In March 2023, the yield on the 2-Year Treasury Note reached 5%. Many can remember the gut-wrenching move in markets as investors undertook a “flight to safety," pulling money out of stocks and putting it into treasury notes.
The maturity date of those notes is approaching. But with the 2-Year Note around 4.1%, you couldn't blame income-oriented investors for believing that Treasuries are still their best option.
There are some high-yield savings accounts that beat that yield. However, you could be trading liquidity for depreciating dollars. Both Donald Trump and Kamala Harris are pledging more government spending in some fashion — which means that investors and consumers are not done with inflation.
That leaves many risk-averse investors with an unattractive option of investing in equities, many of which seem overvalued by historical standards.
If you're looking to shelter your portfolio from market volatility, high-yield dividend stocks are an attractive option. These are generally defined as stocks that have a dividend yield above 4%. Not only will that be competitive with Treasuries, but you get the opportunity for stock price appreciation, leading to a total return far above what you can get from holding Treasuries.
In this special presentation, we are looking at seven high-yield dividend stocks that are outperforming 10-Year Treasuries.
Quick Links
- Chevron
- Altria Group
- Verizon Communications
- Bristol-Myers Squibb
- United Parcel Service
- Kraft Heinz
- Vale
#1 - Chevron (NYSE:CVX)
The energy sector is one place where investors can find high-yield dividend stocks. In terms of stock price appreciation, oil stocks like Chevron Corp. (NYSE: CVX) move with the price of oil. That's why many of these stocks have underperformed the market since 2023.
In addition to lower crude oil prices, Chevron is still in the process of finalizing its merger with Hess Corp. (NYSE: HES). That involves an arbitration hearing with Exxon Mobil Corp. (NYSE: XOM) regarding Hess’ Guyana assets.
But if you’re looking for high-yield dividend stocks a company like Chevron has a rock-solid balance sheet and rewards shareholders with a reliable and growing dividend. As of this writing, CVX stock had a yield of 4.39% and the company has increased its dividend for 37 consecutive years.
Furthermore, Chevron has delivered a total return of 98.4% over the last 10 years. That means a $5,000 investment in Chevron in 2014 with dividends reinvested is worth approximately $9,920 today.
About Chevron
Chevron Corporation, through its subsidiaries, engages in the integrated energy and chemicals operations in the United States and internationally. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, production, and transportation of crude oil and natural gas; processing, liquefaction, transportation, and regasification of liquefied natural gas; transportation of crude oil through pipelines; transportation, storage, and marketing of natural gas; and carbon capture and storage, as well as a gas-to-liquids plant.
Read More - Current Price
- $142.85
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $175.19 (22.6% Upside)
#2 - Altria Group (NYSE:MO)
Altria Group Inc. (NYSE: MO) has a highly attractive 7.04% dividend yield. The parent company of several companies, such as Phillip Morris International Inc. (NYSE: PM), is leading the transition away from combustible tobacco products.
If the company’s third-quarter earnings are an indication, it’s pursuing the right strategy. The company beat analysts' expectations for revenue and earnings as they saw robust demand for its nicotine pouches and e-cigarettes, which helped offset the hit to its legacy tobacco products (i.e., cigarettes). That makes sense. As a “sin stock,” Altria has defensive characteristics as its products will be in demand regardless of their personal financial situation.
In addition to an attractive dividend, Altria recently announced a $1 billion stock buyback program as an added way to generate shareholder value. Over the past 10 years, Altria has generated a total return of 99.8%, which means a $5,000 investment would be worth $9,990.
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
- $53.84
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 2 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $53.33 (0.9% Downside)
#3 - Verizon Communications (NYSE:VZ)
Verizon Communications Inc. (NYSE: VZ) has been a volatile stock to hold over the last five years. In fact, the total return on VZ stock is negative in that time. But Verizon continues to be one of the best stocks for buy-and-hold investors. One good reason for that is the company’s dividend yield of 6.37%. Verizon has also increased that dividend for 20 consecutive years.
The company is one of the world’s leading wireless companies, which gives it a defensive quality highlighted by a predictable but not necessarily high-growth revenue stream. However, in the short term, the company is going to have to work through the debt that it took on with its $20 billion acquisition of Frontier Communications.
Management is planning on working through a significant amount of that debt before the deal with Frontier closes sometime in 2025. In the meantime, the dividend looks safe, and it has attractive fundamentals with a forward price-to-earnings (P/E) ratio of around 9x.
About Verizon Communications
Verizon Communications Inc, through its subsidiaries, engages in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments, Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
Read More - Current Price
- $39.93
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $46.51 (16.5% Upside)
#4 - Bristol-Myers Squibb (NYSE:BMY)
Growth investors getting involved in the biopharmaceutical space have been flocking to companies manufacturing GLP-1 weight-loss drugs. But value investors looking to get involved in this sector should look at The Bristol-Myers Squibb Company (NYSE: BMY). The stock hasn’t been a great hold over the last 10 years, with a total return of 21.8%.
The company’s lead products — Revlimid (multiple myeloma) and Eliquis (blood thinner) — continue to deliver year-over-year growth to the company’s top line. Plus, Bristol-Myers has a deep pipeline, particularly with neurodegenerative drugs including a candidate in clinical-stage trials for treating Alzheimer’s Disease, that are likely to add long-term growth for investors.
BMY stock is attractively valued at around 13x forward earnings and has over $6 billion in cash on its balance sheet. Nevertheless, analysts are neutral to slightly bearish on the stock. But after an earnings report in which it beat on the top and bottom lines, analysts may change their outlook. And even if they don’t, you’ll benefit from a growing dividend with a yield of 4.37%.
About Bristol-Myers Squibb
Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases. The company's products include Eliquis for reduction in risk of stroke/systemic embolism in non-valvular atrial fibrillation, and for the treatment of DVT/PE; Opdivo for various anti-cancer indications, including bladder, blood, CRC, head and neck, RCC, HCC, lung, melanoma, MPM, stomach and esophageal cancer; Pomalyst/Imnovid for multiple myeloma; Orencia for active rheumatoid arthritis and psoriatic arthritis; and Sprycel for the treatment of Philadelphia chromosome-positive chronic myeloid leukemia.
Read More - Current Price
- $57.33
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 13 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $55.64 (2.9% Downside)
#5 - United Parcel Service (NYSE:UPS)
A benefit to owning high-yield dividend stocks is that they don’t require you to engage in market timing. However, if you don’t have a position in United Parcel Service Inc. (NYSE: UPS), this is a time to pay attention.
At the time of this writing, UPS has just finished delivering its third quarter 2024 earnings report. It marked a return to profitability, as the company said it would. That has analysts beginning to upgrade their price targets for the stock, which could be a great entry point.
But even UPS has to admit that it’s still not firing on all cylinders. That could change, however, if the Federal Reserve continues to lower interest rates, which would increase package delivery during the most important time of the year for a company like UPS. And if you’ve been in UPS stock, you’re already familiar with a dividend with a 4.85% yield and increased for 15 consecutive years.
About United Parcel Service
United Parcel Service, Inc, a package delivery company, provides transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services. It operates through two segments, U.S. Domestic Package and International Package. The U.S. Domestic Package segment offers time-definite delivery of express letters, documents, small packages, and palletized freight through air and ground services in the United States.
Read More - Current Price
- $125.68
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $151.29 (20.4% Upside)
#6 - Kraft Heinz (NASDAQ:KHC)
Kraft Heinz Co. (NASDAQ: KHC) has been a better trade than an investment over the past three years. The stock has been trading in a defined range, and the price action in October 2024 confirms that investors continue to bounce between bullish or bearish convictions.
As part of the consumer staples sector, the company is facing the twin headwinds of a lack of pricing power and competition with house brands that are becoming more attractive to consumers.
KHC’s Q3 2024 earnings report did little to make analysts more optimistic. The company beat on the bottom line, but revenue came in lighter than analysts’ forecasts and down on a year-over-year basis.
However, the stock is trading at just 11x forward earnings and pays a dividend with a 4.75% yield. The company hasn’t increased the dividend since 2019 but has still managed to deliver a total return of 48.5% over that period.
About Kraft Heinz
The Kraft Heinz Company, together with its subsidiaries, manufactures and markets food and beverage products in North America and internationally. Its products include condiments and sauces, cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products under the Kraft, Oscar Mayer, Heinz, Philadelphia, Lunchables, Velveeta, Ore-Ida, Maxwell House, Kool-Aid, Jell-O, Heinz, ABC, Master, Quero, Kraft, Golden Circle, Wattie's, Pudliszki, and Plasmon brands.
Read More - Current Price
- $30.52
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $36.55 (19.7% Upside)
#7 - Vale (NYSE:VALE)
Analysts believe that 2025 may be a strong year for commodities, including gold, copper, oil, and steel. The latter defines the case for Vale S.A. (NYSE: VALE). The company is a leading mining company specializing in extracting iron ore and iron ore pellets. Iron ore is a core component of steel, and it is likely to be in high demand no matter which candidate wins the White House.
Vale also mines copper and nickel which puts it in a strong position as demands for AI are spurring the need for power, much of which will come in the form of electricity. The company is in the middle of its Value-Based Management (VBM) initiative that is focusing on operational efficiency and cost reduction.
VALE stock is down over 30% in 2024, but analysts give the stock a consensus price target of $16.17. That’s an upside of over 50% from the current price. Plus, investors get a high-yield dividend that has a yield of 10.80%.
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
- $8.90
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $14.38 (61.6% Upside)
Dividend yields don't tell the entire story of what makes a stock a good investment. In fact, there are many stocks with dividend yields that look too good to be true. These stocks can be yield traps.
Stocks that are yield traps lure investors in with a tantalizing dividend yield. However, the fundamentals of the business make sustaining that dividend impossible. For example, they could be financing the dividend with debt, or they could have low or even negative cash flow. You also have to watch for signs of trouble in the company's underlying business. Taking a long position in these stocks could leave you underwater on the stock and with little or no dividend to speak of.
The stocks in this presentation are from companies that have solid balance sheets that support a high dividend yield. Investing in these stocks can bring an appealing mix of dividend yield, dividend growth, and stock price appreciation. That combination can keep your portfolio growing no matter what's going on in the equity markets.
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