2 High-Yield Sleep-At-Night Stocks To Buy And Forget About

Key Points

• Medtronic is a high-yield dividend grower for risk-averse investors. 
• Verizon is an even higher yield; both companies also offer low beta. 
• Chart action suggests bottoms are in play for these high-yield values. 

Medtronic NYSE: MDT and Verizon NYSE: VZ are 2 high-yielding stocks that investors who like to sleep at night should consider. They offer yield and value, and they also have robust upside potential. The salient point is that they pay healthy dividends that can be relied on through market downturns and even provide some insulation from broad market swings. Medtronic’s beta is below average at 0.72X the S&P 500, and Verizon’s is even lower, making them an attractive pair of stocks. 

Medtronic Makes The Cut At Bank Of America 

Bank of America recently released the results of its screen for sleep-at-night stocks, and Medtronic made the cut. They list the stock in the #2 position behind Walmart for consistent dividend growth. This company is a Dividend Aristocrat verging on King with 46 years of consecutive increases in its history. That alone is not enough to guarantee future increases, but it is a good start coupled with a low 50% payout ratio, low leverage, and an outlook for earnings growth. 

The Q3 earnings were good and showed growth is returning. More importantly, growth in the core business is offsetting declines in COVID-related sales and is helping the stock to bottom. The analysts have been lowering their ratings and targets for the last year, but that changed with the Q3 results.

Only one analyst report has been released since the earnings release, but it is noteworthy for the price target increase. This is the first increase since the middle of 2021 and marks a shift in sentiment that the institutions also point to. The institutions were selling in 2022 but began to buy in Q4 and accelerated the buying in Q1 2023. 

The price action in MDT shares has been volatile since the Q3 release, but it looks like the bottom is in. Price action shows support at the $76 level, which the indicators confirm. Assuming the market follows through on this signal, the stock should move sideways within the new range if not gear up for a reversal. Medtronic shares should increase in the longer term as growth drives earnings and dividend increases. 

Verizon: Too Cheap, Yield Too High To Ignore 

Verizon is no growth company, and it isn’t a dividend stock of Medtronic’s caliber, but it isn’t far off. This company has been increasing its dividend for the last 18 years and appears capable of continuing that trend for the foreseeable future. In addition to increases, this stock offers a low 7.25X price multiple compared to the broad market 15X and pays more than 3X the dividend.

Verizon’s payout (due mainly to a 40% decline in share price) has climbed into the 7% range, which has become too high to ignore. 

The analysts helped drive Verizon to where it is now, but this move is overblown. The analysts rate the stock a Hold despite the trend of price target reduction that began in 2022, and they still see an upside for the market. The consensus predicts at least 30% for the stock, which has stabilized over the last quarter. Assuming this is an end to the downtrend and not just a pause, the stock will continue to bottom at the current level.

The low price target, set by UBS last year, assumes the stock is fairly valued at the current price near $37, so further downside is limited regardless of where the exact bottom is. 

The chart is promising and shows a potential bottom at $36.50. This level has produced 1 bounce, and another is forming. If this bounce is strong enough, the market could reverse, but it is more likely to enter a trading range until broad economic conditions improve.