If your gut tells you now is a good time to add some safe dividend payers to your investment portfolio, you’d be wise to listen. Between geopolitical turmoil, lingering inflation, unpredictable interest rates, rising loan delinquencies, and political uncertainty, the near future may not be a great environment for some — or maybe any — growth stocks.
However, these three high-yield dividend stocks are up to the job of providing investors with solid returns, and they should remain so indefinitely.
1. Altria Group
The United States’ tobacco industry is living on borrowed time. That’s the top takeaway from the World Health Organization’s (WHO) most recent look at the matter anyway, which suggests only 18.2% of the nation’s adult population will be regular tobacco users (smokers, mostly) in 2025. That’s measurably less than 2000’s figure of 23.3%.
The United States’ tobacco business may actually have more years ahead of it than you might expect, however. Also recognizing the smoking-cessation movement is slowing down, the same WHO report suggests 16.5% of U.S. adults will still be regularly using tobacco by 2030. People are picking up alternative vices like vaping and the use of e-cigarettes in droves in the meantime. The National Center for Health Statistics reports over 4% of the country’s adults use vape products regularly, offsetting the shrinking number of smokers.
Connect the dots. Given the nation’s expected population growth between now and then (and beyond), there’s still plenty of opportunity to turn these common consumer habits into lots of cash.
The backdrop bodes well for Altria Group (NYSE: MO), parent to Philip Morris USA, which owns familiar U.S. cigarette brands like Marlboro, Virginia Slims, and others. And, even though cigarettes remain its top seller, it also owns vaping brand NJOY and oral nicotine pouch maker Helix Innovations. These other initiatives are softening the impact of tobacco’s slow demise on Altria, which has adopted the motto “Moving beyond smoking.” By accepting the gradual but inevitable decline of the cigarette market rather than resisting it, the company can continue generating good revenue by managing — and even steering — the transition to other nicotine products. More important to shareholders, managing this evolution lets Altria continue producing the profits that have supported 55 straight years of annual dividend increases.
It’s important for investors to understand that there won’t likely be any meaningful or sustainable capital appreciation here. Altria doesn’t even appear to be trying to muster growth. Its focus is entirely on maintaining the cash flow that funds its dividend payments.
With a forward yield of 7.7% and a dividend that could continue growing and being paid for decades though, that’s not a bad trade-off.
2. Realty Income
Contrary to a common assumption, not all sections of the retail industry are on the ropes. The bulk of the weakness is limited to department stores and the malls where they’re typically found. Strip malls and neighborhood shopping centers are actually doing pretty well, catering to consumers where and how they like to shop.
Enter Realty Income (NYSE: O).
It’s not a retailer, although its fate is tied to a wide swath of that industry. It’s a real estate investment trust (REIT), renting brick-and-mortar properties to retailers, sparing its tenants some of the financial commitments of owning all those buildings.
That may still seem like a risky proposition on the surface. The landlord is still renting to companies in a retail industry that’s being pressured by the ongoing growth of e-commerce.
This overarching idea ignores a couple of important details though. One is that a great deal of retail consumption is still (for convenience and speed reasons) handled in person at stores. And the other reason? The bulk of Realty Income’s tenants are among the retailers with the most staying power, like Dollar General, Walgreens, 7-Eleven, and even Walmart. Once these chains have established a brick-and-mortar presence in a location, they’re unlikely to abandon it.
That’s what this REIT’s dividend track record suggests anyway. Not only has it distributed its monthly (yes, monthly) payments like clockwork ever since they began in 1969, those payouts have been raised 127 times. Those who buy the stock today would be stepping in while Realty Income’s forward dividend yield stands at 5%.
3. Whirlpool
Last but not least, add home appliance maker Whirlpool (NYSE: WHR) to your list of dividend stocks to consider buying while its forward yield stands at 7%.
It’s a suggestion that might raise a few eyebrows. Even if you don’t know for sure, intuitively, it doesn’t seem as if there’d be great demand for home appliances at this time. Growing competition from the likes of Samsung, Bosch, and LG further deflates the bullish argument for owning a stake in this iconic brand name.
Things may not be quite as challenging on this front as it seems they should be, though.
Unlike some other large purchases, the purchase of a major home appliance can’t always be put off. Appliances are also more affordable than cars or homes, for example, so getting financing is less of a hurdle. To this end, the Conference Board’s consumer sentiment measure ticked higher in August specifically because — in apparent defiance of the economic backdrop — more U.S. consumers said they intend to purchase a refrigerator, washing machine, or TV within the next six months. It was the fourth straight month these purchasing plans improved.
Investors who already know Whirlpool will likely also know that while it has continued to make its dividend payments, it hasn’t increased them since 2022, when it raised the quarterly payout to $1.75 per share.
Keep things in perspective though, its ability to maintain its payout was never in question. The decision to halt its long-established cadence of dividend growth was rooted in an abundance of caution at an extraordinary time in modern history. The COVID-19 pandemic and the ripple effects from it not only temporarily up-ended purchases of appliances, they impeded companies’ ability to manufacture them. This year’s expected 14% revenue dip and subsequent profit setback should mark the end of these woes though. Analysts forecast that Whirlpool’s business will turn the corner next year. In the meantime, with the stock trades down 60% from its 2021 high and is valued at less than 9 times next year’s estimated earnings, the worst-case scenario is already priced in … and then some.
Should you invest $1,000 in Altria Group right now?
Before you buy stock in Altria Group, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Altria Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $694,743!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 16, 2024
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income and Walmart. The Motley Fool has a disclosure policy.
Want Safe Dividend Income in 2024 and Beyond? Invest in These 3 Ultra-High-Yield Stocks. was originally published by The Motley Fool
