Given ongoing economic uncertainty and geopolitical tensions mounting overseas, it marks a great time for investors to think about some dividend stocks. Therefore, high-yield dividend stocks, Verizon Communications Inc. (VZ), Altria Group, Inc. (MO), and Ares Capital Corporation (ARCC) might be worthy watchlist additions.
Despite the annual inflation rate in the United States decreasing to 3.4% in April 2024, down from 3.5% in March, it still remains above the Fed target of 2%. There are concerns that this might cause the Fed to keep interest rates elevated longer than expected.
Also, geopolitical turmoil has been the catalyst of turbulence for investors. The persistent geopolitical tensions, notably the conflicts in the Middle East and Ukraine and Western sanctions against Russia, underscore the interconnectedness of global economic and political landscapes. Moreover, the upcoming presidential election adds another question mark to the mix.
With these macroeconomic factors in mind, we think high-yielding dividend-paying stocks might give investors’ portfolios stability to weather market volatility. That said, let's delve into the fundamentals of the three high-yield dividend stocks.
Verizon Communications Inc. (VZ)
VZ provides worldwide communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities. It operates in two segments: Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
On June 6, 2024, VZ introduced the Gizmo Watch 3, Adventure, the latest addition to VZ’s acclaimed line of children’s smartwatches.
This new device, paired with the companion app GizmoHub, was designed to provide parents and caregivers peace of mind while empowering young explorers to safely and confidently embark on their adventures. This is expected to enhance the company’s income streams.
On June 5, 2024, VZ declared a quarterly dividend of 66.50 cents per outstanding share, consistent with the previous three quarters, payable on August 1, 2024.
VZ pays a $2.66 per share dividend annually, translating to a 6.50% yield on the current share price. Its four-year dividend yield is 5.67%. The company’s dividend payouts have grown at CAGRs of 2% and 2% over the past three and five years, respectively.
In terms of the trailing-12-month EBITDA margin, VZ’s 35.83% is 92.7% higher than the 18.59% industry average. Its 12.82% trailing-12-month Capex / Sales is 245.3% higher than the 3.71% industry average. Likewise, the stock’s 22.60% trailing-12-month EBIT margin is 154.8% higher than the 8.87% industry average.
VZ’s total revenues for the fiscal first quarter that ended March 31, 2024, increased marginally year-over-year to $32.98 billion. Net income attributable to VZ and earnings per common share stood at $4.60 billion and $1.09, respectively. In addition, its total current assets, as of March 31, 2024, stood at $37.96 billion, compared to $36.81 billion as of December 31, 2024.
For the quarter ending June 30, 2024, VZ’s revenue is expected to increase 1.2% year-over-year to $33 billion. Its EPS for the quarter ending December 31, 2024, is expected to increase 1.7% year-over-year to $1.10. VZ surpassed the consensus EPS estimates in three of the trailing four quarters.
VZ gained 19.5% over the past nine months to close its last trading session at $40.41.
VZ’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates 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 #4 out of 17 stocks in the Telecom - Domestic industry.
For additional VZ’s Momentum, Quality, Growth, Value, and Sentiment ratings, click here.
Altria Group, Inc. (MO)
MO manufactures and sells smokable and oral tobacco products. They offer cigarettes under the Marlboro brand, cigars and pipe tobacco under the Black & Mild brand, and moist smokeless tobacco and snus products under brands like Copenhagen, Skoal, Red Seal, and Husky.
MO pays a $3.92 per share dividend annually, translating to an 8.39% yield on the current share price. Its four-year dividend yield is 8.04%. The company’s dividend payouts have grown at CAGRs of 4.3% and 4.6% over the past three and five years, respectively.
In terms of the trailing-12-month gross profit margin, MO’s 69.45% is 97% higher than the 35.25% industry average. Likewise, its 23.23% trailing-12-month Return on Total Assets is 406.3% higher than the industry average of 4.53%. Furthermore, the stock’s 65.73% trailing-12-month levered FCF margin is significantly higher than the industry average of 5.74%.
MO’s net revenues for the first quarter ended March 31, 2024, were reported at $5.58 billion. Its gross profit stood at $3.28 billion and operating income at $2.67 billion. The company’s net earnings grew 19.1% year-over-year to $2.13 billion, while its adjusted EPS was reported at $1.15.
Street expects MO’s EPS for the quarter ending June 2024 to increase 2% year-over-year to $1.34 and revenue for the same quarter to expand marginally year-over-year to $5.47 billion.
MO gained 11.9% over the past three months to close its last trading session at $46.49.
MO has an overall C rating, equating to a Neutral in our proprietary rating system. MO also has an A grade for Quality. It is ranked #4 out of 11 stocks in the Tobacco industry.
To see additional POWR Ratings for Value, Stability, Momentum, Sentiment, and Growth, click here.
Ares Capital Corporation (ARCC)
ARCC is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle-market companies.
On May 6, 2024, ARCC announced that it had priced an underwritten public offering of $850 million in aggregate principal amount of 5.95% notes due 2029. The notes would mature on July 15, 2029, and might be redeemed in whole or in part at ARCC’s option at any time at par, plus a "make-whole" premium, if applicable.
ARCC expects to use the net proceeds of this offering to repay certain outstanding indebtedness under its debt facilities.
ARCC pays a $1.92 per share dividend annually, translating to an 8.92% yield on the current share price. Its four-year dividend yield is 9.37%. The company’s dividend payouts have grown at CAGRs of 6.3% and 4.2% over the past three and five years, respectively.
ARCC’s 6.98% trailing-12-month Return on Total Assets is 557.2% higher than the industry average of 1.06%. Furthermore, the stock’s 21.06% trailing-12-month levered FCF margin is 20.9% higher than the industry average of 17.42%.
ARCC’s total investment income for the first quarter ended March 31, 2024, increased 13.4% year-over-year to $701 million. The company’s net increase in stockholders’ equity resulting from operations grew 61.5% year-over-year to $449 million. Net income per common share increased 49% year-over-year to $0.76.
Street expects ARCC’s revenue for the quarter ending June 2024 to increase 12.6% year-over-year to $713.87 million. Its EPS is expected to be $0.59 for the same quarter. It surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained 13.1% over the past year to close the last trading session at $21.52.
ARCC has an overall rating of C, which translates to a Neutral in our POWR Ratings system. ARCC also has a B grade for Momentum. It is ranked #12 in the 34-stock Private Equity industry.
Beyond what is stated above, we’ve also rated ARCC for Growth, Value, Stability, Sentiment, and Quality. Get all ARCC ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VZ shares were trading at $40.31 per share on Tuesday afternoon, down $0.10 (-0.25%). Year-to-date, VZ has gained 10.49%, versus a 13.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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