s dividend growth is leadership continuity. In the 137 years since J&J was founded, it has had only eight CEOs, including current CEO Joaquin Duato. Having consistent leadership positions ensures that growth initiatives are properly implemented from start to finish.

Verizon Communications: $11.17 billion in annual dividends

The seventh and final dividend stock to distribute a hefty nominal payout is telecom company Verizon Communications. Based on the quarterly dividend of USD 0.665 per share, it should pay almost USD 11.2 billion to its shareholders over the next 12 months.

There seem to be two factors driving Verizon’s high dividends. For starters, its needle is pointing moderately higher due to the 5G revolution. Faster download speeds encourage consumers to use more data, which is a boon to Verizon’s wireless segment. Meanwhile, 5G speeds are helping the company add broadband users at the fastest pace in years.

The other positive for Verizon is that it provides almost essential services. No matter how good or bad the US economy performs, consumers are quite reluctant to give up their smartphones, wireless services or internet access. Historically low churn rates mean that Verizon can count on predictable cash flow.

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