Dividend Lovers: 3 U.S. Stocks to Turbo Charge Your Portfolio

U.S. dividend stocks like Coca-Cola (NYSE:KO) often have surprisingly high dividend yields.

| More on:
edit Balloon shaped as a heart

Image source: Getty Images.

Are you a Canadian dividend investor looking to diversify into U.S. stocks?

If so, there’s never been a better time to get started than now. The U.S. stock markets are down far more than the Canadian markets this year, which means that their dividend yields are rising faster. For the year, the S&P/TSX Composite Index (the Index of Canadian stocks) is only down 13%. The S&P 500, meanwhile, is down 23%. So, U.S. dividend yields are making gains compared to Canadian dividend yields.

Canadian stocks still have higher average dividend yields than U.S. stocks, but some individual U.S. stocks are starting to get interesting. In this article, I will look at three U.S. dividend stocks that could turbocharge your portfolio.

Bank of America

Bank of America (NYSE:BAC) is America’s biggest bank. With a 2.77% dividend yield, it won’t deliver huge income initially, but the payout could grow over time. According to GuruFocus, BAC’s dividend has grown at 24% per year over the last five years. If the company can keep up even maintain half that growth rate over the next five, then people who buy today will see their yield on cost double in that timeframe. For reference, “yield on cost” means dividends divided by stock price at time of purchase.

There are some signs that Bank of America will, in fact, be able to keep raising its dividend. First of all, it has a payout ratio (dividends divided by earnings) of only 29%, suggesting plenty of room to raise the payout. Second, unlike other U.S. banks, BAC’s revenue is still growing this year. Third, industry leaders like Elon Musk have indicated that if we enter a recession, it will be over by the first quarter of 2023, so banks should start growing their earnings again after that. Overall, I’m very excited about buying BAC at today’s depressed prices.

Micron Technology

Micron Technology (NASDAQ:MU) is a U.S. chip stock that has a 0.92% dividend yield. That yield is extremely low, but you need to consider the role that a company like Micron can play in your total portfolio. Micron makes computer chips like RAM (short-term memory) and Flash (long-term memory). These commodities are vital to the tech industry, and there are only three big companies on earth making high-quality RAM.

It’s a great position to be in, and Micron gives you a cut of the profits. Just be ready for some turbulence if you buy MU today, as RAM prices are currently trending downward because of the big tech slowdown. This stock is not for the faint of heart.

Coca-Cola

Last but not least, we have one of the greatest dividend stocks of all time, Coca-Cola (NYSE:KO). This stock is legendary for having given Warren Buffett a 2,500% price return after he bought it in the late 1980s. KO’s dividend has risen so much since the late 1980s that Buffett is now getting a 60% yield on cost on the position! To put that in perspective, with a 60% yield, you’re earning back your entire initial investment every year and a half. You would make an extreme profit at a 60% yield, even if the asset price went to zero.

Of course, Coca-Cola is unlikely to make such extreme gains in the future, but its current 3% yield isn’t too shabby. Plus, the company has a beloved and widely recognized brand and lucrative partnerships with many of the world’s top restaurant chains. It has a solid competitive position, suggesting that it will be able to continue delivering good results in the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Andrew Button has positions in Bank of America and Micron Technology. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

Man data analyze
Dividend Stocks

2 Canadian Dividend Stocks With 6% Yields That Are Too Cheap to Ignore

These top TSX dividend stocks now offer high yields.

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Monday, November 21

The commodity-heavy TSX index is likely to underperform its U.S. peers due mainly to the recent dip in oil and…

Read more »

Oil pumps against sunset
Investing

Oil or Tech? Why Choose When You Can Get Both in a Single Stock?

Tech stock Pason Systems (TSX:PSI) is exposed to the energy market boom.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Investing

Protect Against Inflation With 2 Top TSX Stocks

Here are two top TSX stocks that long-term investors concerned about inflation may want to consider in this time of…

Read more »

Woman has an idea
Tech Stocks

The Smartest Stocks to Buy With $20 Right Now and Hold Forever

These under-$20 stocks have the potential to grow further with time and deliver solid capital gains.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

TFSA Investors: Put $45,000 in These Top TSX Stocks and Watch Your Passive Income Roll In

Are you looking to retire early? Here are a few ideas about how your TFSA could earn a passive-income stream…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Love Passive Income? Here’s How to Make Plenty of it as a Real Estate Investor

You could definitely create passive income by investing in pure real estate, but you could make just as much, if…

Read more »

Make a choice, path to success, sign
Dividend Stocks

2 High-Yielding Dividend Stocks You Can Buy and Hold for Years

These two high-yielding dividend stocks can be the perfect addition to your portfolio, as the bear market causes payout yields…

Read more »