In this article, we discuss 10 high-yield dividend stocks for stable income. You can skip our detailed analysis of dividend stocks and their performance in the past, go directly and read 5 High-Yield Dividend Stocks for Stable Income.
Dividend-paying stocks are gaining traction this year as investors look for cash during difficult times. Blue chip stable companies are popular in this regard as they have proved to be a good source of income for investors in the past. According to data from Ned Davis Research, dividends represented over 40% of the total return of the S&P 500 from December 1929 to May 2022. The report also mentioned that dividends accounted for 76% of the total return of the broader index in each decade when the index’s annualized returns were less than 10%.
Austin Graff, a co-chief investment officer of Titleist Asset Management, talked to CNN about dividend investment in a recent September interview. He said that dividend stocks outperform their peers in times of financial instability. He further said that investors focus on blue-chip dividend stocks that have shown resilience in volatile market situations due to strong balance sheets. Historical average returns of dividends support this stance. According to a report by RBC Global Asset Management, dividend growers and initiators gained 13.8% while non-dividend payers returned 12.2% from 1978 to 2021. During the same period in bear markets, non-dividend stocks declined by 30.7% and dividend growers fell by 12.5% in comparison. Another report by Charles Schwab shows that dividend stocks have outplayed other assets during inflationary periods. In the first nine months of this year, MSCI World Index lost 15.3%, while MSCI World High Dividend Yield Index dropped by 5.8%.
When investing in dividend companies, investors pay attention to yields as it can help them assess the potential profit on their investment. A stable dividend yield signals the company’s ability to generate regular income, which is rewarding for shareholders. In addition to dividend yield, investors also pay attention to the financial health of the company as this gives them an idea of their potential income. Some popular dividend stocks in this context are The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP) which hold solid dividend growth track record and have strong financials to support their dividends. Building upon these arguments, we will discuss high-yield dividend stocks for stable income.
Photo by Mirza Babic on Unsplash
Our Methodology:
For this list, we selected dividend stocks with yields above 5%. We also reviewed the respective companies’ financial health and dividend policies to provide an in-depth analysis of their performance in this current market environment.
High-Yield Dividend Stocks for Stable Income
10. Philip Morris International Inc. (NYSE:PM)
Dividend Yield as of September 16: 5.40%
Philip Morris International Inc. (NYSE:PM) is an American multinational tobacco company that markets its products in 180 countries. On September 14, the company hiked its quarterly dividend by 1.6% to $1.27 per share. The company has been raising its dividends consistently since its IPO in 2008, which makes it a great high-yield dividend stock for stable income. As of September 16, the stock’s dividend yield came in at 5.40%.
In Q2 2022, Philip Morris International Inc. (NYSE:PM) delivered strong results, posting a 3.2% year-over-year growth in its revenue at $7.83 billion. It generated $3.5 billion in operating cash flow, up from $1.1 billion in the previous quarter. The company’s free cash flow also remained strong at $3.2 billion, growing from $889 million in the preceding quarter. Its dividends are safe with a payout ratio of 85.7% and its five-year average dividend payout ratio stands at 94%.
At the end of Q2 2022, 56 hedge funds tracked by Insider Monkey owned stakes in Philip Morris International Inc. (NYSE:PM), compared with 55 in the previous quarter. These stakes hold a combined value of $6.8 billion. Fundsmith LLP was one of the company’s most prominent shareholders in Q2.
In addition to The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP), Philip Morris International Inc. (NYSE:PM) can also be considered for stable income.
First Eagle Investments mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2022 investor letter. Here is what the firm has to say:
“Philip Morris shares benefited from the market rotation into defensive areas of the market. The company continued to make progress in its transition to next-generation, non-combustible products and during the quarter entered into an agreement to acquire Swedish Match, which is a Stockholm-based maker of Zyn oral nicotine pouches.”
9. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Dividend Yield as of September 16: 5.61%
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an Illinois-based retail company that owns retail pharmacy chains and other pharmaceutical companies. In July, RBC Capital maintained its Sector Perform rating on the stock with a $42 price target, following the company’s quarterly earnings. The firm expects the company to show continued recovery in its international business.
In fiscal Q3 2022, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) reported a strong cash position as its cash from operating activities stood at $1.6 billion and its free cash flow came in at $1.3 billion. In the first six months of the year, its cash and cash equivalents amounted to $2.28 billion, compared with $559 million during the same period last year. The company paid nearly $1.2 billion in dividends during the quarter.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) holds a strong history of dividend payments. The company has been making consecutive dividend payments for over 89 years and has raised its payouts consistently for the past 47 years. As of September 16, the stock’s yield stood at 5.61%.
At the end of June 2022, 40 hedge funds tracked by Insider Monkey owned positions in Walgreens Boots Alliance, Inc. (NASDAQ:WBA), up from 30 in the previous quarter. The stakes owned by these hedge funds have a value of nearly $600 million.
8. Kinder Morgan, Inc. (NYSE:KMI)
Dividend Yield as of September 16: 6.06%
Kinder Morgan, Inc. (NYSE:KMI) is a Texas-based energy infrastructure company that owns and controls oil and gas pipelines and terminals. On September 8, the stock was upgraded to Neutral at Goldman Sachs, as the firm appreciated the company’s pipeline growth which would improve its free cash flow. The firm also raised its price target on the stock to $19.
In Q2 2022, Kinder Morgan, Inc. (NYSE:KMI) reported revenue of $5.1 billion, which showed a 63.5% growth from the same period last year. The company’s distributable cash flow was recorded at $1.2 billion, compared with $1.07 billion in the prior-year quarter. Its adjusted earnings were $621 million for the quarter, compared with $516 million in the second quarter of 2021.
Kinder Morgan, Inc. (NYSE:KMI) currently offers a quarterly dividend of $0.2775 per share, with shares yielding 6.06%, as recorded on September 16. The company maintains a 5-year streak of dividend growth and its FCF generation signals further dividend increases.
As of the close of Q2 2022, 41 hedge funds owned stakes in Kinder Morgan, Inc. (NYSE:KMI), up from 40 in the previous quarter, according to Insider Monkey’s data. The stakes owned by these hedge funds hold a value of over $1.24 billion. Among these hedge funds, Orbis Investment Management had the largest position in the company in Q2.
7. Verizon Communications Inc. (NYSE:VZ)
Dividend Yield as of September 16: 6.36%
Another prominent high-yield dividend stock for stable income on our list is Verizon Communications Inc. (NYSE:VZ), which provides wireless and broadband services to its consumers. Of the 895 elite funds tracked by Insider Monkey, 58 hedge funds had investments in the company in Q2 2022, compared with 69 in the previous quarter. These investments are collectively valued at nearly $2.3 billion.
On September 6, Verizon Communications Inc. (NYSE:VZ) announced a 2% growth in dividend, which takes its quarterly dividend to $0.6525 per share. This was the company’s 16th consecutive year of dividend growth.
Verizon Communications Inc. (NYSE:VZ)’s Q2 earnings missed analysts’ estimates on various accounts, but the company reported a growth in its total broadband net additions. Its revenue for the quarter came in at $33.8 billion, relatively flat from the second quarter of 2021. The company’s operating cash flow for the first half of 2022 came in at $17.7 billion.
In August, Morgan Stanley presented a positive outlook on Verizon Communications Inc. (NYSE:VZ), highlighting the company’s free cash flow and payout ratio. The firm expects the company to steadily raise its dividends.
6. AT&T Inc. (NYSE:T)
Dividend Yield as of September 16: 6.62%
AT&T Inc. (NYSE:T) is a multinational telecommunications company that is also one of the largest providers of cell phone services in the US. In July, Morgan Stanley reiterated its Overweight rating on the stock with a $22 price target. The firm highlighted the company’s beat on wireless additions and its increased wireless service revenue guidance.
AT&T Inc. (NYSE:T) made it our list of high-yield dividend stocks for stable income as the company holds a 23-year track record of consistent dividend growth. It currently pays a dividend of $0.2775 per share every quarter. The stock’s dividend yield stood at 6.62% on September 16. It can be a goo addition to dividend portfolios among other dividend stocks like The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG), and PepsiCo, Inc. (NASDAQ:PEP).
At the end of Q2 2022, 55 hedge funds tracked by Insider Monkey owned stakes in AT&T Inc. (NYSE:T), down from 74 in the previous quarter. These stakes have a total value of over $1.7 billion. With nearly $240 million worth of stakes, D E Shaw was one of the company’s most prominent stakeholders in Q2.
Argosy Investors mentioned AT&T Inc. (NYSE:T) in its Q2 2022 investor letter. Here is what the firm has to say:
“I purchased shares of AT&T Inc. (NYSE:T) prior to its spin-off of Warner Brothers Discovery (WBD). Most people are probably familiar with AT&T. They are a major cellular service provider, and until recently owner of the Time Warner media assets, which include HBO, CNN, TNT, TBS, Cartoon Network, DC Comics and the Batman content brands, and more. At the time of my purchase, I estimated that the combined T/WBD assets traded at a 15% levered FCF yield, or 6x FCF. I also believe that WBD, which now has HBO Max, has future growth in front of it which was previously in doubt when Discovery was primarily tied to the declining cable television bundle. Since then, Netflix reported disappointing subscriber growth, which threw all streaming companies into disarray. WBD followed that news with a disappointing outlook on its business during its own quarterly earnings.
As a result, shares of WBD have declined nearly 40% since the spin-off. WBD now trades for 7x 2023E FCF and there is great potential for returns over the next few years as WBD pays down debt used to finance its merger combining Warner Brothers and Discovery and grows. We do not own a large position in WBD at present, but we may add to it over time.”
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Disclosure. None. 10 High-Yield Dividend Stocks for Stable Income is originally published in Insider Monkey.