Dividends are a great way to generate passive income and are a sensible part of any portfolio. The magic of dividend stocks is that they offer two possible ways to generate income. First, you have the dividends themselves, which are an indicator of a financially strong company that can return value to its shareholders. The second avenue is the potential for the value of the company's stock to grow over time.

Let's look at three dividend-focused investments that have provided strong returns over time.

Verizon $VZ-0.4%

Verizon

VZ

$41.15 -$0.16 -0.39%

Capital Structure

Market Cap

173.2B

Enterpr. Val.

345.3B

Valuation

P/E

15.5

P/S

1.3

Open $41.36

Day range $41.13 - $41.79

52 week range $30.14 - $43.42

In a necessary industry, with high barriers to entry, Verizon represents an attractive dividend investment with a yield of 6.4%. Even with slower growth, Verizon has enough free cash flow to continue paying its current dividend.

This communications company has had relatively static earnings over the past five years, but it still delivers solid profits. The wireless and broadband parts of the business are growing, while Verizon's central business faces slow or no growth.

Overall, Verizon has consistently strong cash flow, ending 2023 with $18.71 billion of free cash flow. For the quarter ended March 31, Verizon had $2.71 billion in free cash flow, compared to $2.33 billion in the prior year. The company could definitely use a little boost in earnings growth, but this 6.4% dividend seems safe.

S&P 500 High Dividend ETF $SPYD-0.9%

SPDR Portfolio S&P 500…

SPYD

$44.41 -$0.39 -0.87%

Capital Structure

Market Cap

6.6B

Enterpr. Val.

0.0

Valuation

P/E

16.9

P/S

-

Open $44.84

Day range $44.31 - $44.99

52 week range $32.88 - $45.38

The S&P 500 High Dividend ETF covers 80 companies in the S&P 500 index. This exchange traded fund offers a more diversified approach to finding dividend yields. Think companies like Iron Mountain, a data storage specialist, e-commerce platform Best Buy and investment group Morgan Stanley.

With a yield of over 4.5%, it's a good choice for investors who aren't quite sure about investing in individual stocks. Keep in mind that this fund won't be outperforming the S&P 500 index anytime soon. Its five-year return is just over 5%. This fund is focused solely on collecting dividends.

Coca-Cola $KO+0.0%

Coca-Cola

KO

$71.14 -$0.03 -0.04%

Capital Structure

Market Cap

306.6B

Enterpr. Val.

336.6B

Valuation

P/E

28.9

P/S

6.6

Open $70.99

Day range $70.95 - $71.67

52 week range $51.55 - $73.53

Proven Coca-Cola is a long-term source of dividends. Warren Buffett loves Coca-Cola, and the beverage company has decent growth numbers to keep that 3% dividend alive while also creating upside potential for the stock. For the first quarter of the year ended March 29, Coca-Cola's net operating income rose 3% year-over-year to $11.3 billion, while earnings per diluted share rose 3% to $0.74.

Sales growth has slowed a bit, but it's still there, with about 7% revenue growth in 2023 and 12.28% growth in net income. People may look at Coca-Cola and say that sugary soft drinks aren't as popular as they once were. While that's true to some extent, Coca-Cola is now diversified across a broad product portfolio and remains committed to its dividend plan that has been increasing shareholder payouts for decades.

With free cash flow of $9.75 billion in 2023 and $158 million of free cash flow in the first quarter of 2024, compared to a $116 million decline in the prior year, Coca-Cola appears on track to maintain its dividend plan.

Disclaimer: There is plenty of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always conduct a thorough analysis of your own.

Source: Yahoo Finance.