It’s been a volatile year for investors in general. And nowhere is this more true than with high-yield dividend stocks.
In March and April there were a large number of companies that cut or suspended their dividends. This year has been a time of devastation for income-oriented investors, especially in sectors like Real Estate Investment Trusts (REITs). And while things have gotten better since spring, we’re still seeing more dividend cuts and profit warnings now.
Hence, stock selection is paramount. So which current high yield dividend stocks will manage to weather the current downturn and come out stronger on the other hand? InvestorPlace – Stock market news, stock advice and trading tips
7 Augmented Reality Stocks To Buy For The Future Now
If you are looking for dividends of 5% per year or more, you have to search through many value traps and low quality companies. Fortunately, if the economy comes back to life, these seven companies have what it takes to succeed. Here are seven high-yield companies you can invest in right now:
Kraft Heinz (NASDAQ: KHC)
Enbridge (NYSE: ENB)
Altria (NYSE: MO)
Boston Properties (NYSE: BXP)
Omnicom (NYSE: OMC)
Valero Energy (NYSE: VLO)
People’s United Financial (NASDAQ: PBCT)
Dividend stocks to buy: KraftHeinz (KHC)
Source: SSokolov / Shutterstock.com
Dividend yield: 5%
This food giant has had tough times in recent years. Kraft went into debt a few years ago to complete the monumental merger with Heinz in 2015. However, it turned out that the results fell short of expectations – the company was never able to generate enough cash flows to justify the deal.
As a result, KHC stock previously had to cut its dividend, and the stock price fell from around $ 90 to $ 25 in 2019. For Kraft Heinz, however, a new era begins.
Shortly before the pandemic, the company had stabilized its business and returned to positive organic growth. Then came the novel coronavirus hit, which caused a huge rush of people to purchase packaged food. Even now, the surge in sales continues as people continue to prefer to cook at home rather than eat out.
With profits now increasing, Kraft Heinz seems to have gone around the corner. And at that price, KHC stock only makes 12.9 times its earnings and pays a dividend of more than 5%.
Many people are still mad at Kraft Heinz because of its disastrous decline in recent years. But people with a more forward-looking outlook have an opportunity to make money. Kraft Heinz is at the beginning of a dramatic multi-year comeback story, which is why this dividend stock pick is certainly worth it.
Dividend yield: 8.6%
Some investors currently hate energy stocks. And that is a reasonable response given the terrible performance of crude oil and related oil and gas producers in recent years. However, these traders risk throwing the baby away with the bath water.
This is because the pipeline companies are currently in a much better position than the oil and gas producers themselves. While low energy prices can bring an exploration and production company to a quick standstill, pipeline operators generally have a lot of leeway. Ultimately, the pipeline owner still has a monopoly – and if customers want to function like utilities and gas stations, they still have to pay the “piper”.
We have seen this over the past few years. Despite the ongoing drop in prices, Enbridge has kept its business at a stable level. In fact, it kept its dividend on time – something not all dividend stocks could.
7 unicorn startups for 2021
In addition, the business continues to grow. The management sees a mid single-digit annual distributable cash flow (DCF) for the future. This in turn should enable ENB shares to offer shareholders a small annual dividend increase on top of the already ample dividend yield of 8.6%.
Source: Kristi Blokhin / Shutterstock.com
Dividend yield: 9.2%
Altria stock has suffered badly in recent years and has created a compelling opportunity here and now for high yield dividend stocks.
It’s not hard to see why MO stock has fallen. The company is known to pay a heavy price for its stake in vaping company Juul. After that, Juul came under strict state regulation. Now it appears to be a massive loss for Altria on its original investment.
In a broader sense, it’s no secret that Altria’s core tobacco business remains a declining industry. Altria has offset falling cigarette sales with price increases, resulting in stable profits and revenues. Ultimately, however, its long-term future is not certain.
The company’s diversification efforts have also been mixed. Alongside Juul, Altria’s investments in the marijuana and alcohol sectors have produced uneven results.
While the bearish topics of conversation are reasonable on their own, they miss the big picture. Altria only trades at 8.2x profit – and profit increases. In fact, analysts expect annual earnings growth of 4 to 5% for the future. Needless to say, if a company can only produce unchanged results at this value for money, then you will make good money.
Add to that growth and the returns should be excellent. By my estimation, 8x the value for money equates to an annual earnings return of 12.5% on your capital. With that return, Altria can easily distribute its 9% dividend yield to shareholders and still has profits to pay off debts or buy back shares.
In Altria’s case, investors are too caught up in the company’s negatives. You have overlooked how cheap and compelling MO stocks really are – a standout trait among dividend stocks.
Boston Properties (BXP)
Source: Halfpoint / shutterstock.com
Dividend yield: 5.2%
Boston Properties is one of the leading office owners in the country. Admittedly, given the current work-from-home trend, that sounds like a chaotic business. However, the BXP share more than reflects this risk. Stocks are down a little less than 50% from their 52-week high, which is a great bargain.
And unlike many office companies, Boston Properties is clearly isolated from current adverse trends. This is in large part because the company has focused on trophy building in Tier 1 cities. For example, the company has developed properties in San Francisco that are focused on life sciences. Special facilities like this are set up for laboratory work that is simply not possible via a video call.
In a broader sense, Boston Properties generally owns high-end buildings. While lower quality office space is vacant or has to lower rent to attract tenants, BXP’s holdings should continue to be in high demand. We saw this relatively recently. For example, despite what is currently going on with the economy, Boston Properties managed to amass 98% of its office rent in June. In the face of this pandemic, the company continues to collect.
7 top stocks to buy for November
Of course, given the uncertainty surrounding Covid-19 and the work-from-home trend, BXP stock can remain bumpy in the short term. For long-term income-seeking investors, this selection of dividend stocks – with a dividend of 5.2% – is a real treat.
Source: VectorKnight / shutterstock.com
Dividend yield: 5.3%
Omnicom is one of the world’s leading advertising agencies and is different from other dividend stocks. However, his stock – along with the other players in the industry – has received a walloped in recent years. There’s a logical reason for that.
For one thing, the novel coronavirus damaged the advertising business, especially in 2020, as much of the economy was temporarily closed. In the long term, digitization threatens the leisurely way of working in the industry.
While the internet has certainly changed advertising, some investors may be exaggerating the impact on advertising agencies like Omnicom.
Omnicom doesn’t just buy ads for its customers. It is also a full service public relations and customer relations shop. The company has decades of relationships with many of the world’s leading brands – in addition to running its marketing campaigns, it handles marketing, crisis management, field research, and more for these leading companies.
Sure, the internet has disrupted pure advertising to a great extent. But for a large grocery or auto company, buying some internet search ads is hardly a substitute for having Omnicom by their side. OMC stock reflects this: Despite the surge in online advertising, the company has had stable profits and sales in recent years.
Thanks to the novel coronavirus, however, stocks have fallen from a 12x price-earnings ratio to a forward ratio of 8.9. That offers remarkable value to interested investors – on top of the dividend yield of 5.3%.
Valero Energy (VLO)
Dividend yield: 10%
Like many energy stocks – and dividend stocks in general – Valero has faltered this year. However, the outlook for VLO stock is much better than most of its competitors. This is because Valero is not significantly exposed to the actual price of oil or natural gas. After all, the company does not produce or transport crude oil. It just refines it.
Valero turns crude oil into end products such as jet fuel, gasoline, heating oil and asphalt. Given the novel coronavirus, the demand for these products understandably decreased in 2020. Over time, however, the proverbial engine starts again. International air travel, for example, is showing a steady – albeit modest – increase after virtually halting earlier this year. When the trip returns, demand will return, and Valero will be able to charge normal premiums for its refined oil products.
Meanwhile, as the largest independent refiner in the country, the company has a ton of scalability. This gives it the strength to handle the current downturn in a way that smaller refiners have struggled with.
7 hot stocks with mega-cap status to buy
In addition, the recent election results offer Valero an unexpected benefit. If things stay as they are projected now, apparently we’re going to have President Joe Biden along with a Republican-led Senate. This deadlock is likely to prevent the Democrats from adopting a Green New Deal structure that will phase out Valero’s nifty products. On the other hand, we are almost certain that no new refineries will be built under Biden, which the competition from VLO keeps modest.
This dynamic “not too hot, not too cold” should have a positive effect for Valero – and its investors – in the coming years.
People’s United Financial (PBCT)
Dividend yield: 6.5%
Rounding out my list of dividend stocks, People’s United Financial is one of the largest independent banking franchises in the northeastern United States.
Well, sure, I know there are a lot of high dividend banks out there right now. I also know that given the economic downturn and low interest rates, most people don’t want to invest in them. PBCT stock is worth an exception, however.
Why? For one thing, People’s United survived the 2008 financial crisis with hardly any credit losses because the bank’s management is very conservative. It gives medium reward low risk loans and does not offsets the balance sheet. The bank is also growing modestly – mostly through acquisitions – which allows it to spend most of its profits on the high dividend to shareholders. In fact, People’s United is one of the rare banks that has managed to increase its dividend every year since the early 1990s.
Perhaps People’s United is not an exciting bank – the stock price is usually calm from week to week and earnings reports rarely surprise. However, another fat dividend payment is issued every three months.
With stocks currently in correction, investors now have a good opportunity to get into PBCT stock.
At the time of publication, Ian Bezek was long in KHC, PBCT, MO and ENB stocks.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a junior analyst for Kerrisdale Capital, a New York City-based hedge fund with a volume of $ 300 million. You can reach him on Twitter at @irbezek.
More from InvestorPlace
Why everyone is investing in 5G WRONG
Top Stock Picker Reveals Its Next 1,000% Winner
Radical new battery could degrade oil markets
The revolutionary technology behind the 5G rollout is being developed by this company
Daily selection: stocks to buy before voting
The post-7 high-yield dividend companies to invest in during the pandemic were first posted on InvestorPlace.