Many people think dividend-paying stocks are great for retirees, and that’s certainly true. If you’re retired and you own a stock portfolio worth a total of $500,000 and it has a dividend yield of, say, 4%, you’ll earn about $20,000 in annual income – without having to sell any stocks! Even better, healthy and growing dividend payers tend to increase their distributions over time, so income could even keep pace with inflation.

But dividend-paying stocks are also great for people who are far from retirement. Let’s say your $300,000 portfolio has a total return of 4% – that’s $12,000 of annual income just showing up in your investment account. You may not need it to pay your living expenses, but you can reinvest those dividends – using them to buy additional stocks. So while you may only be able to put $10,000 into your investment account this year, your dividends will contribute $12,000. Dividends can be a powerful portfolio booster.

Here are three solid dividend payers to consider.

1. Pfizer

Pfizer (NYSE: PFE) is wrongly ignored by some investors who assume the company’s glory days as a provider of the coveted COVID-19 vaccines are over. That’s partly true, but there’s more going on at Pfizer. For one thing, the low share price (down about 51% since the end of 2021) has pushed up the dividend yield to 5.7% recently. And even better, CEO Albert Bourla has said, “I want to reiterate our commitment to maintaining and growing our dividend over time.”

Pfizer’s future is bright as the company has an extensive drug pipeline in development, including an obesity drug, and its acquisition of Seagen in 2023 for $43 billion will add several cancer drugs to the company’s portfolio and pipeline.

2. Medtronic

Medtronic (NYSE: MDT) is a giant in the medical device sector whose market value recently exceeded the $100 billion mark. In the fourth quarter, the company announced a 5.6% year-on-year increase in sales and “a strategic collaboration with NVIDIA to accelerate AI innovation for healthcare.”

The stock’s dividend was recently a solid 3.5% – although it may not grow as fast as other dividends. Nevertheless, the stock itself appears to be undervalued and should therefore increase in value in the coming years. The price-to-earnings ratio (P/E) of 14.9, for example, is well below the five-year average of 17.9.

However, you have to look at the whole business, not just the price. Medtronic has over 46,000 active patents and more than 214 active clinical trials. Its offering covers more than 70 health problems and the company specializes in products such as cardiac devices, surgical robots, insulin pumps, surgical instruments and patient monitoring systems. Medtronic is cutting costs and CFO Karen Parkhill says: “We are encouraged by the recovery in patient outcomes that we are seeing in many of our markets, our product availability is improving, we are pleased with our competitive position in all of our businesses and we are bringing many new, innovative products to market.”

The story continues

3. Comcast

Comcast‘S (NASDAQ:CMCS) The investment proposition may be a little less attractive as the company faces some headwinds, but the valuation largely takes this into account, with the company’s recent price-to-earnings (P/E) ratio of 9.3, well below the five-year average of 12.5.

In the second quarter, the company posted earnings of $1.21 per share, up 7 percent from a year ago. That’s promising, but the company’s revenue fell 2.7 percent to $29.7 billion. Comcast is struggling with a significant debt load and tough competition in the wireless and streaming space.

However, Comcast’s dividend was recently at 3.2% and its payout ratio (the percentage of earnings paid out as dividends) was recently at a reasonable 32%. If you’re bullish on and investing in this company that offers home connectivity, theme parks, NBCUniversal TV, Universal Pictures and more, it’s one to keep an eye on.

Take a closer look at the companies you are interested in and know that there are many other solid dividend-oriented investments out there.

Should you invest $1,000 in Pfizer now?

Before you buy Pfizer stock, consider the following:

The Motley Fool Stock Advisor The analyst team has just published what they believe to be The 10 best stocks for investors to buy now… and Pfizer wasn’t among them. The 10 stocks that made the cut could deliver huge returns in the years to come.

Consider when NVIDIA created this list on April 15, 2005… if you had invested $1,000 at the time of our recommendation, You would have $763,374!*

Stock Advisor offers investors an easy-to-understand plan for success, including instructions on how to build a portfolio, regular updates from analysts, and two new stock recommendations per month. The Stock Advisor Service has more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns as of August 12, 2024

Selena Maranjian holds positions in Medtronic, Nvidia, and Pfizer. The Motley Fool holds positions in and recommends Nvidia and Pfizer. The Motley Fool recommends Comcast and Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.

3 Dividend Stocks You Should Double Your Profits On Right Now was originally published by The Motley Fool