Companies are making lots of money these days. Many choose to return a portion of their profits to investors by paying dividends. American corporations paid out $161.5 billion in dividends during the second quarter, an 8.6% increase from the prior-year period.
Anyone can get a slice of this dividend income. All you have to do is buy shares of a company that pays dividends. Here's a look at some of the top options.
The top dog in dividends
Technology titan Microsoft(NASDAQ: MSFT) was the leading U.S. dividend payer last quarter. The company behind the Windows operating system, Xbox, and other technology products and services paid its investors a massive $5.6 billion in dividends during the second quarter. That was the top payout among U.S. corporations and the seventh largest globally.
Anyone can invest in Microsoft stock. Shares currently cost a little more than $400 apiece. Buying one share entitles investors to receive $0.75 per share in dividends each quarter ($3.00 annually). That payment rate gives Microsoft a roughly 0.7% dividend yield at the recent share price. Put another way, every $1,000 you invest in Microsoft stock will generate about $7 of annual dividend income.
Microsoft has a knack for increasing its dividend. It gave investors a 10% raise last September. The technology giant has increased its payout every year for more than a decade. Given its investments in high-growth sectors like cloud computing and artificial intelligence (AI), the company should be able to continue increasing its dividend in the future.
Joining the club
While Microsoft has been paying dividends for over a decade, others in the tech sector are relatively newbies. Search behemoth Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) and social media giant Meta Platforms (NASDAQ: META) have initiated dividends in the past year. Meta Platforms, the parent company of Facebook, initiated a $0.50 per share quarterly dividend in February, while Alphabet (owner of Google) followed suit with its first-ever quarterly dividend of $0.20 per share in April. The technology companies combined to pay nearly $4 billion in dividends during the second quarter.
The tech duo currently has low dividend yields. Meta's is around 0.4% at its more than $500 share price, while Alphabet's is slightly higher at around 0.5% at its $150 stock price. At that rate, you could earn about $4 of dividend income each year for every $1,000 invested in Meta stock and about $5 each year from Alphabet.
However, what these tech giants lack in yield, they'll likely make up for in growth. They could follow Microsoft by delivering double-digit annual dividend growth in the coming years, powered by their investments in new technologies, like AI.
A big-time income stream
Those seeking to collect more dividend income have lots of options. Many high-quality companies offer high dividend yields. For example, most real estate investment trusts (REITs) currently offer dividend yields of around 4% (compared to less than 1.5% for the average stock).
Realty Income(NYSE: O) is one of the best REITs for dividend income. The owner of freestanding retail, industrial, and gaming properties has paid over $14.1 billion in dividends throughout its history, including $2.1 billion last year. It's on pace to pay about $2.5 billion in dividends this year.
The REIT makes monthly dividend payments of $0.263 per share ($3.156 annually). With its share price currently in the $60s, the REIT offers a dividend yield of around 5%. That means you could collect about $50 of dividend income each year for every $1,000 you invest in the REIT.
The income stream will likely rise at a steady pace in the future. Realty Income has increased its dividend 126 times since it came public in 1994, including for the last 107 straight quarters. The REIT has grown its payout at a 4.3% compound annual rate during that time frame. With a strong balance sheet and long growth runway (there are trillions of dollars of commercial real estate around the world), it should have no trouble continuing to put more income into its investors' pockets each year.
Get your slice of the income pie
Companies make a lot of money each year. They routinely return a percentage of their profits to their shareholders via dividend payments. You can easily become an investor by opening a brokerage account and buying shares of a company that pays dividends. That would enable you to collect a small sliver of the dividend income they pay their investors each year.
That income stream can grow as these companies increase their payments, and you buy more shares of dividend-paying stocks. And rising dividend income could eventually help you enjoy a more comfortable retirement.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Matt DiLallo has positions in Alphabet, Meta Platforms, and Realty Income. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, and Realty Income. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
