As we move further into October, many investors may be looking to identify certain stocks with the potential to provide additional capital appreciation upside, but also some strong dividend income. Indeed, if interest rates continue to move lower, and expectations that interest rate cuts could pick up intensify, certain high-yield dividend stocks with solid balance sheets could outperform. 

That’s partly due to the fact that many higher-yielding stocks are often compared to lower risk (or risk-free) Treasury bonds. These bond-like proxies tend to outperform as rates come down, and their yields begin to look much more meaningful on a relative basis.

Now, the three stocks I’m going to highlight on this list may be more volatile than the average stock out there. That’s partly due to the fact that these are companies operating in diverse sectors, some more volatile than others. Accordingly, whether it’s commodity price movements or the perceived health and defensiveness of key sectors, there are some risk factors to consider.

That being said, on a balance of risks, I do think these three high-yield dividend stocks may be worth considering in October. Here’s why.

Key Points About This Article:

• High-yield dividend stocks have received little interest from many investors, particularly as interest rates surged, bringing the risk free rate higher.
• However, as interest rates come down, these three higher-yielding stocks could become much more attractive to longer-term investors.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

TXO Partners LP (TXO)

TXO Partners LP (NYSE:TXO) is an intriguing play in the oil and gas space. Operating under a master limited partnership structure, the company is focused on acquiring and optimizing conventional oil and natural gas reserves across North America, with key holdings in the Permian and San Juan basins.

Unfortunately for investors in TXO stock, the company’s share price did decline more than 12% last month as oil prices remained highly volatile and the sector got hit overall. This decline was larger than the Oil & Gas sector’s loss of just 3.4% over that period (with most benchmark indices trading higher). However, if the company can outperform expectations in its upcoming earnings report (in which earnings per share are expected to grow 33% and revenue is projected to rise more than 30%), this is a stock that could have plenty of upside leverage at current levels.

Trading at 17-times trailing earnings (though no forward multiple, as earnings declines are expected over the next year), TXO could be a breakout candidate if the company can post profitable quarters ahead. Higher oil prices, thanks to geopolitical turmoil, could be the catalyst behind such a stock. Thus, as a defensive hedge, this is a stock I certainly think warrants attention right now.

Realty Income (O)

Realty Income (NYSE:O) is among the largest REITs in the U.S., and is one I’ve long thought is among the best ways to play the real estate sector. The reality is that real estate is highly regional. One region that’s working (due to demographic shifts and other factors) over a given five or ten year period could lag the next decade. Thus, having diversification in one’s real estate portfolio is key to managing through market cycles and being able to invest for the long-term.

With more than 15,450 properties in the U.S., U.K., and Europe, Realty Income provides not only sector-wide diversification, but geographic diversification as well. This company has seen some struggles with its occupancy ration (hovering around 96%) for the past three decades. However, the company’s monthly dividend income paid to investors (which has been raised 126 times since its IPO in 1994) does certainly provide a compelling investment case to dividend investors everywhere. At a valuation of just 16-times last year’s AFFO, and with a forward dividend yield of 5%, this is a top high-yield stock I think is worth considering here. 

Despite higher interest rates, Realty Income expanded by adding over 2,000 properties last year. These additions included the acquisition of Spirit Realty, bringing its total to around 15,500. Thus, for those seeking growth (where it’s often hard to find) in the real estate sector, Realty Income certainly looks compelling at its current valuation. 

Pfizer (PFE)

Pfizer (NYSE:PFE) is among the top large-cap pharma stocks in the market, but is one that hasn’t received much love in recent years following the pandemic. A key vaccine maker for Covid-19, Pfizer saw its valuation soar on expectations that annual boosters would become a mainstay of its business. However, recent data have shown that this isn’t nearly the case in most parts of the world. 

This pandemic surge was reflected in Pfizers’  revenue surging from $41.7 billion in 2020 to $100.3 billion in 2022. However, the company’s revenue has since dropped to $55.2 billion over the last twelve months. Thus, the market appears to have gotten too bullish on the upside, but now could be positioned too bearishly on this stock on the downside. 

I think Pfizer’s 5.8% dividend yield is particularly appealing, when one considers the durability of the company’s cash flows and its pipeline of cancer drugs acquired via its Seagen deal. That deal may take years to pay off. But the expectation of eight new blockbuster drugs by 2030 is a story I think most investors can get behind – at least, those who are patient enough to wait.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.