While growth names typically get all the headlines, every investor should consider cash flow. Certainly, you don’t want to be trading hours for income all your life, which means you need a portfolio of companies that will pay you — whether their underlying securities perform well or not. Therefore, dividend stocks have permanent relevance.
But this relevance has become even more pronounced in the present economic backdrop. As you know, the federal government had little choice but to respond aggressively to the resultant effect of the Covid-19 pandemic. That meant turning loose the monetary spigot, which translated to ridiculously low interest rates. Though good for consumers, that’s not great news for savers. Cynically, however, this dynamic bodes well for dividend stocks, particularly the higher yielding ones.
Simply put, the incentivize isn’t to save money. Heck, government data indicates that we’ve been doing enough saving during the Covid-19 crisis last year. Right now, the emphasis is on spending and for good reason. As various sources state, consumer spending “accounts for 70 percent of American economic growth.” Almost ominously, Inc. pointed out in December 2019 that if this trend reverses, “we’ll be in recession next year.”
Therefore, the American economy is like a shark: it needs to keep swimming, to keep spending to maintain, in a way, the façade of the exceptionalism of capitalism. But this aggressive incentivization for constant spending has consequences. Those consequences are exactly why high-yield dividend stocks are so attractive today. When you emphasize spending over saving, the financial benefit of prudence declines.
Fortunately, that’s where high-yield dividend stocks come in — they plug the gap.
While the market is still very much in speculation mode, there are solid opportunities — or those that the crowd ignores — that will help you bring some healthy income to your portfolio. Heaven knows that you’re not going to get your passive income from government bonds.
Therefore, here are the high-yield dividend stocks to look into:
- Walgreens Boots Alliance (NASDAQ:WBA)
- Prudential Financial (NYSE:PRU)
- LyondellBasell Industries (NYSE:LYB)
- IBM (NYSE:IBM)
- GlaxoSmithKline (NYSE:GSK)
- LTC Properties (NYSE:LTC)
- Altria Group (NYSE:MO)
Before we dive in, you should realize that not all dividend stocks are equal. Some companies feature ridiculously high yields, which is a red flag: those yields might be soaring for all the wrong reasons. While you should always perform your due diligence, on this list, I’m going to focus on robust blue chips with dependable dividends — along with a few speculative ideas.
Dividend Stocks: Walgreens Boots Alliance (WBA)
Logically, the coronavirus pandemic had not been kind to multiple industries and companies — and Walgreens Boots Alliance was no exception. At time of writing, WBA stock is trading just under $50, making it still conspicuously below its peak price just before the public health crisis hit. Nevertheless, many contrarians might consider this circumstance justification for why WBA is one of the undervalued dividend stocks to buy.
Presently, the company features a dividend yield of 3.8%, which should give stakeholders solid passive returns. Moreover, it’s very possible that Walgreens Boots Alliance could deliver capital gains as well. For its fiscal year 2020 (ended Aug. 31), Walgreens rang up $139.5 billion in revenue, up 2% from the prior year.
As well, the company posted a 11% sales increase in the fiscal second quarter of 2021 relative to the year-ago level. That it was also a bump up sequentially from fiscal Q1 results was a nice bonus. Moving forward, whether the coronavirus variants wreak havoc on society or if things normalize, Walgreens enjoys a critical essential business. Thus, it’s one of the dividend stocks to consider.
Prudential Financial (PRU)
You might think that a massive entity like Prudential Financial wouldn’t be a viable option for high-yielding dividend stocks. The company’s various subsidiaries covers all of a person’s financial needs, ranging from insurance products to investment management services and everything in between for both retail and institutional clients.
With such a massive footprint, Prudential is one of the most secure firms to trust. After all, it’s not going anywhere. At the same time, you usually have to pay a price for this stability. That’s not the case with PRU stock, though, as it yields 4.3% at time of writing.
True, the company did take a hit during the Covid-19 crisis, as did other dividend stocks tied to the insurance game. With so few people on the road during the worst of the pandemic last year, there wasn’t much point in marketing auto insurance.
Still, Prudential executives recently stated that the impact of the coronavirus was “beginning to moderate.” Further, people with insurance are likely to be vaccinated, thus mitigating disruptive occurrences.
Dividend Stocks: LyondellBasell Industries (LYB)
While many economists have talked optimistically about restoring America’s growth engine following the vaccination rollout, relatively few investors talk about the underpinnings of this engine. Typically, you’ll hear about headline companies that represent the poster child of the economy, not the institutions that provide the commodities and refined products that the economy truly needs.
That’s why investors seeking high-yield dividend stocks should consider LyondellBasell Industries. One of the largest plastics, chemicals and refining companies in the world per the company’s website, LyondellBasell delivers chemicals, polymers, fuels and industrial technologies to feed our economic machinery. Also worth noting that the company is the leading producer of oxyfuels worldwide and top producer of polypropylene in the North American and European markets.
Of course, there’s some risk involved with LYB stock because if the economy falters — especially if the Delta variant worsens substantially — then it’s liable for volatility. Sure enough, shares have declined noticeably since early June of this year.
However, if you’re confident that the economy can get rocking and rolling again, LYB is your ticket to robust passive income. Currently, it has a yield of 4.3%.
The technology firm that time seems to have forgotten, IBM is somewhat of a dark horse when it comes to high yielding but still very respectable dividend stocks. At time of writing, shares of Big Blue yield nearly 4.6%, which is a solid number, especially if you’re looking for passive income that won’t go all over the map.
However, plenty of folks avoid IBM stock because let’s face it, the underlying company has a reputation and it’s not all for the better. For quite some time, the tech firm was encumbered with its legacy businesses, which it has been shedding. Still, the broader performance has been lacking. For instance, shares are down 12% over the trailing five years.
Personally, I look at this circumstance as an opportunity. While it’s had some missteps, IBM is too big and too important to just throw everything away. From its acumen in artificial intelligence to enterprise-level cybersecurity to implementing blockchain technologies to help solve many of today’s pressing challenges, this is an organization that appears to be on a slow but steady rebound.
Dividend Stocks: GlaxoSmithKline (GSK)
Ranked as one of the biggest firms in the pharmaceutical sector by total sales, GlaxoSmithKline casts an extremely wide net across several therapeutic categories, from oncology to antiviral to respiratory solutions. In addition, the company is a behemoth in the consumer health product segment, featuring popular brands like Theraflu, Flonase, Advil and Centrum.
The latter brand, of course, represents GlaxoSmithKline’s vitamins, minerals and supplements division, which could be a surprising hit in the years ahead. Prior to the pandemic, every adult demographic showed year-over-year increases in supplement use. And according to Grand View Research, the global dietary supplement market could hit $272.4 billion by 2028, representing a compound annual growth rate of 8.6% between 2021 and 2028.
Further, there’s a chance that this estimate is conservative. A recent study found that 42% of U.S. adults reported unintended and therefore unwanted weight gain since the beginning of the pandemic. We’re talking an average increase of 29 pounds, which sounds like an unbelievably large figure. But that goes to show you just how important the supplement market is.
Combine that with GlaxoSmithKline’s core businesses and you have a recipe for success. Among high-profile dividend stocks, GSK really does well, yielding 5.4%.
LTC Properties (LTC)
As I’m writing this, LTC Properties has a yield of 6.5%. Invariably, such a stat will attract speculators who are looking for rich payouts. That’s only a little bit shy of the average 8% annual gains that the benchmark indices return over the long run. However, when the yield goes up, typically, so does the risk.
I’m not going to suggest that LTC Properties is a completely treacherous venture because this real estate investment trust (REIT) has been in the game for a while. Plus, management did an excellent job maintaining its payout uninterrupted despite volatility in recent years. Oh yeah, LTC is counted among monthly dividend stocks, so it fits better with our life routines.
Fundamentally, the reason I’m including this REIT is its specialties: senior housing and healthcare properties. Both are incredibly relevant, but I’m especially excited about the former. With baby boomers retiring at an unprecedented rate, the broader senior care industry should experience a long-term boon.
Nevertheless, you want to be careful here, because if the economy trips up, that would impinge the ability for families to pay for senior care, which isn’t cheap.
Dividend Stocks: Altria Group (MO)
One of the most terribly cynical dividend stocks I can think of, Altria Group offers both upside and passive income at a 7.2% yield if you can stomach the risk. But first, I need to get some items out of the way. Number one, I own MO stock, so yes, I’m biased. Two, Altria suffered some not-so-pleasant news recently.
As you may know, the tobacco industry is experiencing a wider shift toward vaporizers and e-cigarettes, also known as heat-not-burn products. Essentially, rather than smoking combustible products, adult enthusiasts can enjoy a cleaner delivery of tobacco. Altria was set to expand its heat-not-burn product IQOS. Unfortunately, the device got embroiled into a legal battle, with British American Tobacco (NYSE:BTI) claiming patent infringement.
Long story short, the situation isn’t looking too hot for Altria, which will now need to pause expansion of IQOS in the U.S. market. That being the case, wouldn’t British American Tobacco be a better buy?
You’d think so, though the technical posture of BTI looks suspect. Not that MO is in a great position. Nevertheless, my interpretation is that MO has a stronger posture. More importantly, I’m not sure if the “analog” cigarette market is dead, considering restrictions on flavored vaporizer products and the rampant rise of stress in the post-Covid-19 era.
On the date of publication, Josh Enomoto held a LONG position in MO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.