When looking for dividend stocks, there are a few things you should keep in mind. Of course, you want a company that has an attractive dividend yield, and anything above 2 to 3% is generally considered pretty good. However, a high yield isn't everything – you should also make sure the company has a history of steady earnings growth. Rising profits give a company stability, which allows it to not only make consistent dividend payments, but also increase those payments on a regular basis.
These characteristics are ideal in dividend stocks, which is why Arbor Realty Trust (WKN: A0CAPU), Cincinnati Financial (WKN: 878440) and United Bankshares (WKN: 923128) are all great dividend stocks. You can count on these distributions increasing year after year.
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Arbor Realty: a REIT with high distributions
Arbor Realty is a real estate investment trust (REIT) focused on the multifamily housing sector, with 81% of its total loan portfolio consisting of such loans. Multifamily sector has high barriers to entry, giving Arbor Realty a competitive advantage and stabilizing its earnings.
Multifamily loans tend to be less cyclical than single-family loans, which can fluctuate depending on market conditions. In times of recession, individuals are less likely to take out mortgages on single-family homes. Housing is always needed, however, and these individuals would rather look for multifamily housing for rent. Here's why multifamily housing survives recessionary conditions better than single-family housing.
In addition, multifamily housing is protected against early repayment. This means that you won't see a big rush to refinance in this area when rates are lowered. As a result, returns are not as volatile as single-family real estate companies.
Arbor Realty has done a good job growing its loan portfolio, which has increased 29% annually since 2015. This strong portfolio growth has led to 15% annual average net interest income growth and 29% annual average net income growth since 2015. Thanks to its excellent growth rate, Arbor Realty has increased its dividend payout for nearly a decade in a row, paying investors a 7.1% yield – making it a high-yield stock to trust.
Cincinnati Financial: a real dividend king
Insurance companies are another good source of income-producing stocks. That's because insurance is a relatively simple business – companies write policies and if they manage the risk properly, they make an underwriting profit. With those excess profits, companies are putting the money to work in the financial markets to generate income through various investment vehicles. Insurance companies are often true cash cows, making them a great source of return for any portfolio. That's why Warren Buffett has often referred to the insurance industry as Berkshire Hathaway's "most important sector".
Cincinnati Financial is a property and casualty insurer that has increased its dividend payout for 61 consecutive years. That makes the stock a member of the exclusive group of "Dividend Kings". A dividend king is a company that has increased its dividend payout for at least 50 consecutive years, and only 27 companies currently hold this stock.
The insurer has managed to grow its dividend for so many years thanks to its capital management and underwriting of profitable policies. Last year, the company reported a combined ratio of 98.1. Combined ratio is an important measure of profitability in the insurance industry; anything below 100% means you're making an underwriting profit. Over the past five years, Cincinnati Financial has achieved an average combined ratio of 96.1 percent.
In the process, earned premiums grew at a compound annual growth rate of 6.2% – above the industry average. Continued premium growth combined with underwriting profitable policies makes Cincinnati Financial another trustworthy stock that currently offers investors a solid 2.1% yield.
United Bankshares: the underrated income stock
United Bankshares does not officially count as a dividend aristocrat. But that's not because they haven't increased their dividends. In fact, the regional bank has increased its distributions for 47 years in a row. The only reason it's not one of the dividend aristocrats is that it's not an S&P 500 company – that makes this regional bank a dividend mainstay that stays under the radar.
Last year, it grew net income by 11.1% despite the pandemic. This was helped by its mortgage banking business and expansion into North and South Carolina through its purchase of Carolina Financial.
In the first quarter of this year, interest income rose 14% year-on-year to 206 million. U.S. dollar. The bank benefited from a dramatic reduction in loan loss provisions as well as income from its mortgage banking business. This contributed to a 166% year-on-year increase in net profit to 107 million. U.S. dollar increase.
United Bankshares has done an excellent job of growing net interest income and net income over the past decade, with annual growth rates of 10 and. 14% achieved. It also pays a solid dividend yield of 3.7%, making it another solid dividend stock to have confidence in.
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