Dividend stocks are a go-to for many investors seeking reliable passive income and robust total returns. The total return is a comprehensive metric that includes interest, capital gains, dividends, and distributions over time, essentially summing up income and stock appreciation. This dual benefit makes dividend stocks a potent tool for enhancing investment success through regular income and capital growth.
The latest jobs report released on Friday confirmed the widespread sentiment on Wall Street: the economy is decelerating rapidly. There’s a growing consensus that the Federal Reserve has been too slow in lowering interest rates. Given the weak employment data, where most new jobs were in government and healthcare, many analysts now foresee up to three 25 basis point rate cuts in 2024, starting as early as September. Some even predict the initial cut could be a more substantial 50 basis points.
With yields on government bonds plummeting— the 10-year bond closing below 4% for the first time since February—investors are likely to seek alternative sources of dependable passive income. High-yield dividend stocks stand out as a prime option, particularly those with a track record of paying reliable quarterly dividends for over five decades.
Here are five top picks that could benefit growth and income investors looking to capitalize on an anticipated aggressive rate-cut cycle.
Altria Group Inc. (NYSE: MO)
Altria, a leading tobacco company, currently presents a compelling opportunity for value investors, offering a substantial 7.84% dividend yield. Altria manufactures and sells smokable and oral tobacco products in the United States through its subsidiaries. Its portfolio includes:
- Cigarettes under the Marlboro brand
- Cigars and pipe tobacco under the Black & Mild brand
- Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
- Oral nicotine pouches under the on! brand
The company primarily sells its products to wholesalers, including large retail organizations and chain stores. Notably, Altria recently sold a significant portion of its stake in Anheuser-Busch InBev S.A. (NYSE: BUD), freeing up capital for a $2.4 billion stock repurchase plan.
Energy Transfer L.P. (NYSE: ET)
Energy Transfer, a top-tier master limited partnership, offers a massive 7.91% distribution yield, making it an attractive option for those seeking energy sector exposure and income. Energy Transfer owns and operates an extensive and diversified portfolio of energy assets in the U.S., with operations spanning:
- Natural gas midstream
- Intrastate and interstate transportation and storage assets
- Crude oil, NGL, and refined product transportation and terminalling assets
- NGL fractionation and various acquisition and marketing assets
With over 114,000 miles of pipelines across 41 states, Energy Transfer is a dominant player in the midstream sector. The company also owns substantial interests in Sunoco L.P. (NYSE: SUN) and USA Compression Partners L.P. (NYSE: USAC).
Franklin Resources Inc. (NYSE: BEN)
Franklin Resources, a mutual fund giant, provides a secure 5.58% dividend yield. This global money manager markets mutual funds and institutional separate accounts under several brands, including Franklin, Templeton, and Mutual Series. Its international sales often constitute half of its revenue, providing a buffer against the maturing U.S. market.
Pfizer Inc. (NYSE: PFE)
Pfizer, a top pharmaceutical firm, pays a hefty 5.48% dividend and has a diverse portfolio of medicines and vaccines. Despite recent setbacks in booster vaccine uptake, Pfizer remains a solid investment with products spanning:
- Cardiovascular and women’s health (Eliquis, Premarin)
- Cancer treatments (Ibrance, Xtandi)
- Sterile injectables and anti-infectives (Zithromax, Paxlovid)
- Vaccines (Prevnar, Comirnaty)
Trading at near-record lows, Pfizer offers an attractive valuation and a robust dividend, with the company recently raising its 2024 guidance by $1 billion.
Verizon Communications Inc. (NYSE: VZ)
Verizon, a leading telecommunications firm, trades at just 8.7 times estimated 2025 earnings and provides a substantial 6.51% dividend yield. Verizon serves consumers and businesses through its Consumer and Business segments, offering a range of services including wireless, fixed wireless access broadband, and fiber-optic services through its Verizon Fios product line.
Key Takeaways
- Altria: A value buy with a rich dividend.
- Energy Transfer: High distribution yields in the energy sector.
- Franklin Resources: Stability and growth from a mutual fund powerhouse.
- Pfizer: Strong pharmaceutical dividends despite recent volatility.
- Verizon: High-yield telecom with significant upside potential.
As the Federal Reserve navigates rate adjustments, these high-yield dividend stocks offer a strategic advantage for investors seeking reliable income and growth potential.