The Fed’s move to lower interest rates would have a ripple effect throughout the economy, pushing investors looking for passive income elsewhere. As yields on things like high-yield savings accounts fall, investors may turn to high-quality, high-dividend stocks. Consumer spending and healthcare are two pillars of the U.S. economy, making it a great place to look for these stocks.
I’ve identified three stocks with generous yields and the financial strength to pay dividends. These companies also boast durable business models that thrive even in recessions, providing peace of mind for income-focused investors.
1. Pfizer
Current yield: 5.8%
Pharmaceutical giant Pfizer (NYSE:PFE) has been a big winner during the coronavirus outbreak, thanks to its vaccines and treatments that have generated a temporary wave of growth. But over the past few years, that trend has faded, and as sales and profits have shrunk, stock prices have fallen to multi-year lows.
However, the company is poised to resume growth, with analysts expecting annual profit growth of 8% to 9% over the next three to five years. Pfizer has focused its business on oncology, using pandemic profits to buy Seagen for $43 billion last year.
Management raised Pfizer’s dividend by 2.4% last December, a sign of confidence that the dividend is safe. The dividend payout ratio has also become healthy. Dividends represent approximately 64% of expected profits in 2024, so Pfizer appears poised to continue increasing its dividend for 15 consecutive years. The company’s stock trades at just 11 times estimated 2024 earnings, a significant discount to the broader market and an attractive price for a company with low-single-digit earnings growth. .
Pfizer represents a solid income investment with future upside potential.
2. Artoria
Current yield: 8%
Tobacco companies are known for being dividend stocks, and Altria ( NYSE:MO ) is a great example of a company that has been funneling cash to shareholders for decades. The company sells Marlboro cigarettes and major brands of cigars, chewing tobacco and smokeless products in the United States. The company is also a Dividend King, meaning it has increased its dividend for over 50 years, proving how resilient the tobacco industry is despite declining smoking rates.
Dividends continue to maintain a good financial position, with a payout ratio of 80% of expected earnings in 2024. The dividend is backed by an investment-grade balance sheet and multibillion-dollar stake in Anheuser-Busch, which the company can liquidate if needed.
the story continues
Altria’s cigarette shipments have declined almost every year, but profits continue to inch upwards due to a combination of price increases and stock buybacks. Analysts expect the company’s profits to grow by an average of 3% to 4% over the next 3 to 5 years, meaning the dividend will continue to grow gradually.
The stock trades at 10 times Altria’s estimated 2024 earnings, but I’m hesitant to call the stock a bargain given its low growth rate. However, you don’t need that much to get an 8% dividend yield. Those ultimately concerned with investment returns will have a hard time finding yields this high that are equally safe.
3. Real estate income
Current yield: 5%
Real estate is one of society’s oldest industries, and real estate investment trusts (REITs) like Realty Income (NYSE: O) allow people to invest in real estate without directly owning it. REITs acquire real estate, rent it out, and distribute most of the proceeds to shareholders. That makes Realty Income a great dividend stock.
Although the company has increased its dividend for 29 consecutive years, its payout ratio remains at just 75% of this year’s projected funds from operating funds (FFO). Additionally, Realty Income pays dividends monthly. This is a nice perk for investors who need regular cash flow to pay their bills.
Real estate revenue has thrived through economic ups and downs because it focuses on retail rentals that people use regardless of economic conditions. Think grocery stores, restaurants, convenience stores, and pharmacies. Realty Income leases more than 15,000 properties, resulting in a vast and diverse portfolio that generates stable rental income for the company.
REITs like Realty Income often borrow money to fund real estate acquisitions, so lower interest rates are advantageous. Lower borrowing costs should make real estate income even more profitable.
Real Estate Income trades at nearly 15 times estimated 2024 FFO, a fair price given the company’s positive outlook and reliable dividend growth.
Should I invest $1,000 in Pfizer right now?
Before purchasing Pfizer stock, consider the following:
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Justin Pope has no position in any stocks mentioned. The Motley Fool has a position in and recommends Pfizer and Realty Income. The Motley Fool has a disclosure policy.
3 High Dividend Stocks to Buy Right Now was originally published by The Motley Fool.