Investors and now Wall Street 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. For example, if you buy a stock at $20 that pays a 3% dividend and it rises to $22 in a year, your total return is 13%. That is, 10% for the increase in stock price and 3% for the dividends paid.
In a recent Bank of America global fund manager survey, it was evident that many of the top portfolio managers are somewhat nervous about the prospects for the stock market and equities going forward. In fact, their allocation to U.S. equities at 23% underweight is the lowest reading since June of 2023 and represents the most significant contraction in exposure on record. Additionally, cash levels in the top funds have risen from 4.1% to 3.5%. The survey revealed that stagflation, trade war chatter, and other items, like the supposed end of American exceptionalism, were also cited as reasons for the increasingly defensive posturing.
We found two very intriguing items: portfolio managers have the highest allocation to consumer staples stocks in 18 months, many of which pay big dividends, and participated in the most extensive rotation to high dividend stocks from low dividend stocks on record. This rotation indicates that they may be looking for a total return to help bolster fund performance in a year that could be a lot less promising than 2023 and 2024.
We screened our high-yield 24/7 Wall St. research stock database looking for quality companies with higher dividends, and four are perfect picks now for investors looking to pursue the strategy that many of the top money managers on Wall Street and around the globe are utilizing. All are rated Buy at top firms we cover.
British American Tobacco
European giant British American Tobacco PLC (NYSE: BTI | BTI Price Prediction) is a consumer-centric, multi-category consumer goods company that pays shareholders a hefty 7.70% dividend. The company provides tobacco and nicotine products. Its segments include:
- United States
- Asia Pacific
- Middle East
- Africa
- The Americas
- Europe
The company’s product categories include:
- Vapor
- Tobacco heating products (THPs)
- Modern oral, traditional oral, and combustible cigarettes
Vapor products are handheld, battery-powered devices that heat a liquid (called an e-liquid) to produce an inhalable aerosol known as vapor. THPs are a new category of tobacco product designed to heat rather than burn tobacco.
Modern oral products are smoke-free oral nicotine products called nicotine pouches, designed for use in the mouth. Traditional oral products include snus and snuff.
British American Tobacco brands include:
- Vuse
- glo
- Velo
- Grizzly
- Dunhill
- Kent
- Lucky Strike
- Pall Mall
- Rothmans
- Newport
- Natural American Spirit
- Camel
- Vogue
- Viceroy
- Kool
- Peter Stuyvesant
- Craven A
- State Express 555
- Shuang Xi
Energy Transfer
This top master limited partnership is a safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
The company is a publicly traded limited partnership with core operations that include:
- Complementary natural gas midstream, intrastate, and interstate transportation and storage assets
- Crude oil, natural gas liquids (NGL), and refined product transportation and terminalling assets
- NGL fractionation
- Various acquisition and marketing assets
After purchasing Enable Partners in December 2021, Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in 41 states, covering all of the major U.S. producing regions and markets. This further solidifies its leadership position in the midstream sector.
Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, the general partner interests, the incentive distribution rights, and 28.5 million standard units of Sunoco, and the public partner interests and 39.7 million standard units of USA Compression Partners.
Pfizer
This top pharmaceutical stock was a massive winner in the COVID-19 vaccine sweepstakes but has traded sideways for almost two years. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It pays a rich reliable dividend, which has risen yearly for the past 14 years.
The company offers medicines and vaccines in various therapeutic areas, including:
- Cardiovascular metabolic and women’s health under the Premarin family and Eliquis brands
- Biologics, small molecules, immunotherapies, and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena, and Braftovi brands
- Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga, and Paxlovid brands
Pfizer also provides medicines and vaccines in various therapeutic areas, such as:
- Pneumococcal disease, meningococcal disease, tick-borne encephalitis
- COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba, and the Prevnar family brands
- Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis, and Cibinqo brands
- Amyloidosis, hemophilia, and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX, and Genotropin brands
Verizon
This top telecommunications company offers tremendous value, trading at 8.75 times estimated 2025 earnings. Verizon Communications Inc. (NYSE: VZ), through its subsidiaries, provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide.
It operates in two segments:
- Verizon Consumer Group
- Verizon Business Group
The Consumer segment provides wireless services across the wireless networks in the United States under the Verizon and TracFone brands and through wholesale and other arrangements.
It also provides fixed wireless access (FWA) broadband through its wireless networks and related equipment and devices, such as:
- Smartphones
- Tablets
- Smartwatches and other wireless-enabled connected devices
The segment also offers wireline services in the Mid-Atlantic, including the District of Columbia, and the northeastern United States through its fiber-optic network, Verizon Fios product portfolio, and copper-based network.
The Business segment provides wireless and wireline communications services and products, including:
- FWA broadband
- Data
- Video and conferencing
- Corporate networking
- Security and managed network
- Local and long-distance voice
Network access services to deliver various IoT services and products to businesses, government customers, and wireless and wireline carriers in the United States.
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