3 High-Yield Dividend Stocks That Are Loud Buys Right Now

The Federal Reserve’s pivot to lower interest rates will have ripple effects throughout the economy and send investors looking for passive income to new places. As yields decline in vehicles like high-yield savings accounts, investors may turn to high-quality, high-yielding dividend stocks. Consumer spending and healthcare are two mainstays of the US economy and great places to look for such stocks.

We’ve identified three stocks with generous, financial returns that can afford their payouts. These companies also boast sustainable business models that should thrive during downturns, giving income-focused investors peace of mind.

1. Pfizer

Current yield: 5.8%

The pharmaceutical giant Pfizer (PFE 0.85%) was a big winner during the peak of COVID-19 thanks to its vaccines and treatment products, which created a wave of temporary growth. However, the tide has ebbed over the past few years, and shares have fallen to multi-year lows as revenues and earnings contract.

But the company is poised to resume growth, with analysts anticipating annual earnings growth of 8% to 9% for the next three to five years. Pfizer has pivoted its business to focus on oncology, using profits generated by the pandemic to acquire Seagen for $43 billion last year.

Management raised Pfizer’s dividend by 2.4% last December, a sign of confidence that the payout is certain. The payout ratio is also getting healthier. The dividend represents about 64% of estimated 2024 earnings, so Pfizer looks poised to continue extending its 15-year streak of growth. The stock trades at just 11 times estimated 2024 earnings, a significant discount to the broader market and an attractive price for a business with high single-digit earnings growth.

Pfizer represents a solid income investment with potential for capital appreciation in the future.

2. Altria

Current yield: 8%

Tobacco companies are famous dividend stocks and Altria (MO 0.24%) is a prime example that has flown shareholders with cash for decades. The company sells Marlboro cigarettes and leading brands of cigars, chewing tobacco and smokeless products in the United States. The company is also a dividend king, meaning it has increased its dividend for more than five decades, a testament to how resilient the tobacco industry is despite declining smoking rates.

Dividends remain in good financial health with a payout ratio of 80% of estimated earnings through 2024. This dividend is supported by an investment-grade balance sheet and multi-billion dollar equity Anheuser-Buschwhich the company could liquidate as the case may be.

Altria’s cigarette shipments are down almost annually, but a combination of price increases and share buybacks continues to boost earnings. Analysts expect the company to grow earnings by an average of 3% to 4% over the next three to five years, meaning the dividend will continue to grow as well.

The stock trades at 10 times Altria’s estimated 2024 earnings, but I’d be hesitant to call the stock a bargain because of its low upside. However, you don’t need much when you’re getting an 8% dividend yield. Those ultimately concerned with investment income will struggle to find a return as assured as this high.

3. Real estate income

Current yield: 5%

Real estate is one of society’s oldest industries, as are real estate investment trusts (REITs). Real estate income (A -0.62%) allows people to invest in real estate without owning property directly. REITs buy and lease real estate, then distribute most of their income to shareholders. This makes Realty Income an excellent dividend stock.

The company has paid and raised dividends for 29 consecutive years, and the payout ratio is still just 75% of estimated funds from operations (FFO) for this year. In addition, Realty Income pays a monthly dividend, a boon for investors who want regular cash flow to pay their bills.

Real estate income has thrived through economic ups and downs because it focuses on renting out retail businesses that people use regardless of what the economy is doing. Think grocery stores, restaurants, department stores and pharmacies. Realty Income has over 15,000 properties under lease, so it’s a vast and diverse portfolio that generates consistent rental income for the company.

Lower interest rates are a bonus for REITs like Real Estate Income, as they often borrow to finance their property purchases. Cheaper borrowing costs should make Real Estate Income more profitable.

Realty Income trades at nearly 15 times estimated 2024 FFO, a fair price given the company’s bright outlook and reliable and growing dividend.