With the recent turmoil in global markets, investors are eyeing dividend-paying stocks that offer stability. While high yields are one appealing characteristic of dividend stocks, companies that have consistently paid dividends despite macroeconomic challenges can serve as a safe haven.
Companies with a history of paying and increasing dividends exhibit strong financial health, effective leadership and growth strategies, and a commitment to returning to shareholders. Here are three high-yield, safe dividend stocks from various sectors that can help to diversify your portfolio.
#1. AbbVie: Dividend Yield of 3.26%
Valued at $ 337.6 billion, AbbVie (ABBV) is a global biopharmaceutical company known for its robust drug portfolio, particularly in immunology and oncology. Following the patent expiration of its blockbuster immunology drug Humira, the company has worked hard to diversify its revenue streams and develop a strong pipeline of new drugs.
AbbVie stock has gained 23.8% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of 14%.
AbbVie has earned the title of "Dividend King" by paying and increasing dividends for 52 consecutive years, thanks to its diverse product portfolio and strategic acquisitions. AbbVie's newer immunology drugs, Skyrizi and Rinvoq, which treat a wide range of autoimmune diseases, are gaining market share. These treatments are expected to be significant future growth drivers. In the second quarter, global Skyrizi net revenues increased by 44.8%, while global Rinvoq net revenues increased by 55.8%.
Furthermore, AbbVie's oncology division is experiencing significant growth, with drugs such as Imbruvica and Venclexta leading the way. Its neuroscience portfolio is also expanding, with net revenue up 14.7% and contributing 15% of total revenue. The neuroscience and oncology pipelines could help lessen AbbVie's dependency on the immunology portfolio, which accounted for 48% of revenue in Q2.
What's more, AbbVie's strategic acquisitions of Cerevel Therapeutics to expand its neuroscience pipeline and ImmunoGen to enter the commercial ovarian cancer market will help boost its long-term financial performance. Despite the aggressive strategic investments, AbbVie's balance sheet remains strong, with $13.1 billion in cash and cash equivalents at the end of the second quarter. Additionally, it generated $5.8 billion in free cash flow (FCF).
AbbVie pays a forward dividend yield of 3.26%, which is higher than the healthcare sector average of 1.58%. Its forward payout ratio of 51.2% indicates that current dividend payments are sustainable, with room for growth. Analysts who follow AbbVie stock predict a 2.0% drop in earnings in 2024, followed by a 10.9% increase in 2025.
Overall, Wall Street has assigned a “moderate buy” rating to AbbVie stock. Out of 22 analysts covering the stock, 13 have a “strong buy” rating, two suggest a “moderate buy” rating, and seven recommend a “hold” rating. The mean target price for ABBV is $194.68, which is 1% above its current levels. Its high price estimate of $215 implies a potential upside of 11.6% over the next 12 months.
For long-term investors seeking a blend of growth potential and income through dividends, AbbVie is an attractive investment.
#2. Enterprise Products Partners: Dividend Yield of 7.4%
In the volatile energy industry, Enterprise Products Partners (EPD) has been a consistent performer. This is evident in its efforts to pay and increase dividends over the last 27 years. Enterprise Products is a top provider of midstream energy services. It transports, stores, and processes natural gas (NGU24), crude oil (CLU24), natural gas liquids (NGLs), petrochemicals, and refined products.
Valued at $61.3 billion, EPD stock has gained 9.5% YTD, compared to the broader market gain.
Enterprise offers an impressive 7.4% forward dividend yield, which is significantly higher than the energy sector average of 4.2%. Furthermore, EPD is a Dividend Aristocrat, a title assigned to S&P 500 companies that have increased their dividends for more than 25 consecutive years.
EPD has earned the title of Dividend Aristocrat for its efforts to maintain healthy cash flows in the face of energy sector volatility. In the most recent second quarter of 2024, its distributable cash flow (DCF) stood at $1.8 billion, up from $1.7 billion in the year-ago quarter. After paying dividends, the company kept $661 million in DCF.
The company also generated $814 million in adjusted FCF during the quarter. A healthy FCF balance should help the company manage its debt levels. Its debt-to-equity ratio is quite high, at 1.03.
EPD increased its quarterly dividend by 5% to $0.525 per share in the second quarter. The company's forward dividend payout ratio of 73.18%, is on the high end. However, EPD can sustain its dividend payments if it continues to grow its earnings. Adjusted net income rose 10.8% in the second quarter, and analysts predict that EPD's earnings will increase by 7.4% and 5.4%, respectively, over the next two years.
EPD's strong financial performance, attractive dividend yield, consistent dividend hikes, and growth potential make it a compelling choice in the midstream energy space, particularly for income-seeking investors.
Overall, Wall Street considers EPD stock to be a "strong buy." Out of the 16 analysts who cover EPD, 12 recommend a "strong buy," two recommend a “moderate buy,” and two rate it a "hold." The average price target of $33.29 represents a potential 14.7% increase from current levels. Furthermore, its Street-high estimate of $37 indicates the stock can go as high as 27.5% over the next 12 months.
#3. Altria: Dividend Yield of 7.79%
Altria Group (MO) is a well-known name in the tobacco industry. Its core business is the sale of tobacco products, specifically cigarettes, which have long been its primary source of revenue. The company also has stakes in other industries, including smokeless tobacco, wine, and, most notably, cannabis, through its investment in Cronos Group (CRON), a Canadian marijuana company.
The tobacco industry has been struggling due to rising health concerns and regulatory pressures. Nonetheless, Altria has remained popular among income investors due to its high dividend yield and consistent cash flows.
Valued at $87.7 billion, Altria stock has gained 26.6% YTD, edging out the overall market.
Its most appealing feature is perhaps its 7.7% annualized forward dividend yield, which exceeds the consumer staples sector average yield of 1.9%.
Adjusted earnings per share remained flat in the second quarter, at $1.31. However, the company paid out $1.7 billion in dividends during the quarter. Altria has been increasing its dividends for 55 years, earning the title of Dividend King. Its forward payout ratio of 73.7% is high, but it can be sustained if earnings continue to grow.
During its 2023 Investor Day, the company released projections to increase dividends by mid-single digits until 2028. However, in the recent quarter, management stated that dividend payments in the future will be based on the Board’s decision.
Altria expects its earnings to increase by 2.5% to 4% in 2024, depending on the second half of the year, according to management. By comparison, analysts predict a 3.09% increase in 2024 earnings, followed by another 3.9% growth in 2025.
Overall, Wall Street rates Altria stock a “hold.” Of the 11 analysts covering MO, four have rated it a “strong buy,” five have a “moderate buy” recommendation, and 2 suggest a “strong sell.”
Altria stock has surpassed its mean price target price of $49.56. However, its high target price of $57 implies the stock could go up by 11.3% from current levels.
