Investing
Yields Are Plunging Lower Daily: 7 Sizzling Blue Chips That Pay 6% or Bigger Dividends
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In a logical world, one would think that, with the Federal Reserve raising interest rates all year long, the rates across the entire Treasury yield curve would be headed higher. In fact, just the opposite has been occurring. Since the middle of June, the yield on the benchmark 10-year note and 30-year bond have retreated a stunning 23%. In fact, with federal funds now at 2.25% to 2.50%, the 10-year note is less than 20 basis points higher to the top end of the range.
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Why is this happening? There are numerous reasons, but the biggest one is that the bond market senses that a recession, if not here now despite the empirical data that says it is, is certainly on the way, and it could be very ugly. What are income investors to do? Look for quality stocks that can survive in a turbulent market and that pay big dividends.
We screened our 24/7 Wall St. research database for quality companies that, while perhaps off the radar in some cases, offer solid upside and dependable dividends. Plus, all are rated Buy across Wall Street.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Antero Midstream
With shares trading just under $10 apiece, this very well-run company offers a huge total return package. Antero Midstream Corp. (NYSE: AM) owns, operates and develops midstream energy infrastructure. It operates through two segments.
The Gathering and Processing segment includes a network of gathering pipelines and compressor stations that collects and processes production from Antero Resources’ wells in West Virginia and Ohio.
The Water Handling segment delivers fresh water and offers other fluid handling services, such as wastewater transportation, disposal and treatment, as well as high-rate transfer services.
Antero Midstream stock investors receive a 9.35% distribution. Wells Fargo recently lifted its target price to $13. The consensus target is $10.50, and shares closed on Thursday at $9.63.
AT&T
The legacy telecommunications company has been going through a long restructuring, has lowered its dividend and has sold off or merged underperforming assets. AT&T Inc. (NYSE: T) provides telecommunications, media and technology services worldwide.
The Communications segment offers wireless voice and data communications services and sells handsets, wireless data cards, wireless computing devices with carrying cases and hands-free devices through its own company-owned stores, agents and third-party retail stores.
The company also provides data, voice, security, cloud solutions, outsourcing and managed and professional services, as well as customer premises equipment for multinational corporations, small and midsized businesses, and governmental and wholesale customers. In addition, it offers broadband fiber and legacy telephony voice communication services to residential customers.
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The company markets its communications services and products under the AT&T, Cricket, AT&T Prepaid and AT&T Fiber brand names. The Latin America segment provides wireless services in Mexico and video services in Latin America. This segment markets its services and products under the AT&T and Unefon brand names.
Investors receive a 6.08% dividend. Goldman Sachs has a $23 price objective, and the consensus target is $22.11. AT&T stock closed on Thursday at $18.27 a share.
British American Tobacco
This conglomerate got much bigger with the acquisition of Reynolds American in 2017. British American Tobacco PLC (NYSE: BTI) provides tobacco and nicotine products to consumers worldwide. It offers vapor products, tobacco heating products and modern oral products; combustible products; and traditional oral products, such as Swedish-style snus and American moist snuff. The company distributes its products to retail outlets.
The company’s New Categories business, which includes products outside of traditional cigarettes, saw revenues increase solidly over the past two years. It noted recently that non-combustible products, such as its Vuse vaping brand and Glo heated tobacco brand, now make almost 12% of total operations.
Investors receive a 7.37% dividend. The $49.10 price target on New York-traded shares at Jefferies compares with a $53.30 consensus target for British American Tobacco stock. Thursday’s close was at $39.08.
Devon Energy
This may be one of the best value propositions in its sector, as it uses a variable dividend strategy. Devon Energy Corp. (NYSE: DVN) is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs) in the United States and Canada. It operates approximately 19,000 wells.
The company also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensate through its natural gas pipelines, plants and treatment facilities.
Production is weighted toward crude oil while growth opportunities are liquids focused, anchored by the Delaware Basin, SCOOP/STACK, Eagle Ford Shale, Canadian Oil Sands, and the Barnett. Devon also owns equity in the publicly traded midstream MLP EnLink.
Shareholders receive an 8.55% dividend. The target price on Devon Energy stock at Truist Financial is $115. The consensus target is $77, and shares closed at $54.49 on Thursday.
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Franchise Group
This way-off-the-radar idea could be a total return home run for investors. Franchise Group Inc. (NYSE: FRG) owns and operates franchised and franchisable businesses.
The Vitamin Shoppe segment operates as an omnichannel specialty retailer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products under the BodyTech, True Athlete, The Vitamin Shoppe, ProBioCare, Fitfactor Weight Management System and Vthrive The Vitamin Shoppe brands.
The Pet Supplies Plus segment operates as an omnichannel retail chain and franchisor of pet supplies and services that includes premium brands, proprietary private labels and specialty products, as well as offers grooming, pet wash and other services.
The Badcock segment operates as a specialty retailer of furniture, appliances, bedding, electronics, home office equipment, accessories and seasonal items in a showroom format. It offers multiple and flexible payment solutions and credit options through its consumer financing services.
The American Freight segment operates a retail chain that provides in-store and online access to furniture, mattresses, new and out-of-box home appliances, and home accessories. It also serves as a liquidation channel for appliance vendors.
The Buddy’s segment operates as a specialty retailer of consumer electronic, residential furniture, appliances and household accessories through rent-to-own agreements.
The Sylvan segment establishes and grows as a franchisor of supplemental education for Pre-K-12 students and families in the United States and Canada.
Investors receive a 7.33% dividend. B. Riley Securities has set a $63 target price, well above the $59.00 consensus target. Thursday’s final Franchise Group stock trade came in at $34.12.
24/7 Wall St.Holly Energy Partners
This limited partnership is owned by HollyFrontier, and it is a solid dividend play. Holly Energy Partners L.P. (NYSE: HEP) owns and operates petroleum product and crude pipelines, storage tanks, distribution terminals, loading rack facilities and refinery processing units that support the refining and marketing operations of HollyFrontier in West Texas, New Mexico, Utah, Nevada, Oklahoma, Wyoming, Kansas, Arizona, Idaho and Washington.
The company’s refined product pipelines transport conventional gasolines, reformulated gasolines and low-octane gasolines for oxygenate blending, as well as distillates, such as high- and low-sulfur diesel and jet fuels and liquefied petroleum gases. Its intermediate product pipelines transport intermediate feedstocks and crude oils; and its oil trunk, gathering and connection pipelines deliver crude oil.
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Holly operates 26 main pipelines; crude gathering networks; 10 refined product terminals; a crude terminal; 31,800 track feet of rail storage; seven locations with truck or rail racks; and tankages at six refining facility locations, as well as five refinery processing units.
Holly Energy Partners stock comes with an 8.27% distribution, which appears safe for now. The Raymond James price target of $20 is higher than the $18 consensus target and Thursday’s close of $16.92.
New York Community Bancorp
This somewhat off-the-radar company pays a huge dividend and is an attractive idea for investors also looking to own financials now. New York Community Bancorp Inc. (NYSE: NYCB) operates as the bank holding company for New York Community Bank, which provides banking products and services in New York, New Jersey, Ohio, Florida and Arizona.
The company accepts various deposit products, such as interest-bearing checking and money market, savings, non-interest-bearing and individual retirement accounts, as well as certificates of deposit. Its loan products include multifamily loans; commercial real estate loans; specialty finance loans and leases; and commercial and industrial loans; acquisition, development and construction loans; one-to-four family loans; and consumer loans.
The company also offers annuities, life and long-term care insurance products and mutual funds; cash management products; and online, mobile and phone banking services. It primarily serves individuals, small and midsize businesses, and professional associations through a network of 237 community bank branches and 340 ATM locations.
Shareholders receive a 6.59% dividend. The BofA Securities price target is $11, while the consensus target is $12.00. Thursday’s closing print for New York Community Bancorp stock was $10.32 per share.
While a few of these seven top companies are somewhat off the radar, their stocks all offer investors outstanding entry points and some of the biggest dividends. They are Buy rated at top Wall Street firms, and the companies have a reasonably strong moat around their businesses.
The reality is that we are in one of the worst economic periods in America in decades. With that in mind, buying stocks that will pay dependable dividends until the mess is sorted out continues to make sense now.
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