Investors love dividend stocks, especially the high-yield variety because they offer a significant income stream and have massive total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.
In a recent blogcast, we noted that the broad stock market has not had a full 10% correction since the inflation scare of 2022. According to Ned Davis’s research, a correction has occurred every 1.1 years going back to 1928. Furthermore, the last time the market entered an official correction was 329 trading days ago, well beyond the average of 173 trading days without a correction since 1928. It remains to be seen if this tariff-driven sell-off has legs, but some feel we could be close to the end.
Growth and income investors who stayed with some of Wall Street’s favorite high-yield dividend stocks have had reason to cheer lately, as some top stocks are at or close to hitting 52-week highs. The good news for investors looking to move capital is that they are still attractive even at those 52-week highs. All four are rated Buy at the top Wall Street firms we cover.
Why do we cover high-yield dividend stocks?
Dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence. Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.
AT&T
AT&T Inc. (NYSE: T | T Price Prediction) is the world’s fourth-largest telecommunications company in terms of revenue. The legacy telecommunications company has been undergoing a lengthy restructuring while lowering its dividend and debt levels. It provides worldwide telecommunications, media, and technology services. Its Communications segment offers wireless voice and data communications services.
AT&T sells through its company-owned stores, agents, and third-party retail stores:
- Handsets
- Wireless data cards
- Wireless computing devices
- Carrying cases
- Hands-free devices
AT&T also provides:
- Data
- Voice
- Security
- Cloud solutions
- Outsourcing
- Managed and professional services
- Customer premises equipment for multinational corporations, small and mid-sized businesses, and governmental and wholesale customers.
In addition, this segment offers residential customers broadband fiber and legacy telephony voice communication services.
It markets its communications services and products under:
- AT&T
- Cricket
- AT&T PREPAID
- AT&T Fiber
The company’s 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 brands.
Altria
Altria Group Inc. (NYSE: MO) is one of the world’s largest producers and marketers of cigarettes and other tobacco-related products and still offers value investors a great entry point. Altria manufactures and sells smokable and oral tobacco products in the United States through its subsidiaries.
The company provides cigarettes primarily under the Marlboro brand, as well as:
- Cigars and pipe tobacco, principally under the Black & Mild and Middleton brands
- Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
- on! Oral nicotine pouches
- e-vapor products under the NJOY ACE brand
It sells its tobacco products primarily to wholesalers, including distributors and large retail organizations, such as chain stores.
Altria used to own over 10% of Anheuser-Busch InBev N.V. (NYSE: BUD), the world’s largest brewer. Earlier this year, the company sold 35 million of its 197 million shares through a global secondary offering. That represents 18% of its holdings but still leaves 8% of the outstanding shares in its back pocket. Altria also announced a $2.4 billion stock repurchase plan partially funded by the sale.
Bristol-Myers Squibb
Bristol-Myers Squibb Co. (NYSE: BMY) is a global biopharmaceutical company committed to discovering, developing and delivering innovative medicines. This top company remains a solid pharmaceutical stock to own long-term while offering an outstanding entry point. It discovers, develops, licenses, manufactures, and markets pharmaceutical products worldwide.
The company offers products in:
- Hematology
- Oncology
- Cardiovascular
- Immunology therapeutic classes
Bristol-Myers Squibb products include:
- Revlimid, an oral immunomodulatory drug for the treatment of multiple myeloma
- Opdivo for anti-cancer indications
- Eliquis, an oral inhibitor indicated for the reduction in risk of stroke/systemic embolism in NVAF and for the treatment of DVT/PE
- Orencia for adult patients with active RA and psoriatic arthritis, as well as reducing signs and symptoms in pediatric patients with active polyarticular juvenile idiopathic arthritis
The company also provides:
- Sprycel for the treatment of Philadelphia chromosome-positive chronic myeloid leukemia
- Yervoy for the treatment of patients with unresectable or metastatic melanoma
- Abraxane, a protein-bound chemotherapy product
- Implicit for the treatment of multiple myeloma
- Reblozyl for the treatment of anemia in adult patients with beta-thalassemia
Enterprise Products Partners
Enterprise Products Partners L.P. (NYSE: EPD) is an American midstream natural gas and crude oil pipeline company and is one of the largest publicly traded energy partnerships. It provides various midstream energy services, including:
- Gathering
- Processing
- Transporting and storing natural gas, natural gas liquids (NGL) fractionation
- Import and export terminalling
- Offshore production platform services
The company has four reportable business segments:
- Natural Gas Pipelines and Services
- NGL Pipelines and Services
- Petrochemical Services
- Crude Oil Pipelines and Services
Many top Wall Street analysts may like the stock because of its distribution coverage ratio, which is well above 1x. This makes the company relatively less risky in the MLP sector.
Royal Bank of Canada has an Outperform rating to go with a $36 price target.
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