Analysis

3 High-Yield Dividend Stocks to Buy Hand Over Fist

These top stocks can put more cash in your pocket.

If you’re looking for dividend-paying companies that can help you earn more passive income, you’ve come to the right place. Here are three high-yield dividend stocks that are smart buys today.

No. 1 high-yield stock to buy: AT&T

For more than 140 years, AT&T (T -1.31%) has helped people connect. Today, the telecommunications giant provides vital wireless and internet services to over 100 million people and almost 2.5 million businesses.

High customer loyalty rates allow AT&T to generate dependable cash flow. Moreover, the company continues to gain 5G wireless and high-speed fiber internet customers at a solid clip. Combined with management’s cost-cutting initiatives, these customer wins have AT&T on pace to produce as much as $18 billion in free cash flow in 2024.

This bountiful cash production can easily cover AT&T’s approximately $8 billion in annual dividend payments to investors. Management is prudently using some of the excess cash to pay down the company’s debt. By strengthening its balance sheet, AT&T is reducing the risks for shareholders.

Better still, you could scoop up the telecom leader’s stock at an attractive price today. AT&T’s shares change hands at about 7x this year’s projected cash flow. This bargain-priced dividend stock’s forward yield stands at a lucrative 6.3%.

No. 2 high-yield stock to buy: Altria

Yield-focused investors might also want to consider Altria Group (MO -0.02%). The tobacco leader’s dividend yield currently checks in at a whopping 8.6%. Income investors who value dividend growth and reliability will also appreciate that the company has raised its cash payout 58 times over the past 54 years.

Population growth and price hikes enabled Altria to offset falling smoking rates. In turn, its total return to shareholders, which includes share price gains and dividends, has roughly tracked its long-term growth in free cash flow over the past decade.

MO Total Return Price data by YCharts.

Cigarette sales should continue to produce sizable profits for Altria in the coming years. Yet the company’s future growth will likely be derived from two major sources: smoke-free products and cannabis.

Shipments of Altria’s On! tobacco-leaf-free oral nicotine pouches surged by 32% in the first quarter. The company spent $2.8 billion to expand its smoke-free offerings when it bought vaping products supplier NJOY Holdings in June. Management expects these fast-growing businesses and other investments to help Altria earn $5 billion in smoke-free revenue by 2028, up from $2.7 billion in 2023.

Altria has another intriguing opportunity in cannabis. The tobacco king has a roughly 40% stake in Canadian cannabis company Cronos Group.

The U.S. Justice Department and other federal agencies recently took steps to reclassify marijuana as a lower-risk drug, and these efforts could make it easier and more profitable for cannabis companies to operate in the U.S. Altria’s vast tobacco distribution network could help it capture a significant portion of a U.S. cannabis industry that might be worth as much as $100 billion, according to Tilray CEO Irwin Simon.

Yet right now, Altria’s stock can be had for less than 9x its earnings guidance for 2024, and management seems to think that’s quite a bargain. Altria sold $2.4 billion worth of its stake in beer titan Anheuser-Busch InBev in March and used the cash to buy back its own shares.

No. 3 high-yield stock to buy: Enterprise Products Partners

Don’t overlook the energy sector if you want to profit from the artificial intelligence (AI) boom. Hungry data centers gobble up electricity, which boosts demand for the natural gas transportation services that Enterprise Products Partners (EPD -0.43%) provides.

Enterprise’s pipelines, processing facilities, and storage sites help to move natural gas, oil, refined products, and petrochemicals across the U.S. Yet it’s not as exposed to the commodity price volatility as oil drillers or other energy producers. Instead, Enterprise generates the lion’s share of its revenue from volume-based fees. This allows the company to generate consistently strong earnings under most economic conditions.

Enterprise's cash flow generation held up well during difficult market environments like the financial crisis.

Image source: Enterprise Products Partners.

As a master limited partnership (MLP), Enterprise must send a sizable portion of these earnings to investors each quarter. The MLP’s forward yield stands at a robust 7.3% today. Enterprise also sports a 25-year track record of annual dividend increases.

These cash distributions should continue to grow steadily. Demand for Enterprise’s energy transportation services is predicted to rise along with population growth in the coming decades.¬†Additionally, soaring demand for AI services is creating an urgent need for more electricity. Data centers devour enormous amounts of energy when they train and run AI models and applications.

With over 50,000 miles of pipelines, Enterprise is well-positioned to transport natural gas to the power plants that will supply these data centers with the electricity they require. The AI revolution, in turn, could be a powerful growth driver for Enterprise — and its investors’ dividends — in the years ahead.

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