Despite signs of a slowing economy, investors continue to climb the wall of worry. And let's face it, many of the most popular technology stocks are the opposite of value investing.
So is now the time to buy dividend stocks? Not according to billionaire hedge fund manager David Einhorn, who recently expressed his belief that value investing is dead.
Those are harsh words for investors who enjoy the passive income and compounding growth that come from great dividend stocks. However, while Einhorn is offering a new investing methodology, the basics of dividend investing still hold.
If you want buy-and-hold stocks to build wealth slowly, there aren't many better options than high-yield dividend stocks. That's particularly true during periods of high inflation.
In this presentation, we cover seven stocks that all have a dividend yield of over 7%. As you would expect, energy stocks and material stocks are heavily represented on our list, but as you'll see you can find high-yield dividend stocks in many sectors of the economy.
Quick Links
- Rio Tinto Group
- Vale
- Altria Group
- Enbridge
- Energy Transfer
- National Grid
- JPMorgan Equity Premium Income ETF
#1 - Rio Tinto Group (NYSE:RIO)
The Rio Tinto Group (NYSE: RIO) is the world’s second-largest miner. The company has integrated mining operations in eight countries, including Africa and Australia. Along with precious metals (gold, silver, etc.), Rio Tinto mines for iron ore and lithium, which will be essential as we move to a renewable energy economy.
Materials stocks and mining stocks in particular can be highly cyclical in nature. Much like oil, it’s capital intensive to get minerals and metals out of the ground, which can limit the upside. However, it appears demand for vital metals such as lithium and copper will outpace supply over the next decade. That should increase the runway and the potential upside for RIO stock.
RIO stock has delivered an average five-year total return of 50.81%. That means every $1,000 invested in the stock would now be worth over $1,500. The dividend yield as of July 5, 2024 is 7.62%, and it currently pays $5.15 per share annually.
About Rio Tinto Group
Rio Tinto Group engages in exploring, mining, and processing mineral resources worldwide. The company operates through Iron Ore, Aluminium, Copper, and Minerals Segments. The Iron Ore segment engages in the iron ore mining, and salt and gypsum production in Western Australia. The Aluminum segment is involved in bauxite mining; alumina refining; and aluminium smelting.
Read More - Current Price
- $62.40
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#2 - Vale (NYSE:VALE)
Vale S.A. (NYSE: VALE) is another materials stock on this list of high-yield dividend stocks. The bullish argument for Vale is similar to that of Rio Tinto. Vale is highly focused on iron ore and copper, both of which will be essential to the renewable energy economy. The company touts its commitment to sustainable mining.
Like many mining stocks, VALE stock has been trading lower. It’s down 13.3% over the last 12 months, with the biggest losses occurring in 2024, as the stock is down 26% year-to-date. However, analysts appear to believe that the stock may be oversold. The Vale analysts' forecast on MarketBeat give the stock a consensus Moderate Buy rating with a price target of $16.86, which is a 44% upside.
The average five-year total return for VALE stock is 9.88%. The dividend yield is 10.13% and it pays out $1.18 per share on an annual basis.
About Vale
Vale SA, together with its subsidiaries, produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally. The company operates through Iron Solutions and Energy Transition Materials segments. The Iron Solutions segment produces and extracts iron ore and pellets, manganese, and other ferrous products; and provides related logistic services.
Read More - Current Price
- $10.03
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $15.13 (50.9% Upside)
#3 - Altria Group (NYSE:MO)
Altria Group Inc. (NYSE: MO) is a consumer staples stock that falls into the category of sin stocks. Until the S&P 500’s recent rally, Altria was outpacing the S&P 500 in terms of stock price growth. And as of July 5, 2024, the 13.7% year-to-date gain in MO stock is within striking distance of the 16.7% gain in the S&P 500.
With cigarette smoking declining, Altria continues to pivot into reduced-risk products (RRP). In March 2023, Altria acquired NJOY and its e-vapor product portfolio, including NJOY ACE, the only pod-based e-vapor product to have received market authorizations from the FDA.
Among these dividend dynamos, Altria’s revenue and earnings growth is not going to blow away investors. Still, the company has generated an average five-year total return of $40.21. Furthermore, the company is a Dividend King that has increased its dividend for 55 consecutive years. That puts some teeth into the company’s dividend yield which is 8.51%.
About Altria Group
Altria Group, Inc, through its subsidiaries, manufactures and sells smokeable and oral tobacco products in the United States. The company offers cigarettes primarily under the Marlboro brand; large 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; and e-vapor products under the NJOY ACE brand.
Read More - Current Price
- $55.98
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 3 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $51.33 (8.3% Downside)
#4 - Enbridge (NYSE:ENB)
When you think of value investing, energy stocks come to mind. Enbridge Inc. (NYSE: ENB) is a Canadian company that has the largest midstream operation in North America.
Due to the cyclical nature of the oil and gas industry, companies like Enbridge are known for offering high-yield dividends to keep investors interested. However, because oil and gas need a path to flow regardless of demand, Enbridge can keep its vast pipeline network active. Still, the company’s revenue and earnings have been hurt as the market is currently well-supplied.
But Enbridge isn’t sitting still. Rather, it’s almost finished acquiring three high-quality gas utilities in the United States. Once those deals are complete, analysts will likely increase their earnings estimates, which currently are in the mid-single digits.
ENB stock has delivered an average five-year total return of 37.7%. The company’s current dividend yield is 7.53%.
About Enbridge
Enbridge Inc, together with its subsidiaries, operates as an energy infrastructure company. The company operates through five segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services. The Liquids Pipelines segment operates pipelines and related terminals to transport various grades of crude oil and other liquid hydrocarbons in Canada and the United States.
Read More - Current Price
- $42.79
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Energy Transfer (NYSE:ET)
Energy Transfer LP (NYSE: ET) is another high-yield dividend energy stock to consider. Like Enbridge, Energy Transfer is a midstream company that has a large network of natural gas pipelines. And also like Enbridge, the company is growing through acquisition.
Energy Transfer is in the process of acquiring WTG Midstream for $3.25 billion. The aquisition will give Energy Transfer the largest gas gathering and processing business in the coveted Permian Basin, a strategically important location for delivering natural gas to data centers. This will be a massive growth area in the coming decade in order to power the expansion of AI applications, and Energy Transfer is at the forefront.
ET stock has delivered an average annual return of 12.98% in the last five years. The company’s dividend yield is 7.85%. It has been growing its dividend at a rate of 4.98% over the last three years.
About Energy Transfer
Energy Transfer LP provides energy-related services. The company owns and operates natural gas transportation pipeline, and natural gas storage facilities in Texas and Oklahoma; and approximately 20,090 miles of interstate natural gas pipeline. It also sells natural gas to electric utilities, independent power plants, local distribution and other marketing companies, and industrial end-users.
Read More - Current Price
- $18.29
- Consensus Rating
- Buy
- Ratings Breakdown
- 8 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $20.00 (9.3% Upside)
#6 - National Grid (NYSE:NGG)
National Grid plc (NYSE: NGG) is a regulated electric and gas utility with operations in the United Kingdom and United States. Utility stocks can be exceptional choices among high-yield dividend stocks and National Grid is no exception. Still investors need to be aware of why NGG stock is trading near its 52-week low as of July 5, 2024.
The company is investing billions in upgrading its systems to accommodate the renewable energy transition. This has investors nervous about National Grid’s debt position which is likely to increase - and that will be dilutive to current NGG shareholders.
Nevertheless, utility stocks tend to be good investments in declining interest rate environments. Although nobody knows when it will happen, it’s a near certainty that interest rates will move lower over the next couple of years. That means that a high-yield dividend stock like NGG, which has a yield of 8.24%, is a solid choice for income-hungry investors.
About National Grid
National Grid plc transmits and distributes electricity and gas. It operates through UK Electricity Transmission, UK Electricity Distribution, UK Electricity System Operator, New England, New York, National Grid Ventures, and Other segments. The UK Electricity Transmission segment provides electricity transmission and construction work services in England and Wales.
Read More - Current Price
- $63.28
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI)
There are many exchange-traded funds (ETFs) that can help investors looking to benefit from high-yield dividends. An interesting choice is the JPMorgan Equity Premium Income ETF (NYSEARCA: JEPI), which sells covered call options to generate a portion of its revenue - something that may appeal to traders and investors alike.
Many buy-and-hold investors don’t trade options on individual stocks. Yet, in today’s market, options trading is vital to maximizing gains. That’s an attractive feature of the JEPI fund, which has generated a total return CAGR of 12.38% over the last five years with an average dividend yield of 10.43%.
Plus, the fund is largely concentrated in blue-chip large cap stocks. And its equal weight methodology means that each stock held by the fund is roughly as important as the others. It may limit the upside on a high-flying tech stock, but it also limits the downside risk to underperformers.
About JPMorgan Equity Premium Income ETF
The JPMorgan Equity Premium Income ETF (JEPI) is an exchange-traded fund that is based on the S&P 500 index. The fund is an actively-managed fund that invests in large-cap US stocks and equity-linked notes (ELNs). It seeks to provide similar returns as the S&P 500 Index with lower volatility and monthly income.
Read More - Current Price
- $59.46
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 1 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $59.46 (0.0% Downside)
A stock's dividend yield measures a company's annual dividend income for every dollar invested in the stock. Simply put, it measures the amount of income you get from dividends relative to the price of the stock.
However, dividend yield isn't everything. That's because a stock's dividend yield and its price have an inverse relationship. Many stocks have a high dividend yield because of a fundamental problem with their business model that will prevent the stock price from increasing. In that case, a high-yield dividend will not be enough to generate a market-beating total return.
Dividend yield matters more than ever as investors deal with inflation that is higher than it's been in a generation. When inflation is close to the Federal Reserve's preferred target of 2%, it's not that difficult for a company to have a dividend that outpaces inflation. But that's harder to do when the rate of inflation is over 3.3%.
If you want to see more high-yield dividend stocks, MarketBeat offers a variety of screening tools that make it easy for you to find attractive dividend stocks that fit your investment style.
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