Before diving deeper into the highest dividend-paying stocks on the market, we must first understand the core purposes behind dividends and why companies choose to distribute a portion of their net earnings to shareholders. Some of the reasons for dividend payments include:

• Investor loyalty - while this may sound counterintuitive at first, all stocks have a degree of ownership that is attributed to institutional investors. The trades made by these institutions are heavily scrutinized and frequently published, which means a large institutional sell-off can turn into a self-fulfilling prophecy and tank the stock. This is one of the reasons why many companies that can financially afford to pay dividends - usually choose to do so
• Compensating for slow growth - this is a case that is strictly attributable to large blue-chip stocks that are already well-established and grow at a steady annual rate. However, this steady growth can also lead to lower returns to investors, which is compensated by dividend payments, which increase the overall shareholder value created by the stock over a given period of time 
• Attracting new investors - it is important for companies to attract new investors to their stock to have a diverse demographic of shareholders. Paying attractive dividends can attract more conservative investors who are seeking stable cash flows to their portfolios

Invesco Mortgage Capital Inc (NYSE:IVR)

Invesco Mortgage Capital is a real estate investment trust that invests in residential mortgage-backed securities (RMBS). The REIT generates revenue from RMBS issued by government-sponsored enterprises, such as Freddie Mac, Fannie Mae, and Ginnie Mae. 

IVR currently has a dividend yield of 23.21%, making it one of the highest-yielding REITs on the market. Invesco Mortgage Capital also invests in commercial mortgage-backed securities or CMBS. In dollar terms, IVR returns $0.65 per share to its shareholders. 

The Q4 financial report published in December 2022 showed some impressive increases in the REIT’s bottom line:

• Revenue increased by a whopping 172% - reaching $41.5 million
• Net earnings reached $36.46 million - up 156.4% YoY
• Diluted EPS reached 0.83 - 136% increase YoY 

Solid financial performance and a high dividend yield make Invesco Mortgage Capital an attractive investment for many investors. 

ExxonMobil Corp (NYSE:XOM)

ExxonMobil is one of the largest oil and gas corporations in the world, with a market capitalization exceeding $435 billion. The company is also one of the best dividend-paying stocks on the market, paying just under $38 billion in dividends in FY 2022. This was the highest figure recorded on the U.S. stock market in 2022. Furthermore, ExxonMobil has a steady track record of dividend increases, with the 2022 dividend representing a 0.53% increase YoY. 

In terms of both stock performance and financials, ExxonMobil has had a stellar year in 2022. Rising inflation and demand for hydrocarbons have driven the company’s stock to all-time highs, gaining 38% over the past 12 months. The Q4 2022 financial report also highlights the huge boost to the company’s bottom line:

• Quarterly revenue increased by 15.47% - reaching $95.71 billion 
• Net earnings reached $12.75 billion - 43.74% increase YoY
• Net profit margin increased by 24.49% to 13.32% for the quarter

Superior financial performance, coupled with solid dividend payments, makes XOM one of the best stocks to buy and hold for long-term investors. The stock currently maintains a 3.53% dividend yield - returning $0.91 per share. 

"The evolution and success of the company [!exxonmobil!] has come from our work in technology and the advances that we've made in technology." - Darren Woods

Keurig Dr Pepper Inc (NASDAQ:KDP)

When Dr Pepper Snapple and Keurig Dr Pepper merged in 2018, an interesting dividend case could be observed by investors. Keurig offered to invest $9 billion in Dr Pepper Snapple’s equity, which would not have been enough to fully acquire the company, which is why the merged company offered a special dividend rate to existing shareholders. 

The agreement included a proposal for Keurig to pay existing Dr Pepper Snapple shareholders an enormous $103.75 per share. This dividend payment added up to $19 billion to the shareholders in total, which was an unprecedented occurrence. The special dividend payout came up to over 80% higher than the going value of the stock at the time. 

Nowadays, the merged Keurig Dr Pepper is far from a dividend aristocrat, with an annual dividend yield of 2.31%, the stock returns $0.20 per share, which is nowhere near the highest dividend rates paid by other members of the S&P 500. 

KDP’s bottom line was hit hard in 2022. Supply chain issues and increasing interest rates caused the business to narrow its profit margin to 11.9%, which is more than half of the Q4 2021 result, while revenues increased by over 12% to $3.8 billion.

"We're really bullish on where we're going in the future" - Bob Gamgort

Orchid Island Capital Inc (NYSE:ORC)

Orchid Island Capital is a residential real estate investment trust (REIT) that invests in residential mortgage-backed securities (RMBS). RMBS are backed by a pool of residential mortgages that earn interest income for the REIT.

Orchid Island Capital currently maintains a dividend yield of 18.92% - making it one of the highest-yielding REITs on the market. In terms of financials, ROC’s Q4 report from 2022 shows a revenue figure of $40.78 million, while net income came in at $34.93 million. While such results are generally characteristic of REITs, ROC has an exceptionally tight margin between its revenue and net earnings figures. Low fixed and variable costs allow Orchid Island Capital to return more value to shareholders. However, while the yield figure is quite impressive, ROC’s dividend per share only comes in at $0.48 per share, which is lower than many blue-chip stocks on the market. 

In terms of stock performance, Orchid Island Capital had a rough year in 2022, losing around 40% of its market value during the period. This comes as no surprise, however, as increasing interest rates make it difficult for some home buyers to pay back their mortgage, it affects the yields of RMBS investments. 

Apple Inc (NASDAQ:AAPL)

The largest ever annual dividend payment in a single fiscal year goes to Apple Inc. The technology giant paid a whopping $45 billion as part of its dividend and share buyback program in 2012, which represented a 2.65% dividend yield at the time. 

Currently, Apple still remains one of the largest dividend payers on the market, with $37 billion paid by the company as recently as 2022. 

Apple’s consistent dividend increases are also worth noting. The company has been steadily increasing its dividends, hiking payments by 2.74% by 2022. Apple’s global reach and massive earnings allow the company to reward its investors generously. Aside from being a dividend aristocrat, Apple is also somewhat volatile when compared to other megacorporations with steady dividend growth. The stock currently has a beta of 1.23 - 23% higher than the broader market. 

"We're being very deliberate on our hiring that means we're continuing to hire but not everywhere in the company are we hiring we believe strongly in investing for the long term and we don't believe you can save your way to prosperity, we think you invest your way to it " - Tim Cook

A part of this dividend growth has been funded by debt, which seems to be slowing down as the Federal Reserve hikes interest rates north of 5.00%. However, Apple’s titanic balance sheet and an eye-watering $99.8 billion in 2022 earnings give investors little to concern themselves about the company’s capabilities to service its debt obligations. 

While dividend stocks play an important part in any well-balanced stock portfolio, they do come with their own fair share of advantages and disadvantages. Understanding these factors can help investors better balance risks and returns attributable to their investments. 

Pros

• Less stressful - investors who focus on a portfolio of dividends stocks and bonds are less likely to constantly check the market and worry about the constant price fluctuations
• Cash flow - dividends are regular cash payments made to shareholders, which can add surplus value when the stock price is increasing. A steady influx of cash is always welcomed by investors
• Less volatility - while all stocks are volatile to some extent, most dividend-paying stocks are part of major indices and are relatively stable companies with a long track record of profitability

Cons

• Less room for growth - as already mentioned, most dividend stocks are relatively stable companies with a bulk of their early-stage growth long past. This can lead to low annualized returns for dividend stocks
• Low dividends - while dividend yields can vary from stock to stock, most dividends paid by public companies are relatively low in dollar value. The income generated through dividends is often not even enough to hedge against inflation 
• Capital intensive - generating substantial dollar amounts from dividends require massive principal investments, which is not an option for most investors 

• Dividend payments are one of the primary reasons why so many investors choose the stock market as their preferred place to invest
• Giant multinational corporations pay billions of dollars in dividends each year 
• There is an important distinction to be made between cash dividends and dividend yields, as the former denotes the actual amount of cash paid to shareholders, while the latter shows a percentage return per dollar invested
• The largest-ever dividend payment belongs to Apple, which continues to be one of the leading dividend stocks on the market today 
• Dividend stocks offer steady cash flows and are generally favored by conservative long-term investors