As we all know, dividend-paying stocks are a popular choice during market volatility, as they offer a stable and steady income stream even when the prices fluctuate. Thus, investors looking for such could consider adding high-dividend yield stocks like Verizon Communications Inc. (VZ), AT&T Inc. (T), and Altria Group, Inc. (MO) to their portfolios.
The elevated interest rates and the inflation worries are imminent in the economy. According to the Bureau of Economic Analysis (BEA), the PCE price index, excluding food and energy, increased 2.6% year-over-year in the month of July. With inflation falling substantially, the Fed is poised to cut interest rates for the first time in four years.
On the other hand, with the U.S. job market weakened and unemployment still being noticeably present, it is concerning for the economy. However, the unemployment rate in the month of August was 4.2%, compared to 4.3% in July.
Despite the economic uncertainty, high-dividend yield stocks offer a promising future for investors. They not only provide a steady income but also have the potential for price appreciation. Moreover, these stocks act as a hedge against economic uncertainty, ensuring income regardless of the economy’s momentum.
Given this backdrop, let’s examine the fundamentals of the above-mentioned stocks in detail:
Verizon Communications Inc. (VZ)
VZ is a holding company that, through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies. It operates through two segments: Verizon Consumer Group and Verizon Business Group.
On September 9, VZ announced that it would acquire Frontier Communications Parent, Inc. for a $20 billion cash deal. This acquisition will considerably expand VZ’s fiber footprint and intelligent edge network for digital innovations like AI and IoT across the nation to current as well as new customers. Frontier’s 2.2 million fiber subscribers will be joining VZ’s connections.
On September 4, buoyed by strong financial performance, the company increased its quarterly dividend by $0.0125 to $0.6775 per share, payable to its shareholders on November 1, 2024.
VZ has raised its annual dividend for 18 consecutive years. It pays an annual dividend of $2.66, which translates to a yield of 6.02% at the current share price. Its four-year average dividend yield is 5.82%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 2% over the past five years.
In the fiscal second quarter that ended on June 30, 2024, VZ’s total operating revenues increased marginally year-over-year, amounting to $32.80 billion. Its operating income rose 8.3% from the year-ago value to $7.82 billion. The company’s consolidated adjusted EBITDA came in at $12.30 billion, up 2.8% year-over-year, and its EPS stood at $1.09.
In addition, its retail postpaid phone net additions are 148,000, and retail postpaid net additions are 340,000.
According to VZ’s guidance and outlook for its fiscal year 2024, it is projecting adjusted EBITDA to grow between 1% to 3%. Additionally, its adjusted EPS guidance ranges from $4.50 to $4.70. The company also expects total wireless services revenue growth to range between 2% and 3.5%.
Street expects VZ’s revenue for the fiscal fourth quarter (ending December 2024) to increase marginally year-over-year to $35.54 billion. Its EPS for the same period is expected to register a 2.1% growth from the prior year, settling at $1.10. In addition, it surpassed the consensus EPS estimates in three of the trailing four quarters, which is promising.
The stock has gained 30.5% over the past year and 18% over the past nine months to close the last trading session at $44.08.
VZ’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VZ has a B grade for Stability. It is ranked #5 out of 18 stocks in the Telecom - Domestic industry. Click here to see the additional ratings for VZ (Growth, Value, Momentum, Sentiment, and Quality).
AT&T Inc. (T)
T is a holding company that provides telecommunications and technology services internationally. The company operates through two segments: Communications and Latin America. It provides wireless and wireline telecom services to consumers and businesses worldwide.
On September 9, T expanded its high-speed fiber internet to new geographies, reaching more people. This expansion will be continued through joint ventures and other commercial open-access agreements and will aim to expand Gigapower’s fiber footprint in new locations.
On August 1, the company paid a quarterly dividend of $0.2775 per share to its shareholders. T pays an annual dividend of $1.11 per share, which translates to a yield of 4.98% on the prevailing share price. Also, its four-year average dividend yield is 6.38%.
T's service from operating revenues for the second quarter (ended June 30, 2024) increased marginally year-over-year to $25.01 billion. Its attributable net income came in at $3.55 billion, and its earnings per share stood at $0.49. The company reported a free cash flow of $4.60 billion, indicating a 9.5% growth from the prior year's quarter.
Looking ahead, T anticipates full-year adjusted EBITDA for the fiscal year 2024 to be in the range of 3%, and capital investment and free cash flow are anticipated to be in the range of $21-$22 billion and $17-$18 billion, respectively. The company also projects adjusted EPS to range from $2.15 to $2.25.
Analysts expect T’s revenue and EPS for the current year (ending December 2024) to be $122.68 billion and $2.19, respectively. For the fiscal year 2025, both its revenue and EPS are expected to grow by 1.7% and 3.5% from the prior year to $124.71 billion and $2.26, respectively.
T shares have surged 43% over the past year and 31.8% over the past nine months to close the last trading session at $21.78.
T’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has a B grade for Quality. Within the same Telecom - Domestic industry, it is ranked #2 out of 18 stocks. Click here to see T’s ratings for Growth, Value, Momentum, Stability, and Sentiment.
Altria Group, Inc. (MO)
MO manufactures and sells smokeable and oral tobacco products. The company provides cigarettes mainly under the Marlboro brand, large cigars, and pipe tobacco under the Black & Mild brand, moist smokeless tobacco, and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands. The oral tobacco segment products are under the name of on! brand.
On August 22, demonstrating its commitment to returning value to shareholders, the company declared a quarterly dividend of $1.02 per share, up 4.1% from the previous rate, payable to its shareholders on October 10.
With 54 years of consecutive dividend growth, MO pays an annual dividend of $4.08, which translates to a yield of 7.89% at the current share price. Its four-year average dividend yield is 8.03%. Also, the company’s dividend payouts have increased at a CAGR of 4.4% over the past three years.
On June 21, MO received U.S. Food and Drug Administration (FDA) authorization for the marketing of NJOY’s menthol e-vapor products. The marketing for the product will aim at smoke-free alternatives to traditional adult smokers.
For the second quarter of 2024, which ended on June 30, MO’s oral products segment reported that net revenues increased 4.6% year-over-year to $711 billion.
The company’s net earnings for the quarter amounted to $3.80 billion, representing an increase of 79.6% year-over-year, with its EPS growing 85.7% from the prior year’s quarter to $2.21.
Building on this quarter's momentum, the company updated its guidance for 2024, MO now anticipates that the full-year adjusted EPS will range between $5.07 and $5.15, representing a growth of 2.5%-4.0% from its base in 2023.
The consensus revenue estimate of $5.35 billion for the fiscal third quarter (ending September 2024) represents a marginal increase year-over-year. The consensus EPS estimate of $1.35 for the current quarter indicates a 5.6% improvement year-over-year.
Over the past year, the stock has surged 21%, closing the last trading session at $50.50.
It’s no surprise that MO has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Quality. Out of 10 stocks in the B-rated Tobacco industry, MO is ranked #5.
Beyond what is stated above, we’ve also rated MO for Growth, Value, Momentum, Stability, and Sentiment. Get all MO ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
VZ shares were trading at $44.11 per share on Wednesday afternoon, up $0.03 (+0.07%). Year-to-date, VZ has gained 22.88%, versus a 19.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
3 High-Dividend Yield Stocks to Buy Before September Ends StockNews.com
