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Organon & Co.(OGN-N)

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Want $5,000 in Annual Dividend Income? Invest in These 3 Stocks

Motley Fool - Thu Jun 29, 2023

Whether you're saving for retirement, want to set aside money for travel, or just want to give yourself a raise, dividend stocks can help give you some extra income to accomplish those goals. Plus, by investing in quality stocks, you can also potentially profit from their rising share prices. If you have a lot saved up and want to earn $5,000 in annual dividend income, you can get that by investing approximately $85,000 in the following three stocks: Organon & Co. (NYSE: OGN), Enbridge (NYSE: ENB), and Dominion Energy (NYSE: D).

1. Organon -- $25,000

Organon spun off from Merck & Co. in 2021. The company generates most of its revenue from established brands, including cholesterol drug Atozet and asthma medication Singulair. That segment accounts for two-thirds of the company's revenue, followed by women's health, which brings in around one-quarter of sales. The company's biosimilar business generates the remainder.

Combined, the segments give the company some good long-term stability. And although the business is by no means a growth beast, it did generate 3% revenue growth during the first three months of the year when factoring out the impact of foreign exchange. And with a diluted per-share profit of $0.69, that gives Organon plenty of room for it to cover its quarterly dividend payment of $0.28.

With a modest payout ratio of around 40%, this makes for a fairly safe dividend stock to buy and hold. Organon currently yields 5.4%, which is more than three times the S&P 500 average of 1.6%. Investing $25,000 into the healthcare stock would be enough for you to collect approximately $1,350 in annual dividends.

2. Enbridge -- $35,000

Pipeline company Enbridge offers investors one of the best deals on the market right now, which is why it warrants a larger investment. With a dividend yield of 7.2%, investing $35,000 into this oil and gas stock would mean you're collecting over $2,500 per year from it.

The company prides itself on having a low-risk model that enables Enbridge to continue growing and paying a high dividend. Its long-term contracts give the company some remarkably good long-term stability, and its role in the industry is an important one; the company's Mainline and Express networks deliver over 3 million barrels of crude oil and liquids each day. In North America, the company has 17,809 miles worth of active crude pipeline, as it operates one of the world's longest and most complex transportation systems in the industry.

Through the first three months of 2023, the company's results were on track with its guidance, and its distributable cash flow per share (which it uses to evaluate the safety of its dividend) totaled 1.57 Canadian dollars, which was up 3% year over year, putting its payout ratio at 57%.

The company has also been increasing its dividend for 28 consecutive years, giving investors some excellent incentive to buy and hold the stock for the long haul.

3. Dominion Energy -- $25,000

Dominion Energy is a utility company that operates in 16 states and serves 7 million customers. The company's first-quarter earnings for the period ended March 31 fell short of expectations, with operating earnings per share of $0.99 coming in 10 cents lower due to much warmer weather than anticipated.

But even at $0.99, that's well above the company's quarterly dividend payment of $0.67 and would put it at a payout ratio of 67% if it were to remain at that level of profitability. Seasonality can and will impact Dominion's earnings but using last year as a base, the company's operating earnings per share totaled $4.11, which put its payout ratio at a very sustainable 65%.

At 5.2%, Dominion Energy technically has the lowest yield on this list. Investing $25,000 into the stock would generate approximately $1,300 in annual dividend income. And when combined with the other investments on this list, that would bring your annual dividend tally to $5,150.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge and Merck. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

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