3 High Yielding Dividend Stocks to Buy and Hold Forever

There are many reasons why investors love dividends. First, companies that pay them are generally more stable because unhealthy companies are unable to return value to shareholders in the form of dividends.

Even during downturns or recessions, dividend stocks have historically seen growth, and long-term dividend reinvestment is one of the best ways to build wealth in a portfolio.

With questions about the U.S. economy growing, here are three high-yielding dividend stocks that investors can buy and hold forever: Ford Motor Company (F 0.48%), AT&T (T 1.31%)and Kraft Heinz (KHC 1.26%).

A thriving business

Let’s first address the elephant in the room when it comes to Ford and the current economic uncertainty. The automaker’s balance sheet is in a great position to weather a potential downturn, with nearly $27 billion in cash and about $45 billion in liquidity at the end of the second quarter.

Ford is also dealing with a major quality control problem after leading the US auto industry in recalls for three straight years, which led to $800 million more in warranty costs in the second quarter . JD Power recently reported that the company jumped 14 places to No. 9 in its 2024 US Initial Quality Study. It will take more than a year for its improvement to offset warranty costs, but things are moving in the right direction .

A hot topic for Ford investors right now is its Pro division, the van and commercial truck segment that has seen business grow. In the first half of 2024, Ford Pro generated $5.57 billion in earnings before interest and taxes (EBIT), with EBIT margins close to 16%. These results far outpaced its blue segment with its traditional gasoline vehicles, which generated $2 billion in EBIT on margins of 4.3 percent.

In the short term, look for Ford to continue to improve the quality of the vehicle; expand your Pro business; and cutting losses in its electric vehicle division, Model-e. As the company moves forward, long-term investors can reap the rewards of its dividend yield, which is approaching 6% territory.

No more cuts

Currently, some investors may be hesitant to buy AT&T stock for its dividend. That’s because in 2022, the company cut its quarterly dividend to pay down some of its debt.

In addition to paying off some of that debt, it also generated $8.5 billion in free cash flow in the first half of 2024 and easily has enough left over to pay out $4.1 billion in dividends . The payment now appears protected from further discounts.

AT&T also showed some strong signs of growth during the second quarter. The company added 419,000 postpaid net additions, well ahead of estimates of 285,000, and posted 239,000 AT&T Fiber net additions, reaching more than 200,000 net additions for 18 consecutive quarters.

Mobility services revenue increased by 3.4% compared to the previous year, while broadband revenue increased by 7%.

Potential catalysts could come from a phone upgrade cycle as new devices with artificial intelligence (AI) capabilities continue to emerge, prompting consumers to replace their phones.

Ultimately, long-term investors can expect stable and consistent results, and with a dividend yield of 5.7%, AT&T continues to be very attractive to income seekers.

Time to step up

Kraft Heinz is in an interesting turnaround position while also providing income investors with an exciting long-term opportunity. After years of cutting costs — a challenge in a competitive consumer goods industry that requires marketing and innovation to grow — the company is trying to refocus its strategy.

Kraft has now separated its brands into three categories: Accelerate, Protect and Balance. Management says its Accelerate brands have the potential for higher growth and margins and therefore deserve more marketing and innovation spend. The company plans to drive growth by pushing resources into these brands, and stagnant brands in the Balance category are likely to be sold.

Top-line growth has been a challenge, but Kraft increased its gross profit margin by 180 basis points in the second quarter. Through the first half of 2024, the company’s net cash provided by operating activities rose 8.1%, and its free cash flow rose 8.7% year over year.

As investors wait for the return to gain more traction and for its emerging markets to contribute to earnings growth, the company distributed $1.5 billion back to shareholders through dividends and share buybacks in the first half of 2024. Its yield stands at a robust 4.5%.

The bottom line

Various challenges have investors wary of Ford, AT&T and Kraft Heinz, but all have historically strong brands and should continue to deliver high-yielding dividends. Payouts aren’t likely to drop anytime soon, and should provide returns even during a potential recession.