3 best stocks with high dividend yields
Choosing a high paying dividend stock to buy is easy. The difficult part is finding an income investment where the dividend is not at risk, it is not a value trap that is about to drop in the stock price or is overvalued. Verizon Communications (NYSE: VZ), AbbVie (NYSE: ABBV) and B&G Foods (NYSE: BGS) all of them have safe and reliable dividends that pay 4% or more. These three stocks also pass the test of having a conservative payout ratio, which is the percentage of net income that the company pays out to shareholders in the form of dividends.
Shares of Verizon and AbbVie have both fallen more than 3% year-to-date, while B&G has seen its shares climb more than 47%. However, Verizon is the only one of the three to show declining revenue, as its sales are hit the hardest by the coronavirus pandemic.
Can you hear the Verizon opportunity?
Verizon has increased its quarterly dividend for 14 consecutive years, including a 2% increase this year, despite the pandemic.
The decline in company shares means maybe now is an even better time for income-oriented investors to buy. Its quarterly dividend offers a yield of 4.37%.
Verizon has lost revenue this year due to the pandemic, which has mainly affected the company’s media division because advertising is down, as well as its consumer division because people don’t use cellphones as much. , let alone accumulate roaming charges when they rarely leave home. As a result of these headwinds, third-quarter revenue reached $ 31.5 billion, down 4.1% from the same period a year ago, while net profit was 4.5. billion dollars, down 16.1% year-over-year.
However, the company’s core business remains strong and the setbacks are likely to be temporary. The company’s free cash flow at the end of the quarter was $ 18.3 billion, an increase of $ 3.9 billion year-over-year. Prior to this year, the company’s sales had grown for nine consecutive years.
When you compare Verizon to its peers, T Mobile (NASDAQ: TMUS) Where AT&T (NYSE: T), its return on equity is far superior, even though it recently dropped to 29.69%, and the payout rate of its dividend is very secure with a payout ratio of 53.26%, over 12 months.
AbbVie remains an excellent dividend
The AbbVie share price is down 3.7% this year, which offers another opportunity and boosts the company’s dividend yield to 5.85%. On top of that, the company increased its dividend by 10.2%, to $ 1.30 per share, from the first quarter of 2021. AbbVie is technically a dividend aristocrat if you count his time before parting ways with Abbott Laboratories in 2012. With Friday’s announcement, the company will have increased its dividend for eight consecutive years and over the past three years, its dividends have experienced a compound annual growth rate (CAGR) of 23.36%.
Investors continue to wait for problems with AbbVie and the company continues to manage to avoid these anticipated problems. In particular, market watchers are watching its rheumatoid arthritis drug, Humira, which has been the world’s best-selling drug as it faces stiff competition. However, the company sees increased sales of the Imbruvica lymphoma treatment and the multiple psoriasis drug Skyrizi, along with the addition of Allergan’s consistent stable of aesthetic drugs, such as Botox and Juvederm, support the results. of the company since the Allergan purchase was finalized in May. .
In the company’s third quarter report released on Friday, it said revenue of $ 12.9 billion, up 52.1% year-over-year and earnings per share of $ 2.83 , up 21.5% year-on-year. It also posted net profit in the quarter of $ 2.31 billion, up 22.9% from the same period in 2019. On top of that, the payout to dividend ratio is very sustainable by 47.47%, over 12 months.
B&G thrived throughout the pandemic
B&G Foods, which owns iconic brands such as Green Giant, Ortega, Clabber Girls bakery products and Cream of Rice and Cream of Wheat, flourished this year because people eat more at home. The company’s stock price is up over 47% year-to-date and yet the company’s dividend offers a good yield of 7.05%.
Last week, B&G announced it was purchasing Crisco brand of oils and shortenings from the JM Smucker Company for $ 550 million and the market reacted positively to the news, closing at $ 28.74 the day after the announcement, $ 0.85 more per share than the day before.
As of mid-year, the company’s revenue was $ 961.9 billion from $ 783.9 in the first half of 2019 and its net profit was $ 73 million, up 108% from one year to the next. The company has paid a dividend quarterly since its IPO in 2004, and has increased that dividend for the past nine years. Its cash dividend payout ratio is easily sustainable at 50.6% over 12 months.
there are good choices
Of the tree dividend stocks, I like B&G the most in the short term because it has the highest dividend yield and the company is having a great year. Additionally, this rise is expected to continue as the pandemic continues and could have a lasting effect once it subsides. The company’s price-to-earnings (P / E) ratio is at 14.90, behind its competitors General Mills (NYSE: SIG) at 15.73 and Kraft Heinz (NASDAQ: KHC) at 8:15 p.m.
Verizon and AbbVie are the best long-term choices because I think their stocks are even more undervalued, so they have the most room for growth. Verizon’s P / E of 12.92 Lags Its Telecom Competitors T Mobile (NASDAQ: TMUS) and AT&T (NYSE: T), which are respectively at 35.83 and 17.79. AbbVie’s P / E of 18.14 is eclipsed by the P / E of competitors Gilead Sciences (NASDAQ: GILD) at 59.97 and Bristol Myers Squibb (NYSE: BMY) to 71.36.
In the meantime, as these stocks appreciate, investors can take advantage of good dividends from B&G, Verizon and AbbVie.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.