Interest rate cuts make high-yield dividend stocks more attractive by reducing competition from fixed-income investments and lowering companies’ borrowing costs, thereby supporting both dividend sustainability and stock price appreciation. At 24/7 Wall St., we attempt to evaluate the underlying business fundamentals and dividend sustainability before recommending companies to our readers. Sometimes, remarkably high yields can indicate financial stress rather than opportunity, as was the case with Walgreens this year. Fortunately, four of our favorite high-yield dividend stocks are very attractive from both yield and fundamental perspectives, and all offer outstanding entry points at current trading levels.
There are over 6,650 publicly traded stocks in the United States, so not even the most intelligent investors with the best tools can find them all immediately. Many investors and traders typically maintain a small list of key stocks they follow when seeking capital gains or high-yield dividends. We decided to screen our 24/7 Wall St. high-yield database for companies yielding at least 7% with solid dividend coverage. Four well-run companies hit our screens, and all look like timely buys now, with Buy ratings on three of the stocks from top Wall Street firms.
Why do we cover high-yield dividend stocks?
High-yield dividend stocks offer investors a reliable source 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.
Altria
This is one of the world’s largest producers and marketers of cigarettes and other tobacco-related products. Altria Group Inc. (NYSE: MO) offers value investors a 7.12% dividend yield, a compelling entry point, and a generous dividend. The company manufactures and sells smokable and oral tobacco products in the United States.
The company primarily sells cigarettes 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 S.A. (NYSE: BUD), the world’s largest brewer. Last 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.
Goldman Sachs has a Buy rating with a $72 target price.
Conagra Brands
Conagra Brands Inc. (NYSE: CAG) manufactures and sells products under various brands in supermarkets, restaurants, and foodservice establishments. This is the ideal company for nervous investors, as it pays shareholders a substantial and secure 7.92% dividend that has risen as the stock price has declined. However, the payout’s sustainability is supported by a payout ratio of about two-thirds of earnings.
Conagra operates primarily as a consumer packaged goods food company in the United States through four segments:
- The Grocery & Snacks segment primarily offers shelf-stable food products through various retail channels.
- The Refrigerated & Frozen segment provides temperature-controlled food products through various retail channels.
- The International segment offers food products in various temperature states through retail and food service channels outside the United States.
- The Foodservice segment offers branded and customized food products, including meals, entrees, sauces, and various custom-manufactured culinary products packaged for restaurants and other food service establishments.
The company sells its products under these familiar brands:
- Birds Eye
- Marie Callender’s
- Duncan Hines
- Healthy Choice
- Slim Jim
- Reddi-Wip
- Angie’s
- BOOMCHICKAPOP
Barclays has an Overweight rating with a target price of $26.
Energy Transfer
Energy Transfer L.P. (NYSE: ET) is one of North America’s largest and most diversified midstream energy companies. This top master limited partnership is a safe option for investors seeking energy exposure and income, as the company pays a substantial 7.78% distribution. The company owns and operates a diversified portfolio of energy assets in the United States, with more than 130,000 miles of pipeline and associated energy infrastructure.
Its strategic network spans 44 states with assets in all of the major United States production basins. Its core operations 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
The company’s segments include:
- Intrastate transportation and storage
- Interstate transportation and storage
- Midstream
- NGL and refined products transportation and services
- Crude oil transportation and services
It has investments in Sunoco L.P. (NYSE: SUN) and USA Compression Partners L.P. (NYSE: USAC). It also owns Lake Charles LNG, which owns an LNG import terminal and regasification facility.
J.P. Morgan has an Overweight rating on the shares and a $21 target price.
Universal Health Realty Income Trust
Yielding 7.48% and offering investors the opportunity to invest in healthcare, this stock makes a lot of sense now. Universal Health Realty Income Trust (NYSE: UHT) is a real estate investment trust that invests in healthcare and human service-related facilities, including:
- Acute care hospitals
- Behavioral healthcare hospitals
- Specialty facilities
- Free-standing emergency departments
- Childcare centers
- Medical/office buildings
The company has approximately 76 real estate investments or commitments located in 21 states in the United States consisting of six hospital facilities including three acute care and three behavioral healthcare; 60 medical/office buildings; four free-standing emergency departments; four preschool and childcare centers; one specialty facility located in Evansville, Indiana, and one property comprised of vacant land located in Chicago, Illinois.
Its facilities include McAllen Medical Center, Wellington Regional Medical Center, Aiken Regional Medical Center, Canyon Creek Behavioral Health, Clive Behavioral Health, Desert Valley Medical Center, and Danbury Medical Plaza.
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