Considering the current state of the economy, high-yield dividend stocks stand out, as they offer reliable income and stability, especially during downturns. They are often in defensive sectors that handle economic volatility well and typically have strong financials, making them a solid choice for steady returns and long-term growth.
Hence, investors could consider investing in fundamentally stable high-yield dividend stocks like AT&T Inc. (T), Altria Group, Inc. (MO), and MPLX LP (MPLX) to capitalize on their gains before the rates drop.
The U.S. economy is still grappling with high prices and elevated interest rates. However, the PCE price index (excluding food and energy prices) increased 2.6% annually, which is higher than the desired rate but still proving to be steady. If inflation continues to slow, the Fed might suggest a rate cut in September.
According to the International Monetary Fund, U.S. interest payments on federal debt are set to rise to 3.2% of GDP by fiscal 2024, up from 2.4% in fiscal 2023 due to higher rates, which shows ongoing fiscal challenges. All of this can be countered with the hopes of a potential interest rate cut by the Federal Reserve, and all fingers point toward that for an incoming solution.
Amid such uncertain growth prospects and ongoing policy changes, high-yield dividend stocks can provide stability and reliable income, making them a smart investment choice in this unpredictable environment. They offer regular income through quarterly payouts, which usually increase as companies grow.
Considering these trends, let’s analyze the fundamentals of the three high-yield dividend picks.
AT&T Inc. (T)
T is a global telecommunications and technology company, operating in two segments: Communications; and Latin America. It provides wireless and wireline telecom services to consumers and businesses worldwide, including Mobility, Business Wireline, and Consumer Wireline.
On June 26, T’s Board of Directors declared a quarterly dividend of $0.28 per share on its common shares. The dividend was payable on August 1, 2024, to stockholders at the close of business on July 10, 2024. T pays an annual distribution of $1.11 per share, which translates to a yield of 5.68% on the prevailing share price. Its four-year average dividend yield is 7.14%.
On August 12, Oracle Corporation (ORCL) announced the incorporation of AT&T IoT connectivity and network API into its Enterprise Communications Platform (ECP). With these partnerships T is advancing itself in the IoT and cloud application landscape, offering customers a more streamlined and convenient experience and growing its market presence and overall growth as well.
For the fiscal 2024 second quarter that ended June 30, 2024, T’s adjusted EBITDA came in at $11.3 billion, increasing 1.8% year-over-year. Also, the company’s free cash flow for the quarter increased 9.5% to $4.6 billion.
Street expects T’s revenue for the fiscal 2025 first quarter (ending March 2025) to increase 1.8% year-over-year to $30.57 billion, while its EPS for the same quarter is expected to grow 1.8% year-over-year to $0.56.
T’s stock has gained 17.6% over the past six months and 36.8% over the past year to close the last trading session at $19.51.
T’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Value and Quality. It is ranked #2 among 18 stocks in the Telecom - Domestic industry.
Click here to access T’s ratings for Growth, Stability, Momentum, 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.
On August 22, MO’s Board of Directors announced an increase in its regular quarterly dividend by 4.1% to $1.02 per share versus the previous rate of $0.98 per share. The quarterly dividend is payable on October 10, 2024, to shareholders of record as of September 16, 2024.
MO pays an annual dividend of $3.92, which translates to a yield of 7.57% at the current share price. Its four-year average dividend yield is 8.04%. Moreover, the company’s dividend payouts have increased at a CAGR of 4.1% over the past five years. MO has raised its dividends for 54 consecutive years.
On June 21, MO announced that the FDA issued marketing orders for NJOY ACE Pod Menthol 2.4%, NJOY ACE Pod Menthol 5%, NJOY DAILY Menthol 4.5%, and NJOY DAILY Extra Menthol 6%. The authorizations follow the FDA review of the Premarket Tobacco Product Applications submitted by NJOY, LLC in March 2020.
As the company receives more FDA approvals for new products, MO’s market presence and popularity might increase and enhance its growth prospects.
For the fiscal 2024 second quarter ended June 30, 2024, MO posted net revenues of $6.21 billion. The company’s gross profit was $3.68 billion, and operating income was $2.53 billion for the quarter. Its adjusted net earnings came in at $2.26 billion, while its adjusted EPS came in at $1.31.
Analysts expect MO’s revenue for the fiscal third quarter (ending September 2024) to increase 1.2% year-over-year to $5.34 billion, while its EPS is expected to grow 5.3% year-over-year to $1.35 for the same period.
MO’s stock has gained 26.7% over the past six months and 21.2% over the past year to close the last trading session at $51.83.
MO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Quality. Within the A-rated Tobacco industry, MO is ranked #7 out of 10 stocks.
Click here to access additional ratings of MO for Sentiment, Value, Momentum, Growth, and Stability.
MPLX LP (MPLX)
MPLX is a master limited partnership that operates midstream energy infrastructure and logistics assets, providing fuel distribution services. The company engages in gathering, transporting, storing, and distributing crude oil, refined products, and renewables, along with natural gas transportation and marketing.
On July 30, MPLX’s board of directors declared a quarterly cash distribution of $0.85 per common unit for the second quarter of 2024, or $3.40 on an annualized basis. The distribution was paid on August 16, 2024, to common unitholders of record as of August 9, 2024.
MPLX pays an annual dividend of $3.40, which translates to a yield of 8.06% at the current share price. Moreover, the company’s dividend payouts have increased at a CAGR of 7.3% over the past three years. MPLX has raised its dividends for ten consecutive years.
MPLX’s total revenues and other income increased 13.4% year-over-year to $3.05 billion during the second quarter that ended June 30, 2024. Its income from operations grew 20.8% from the prior year’s quarter to $1.42 billion. Adjusted EBITDA attributable to MPLX LP increased 8% from the previous year’s quarter to $1.65 billion.
Also, net income attributable to MPLX came in at $1.18 billion and $1.15 per limited partner unit, up 26% and 26.4% year-over-year, respectively.
For the fiscal third quarter (ending September 2024), Street expects MPLX’s revenue to increase 4.8% year-over-year to $3.05 billion. The consensus EPS estimate for the same period of $1.05 indicates a 10.1% year-over-year growth. Moreover, the company surpassed the consensus EPS estimates in all of the trailing four quarters.
MPLX’s stock has surged 6.6% over the past six months and 21.6% over the past year to close the last trading session at $42.38.
MPLX’s POWR Ratings reflect its strong prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
MPLX has an A grade for Stability and a B for Sentiment, Momentum, and Quality. The stock is ranked #2 among 24 stocks in the A-rated MLPs - Oil & Gas industry.
To access MPLX’s other ratings for Growth and Value, click here.
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T shares were trading at $19.71 per share on Friday afternoon, up $0.20 (+1.03%). Year-to-date, T has gained 23.15%, versus a 18.66% 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.
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