2 High Yield Dividend Stocks to Buy Hand Over Fist

Owning profitable industry leaders is a surefire way to grow your retirement savings. Many of these companies pay a portion of their annual profits to shareholders in the form of dividends.

The best time to invest in the strongest companies is when they are experiencing temporary headwinds that affect their share price. The lower share price leads to their higher dividend yields, meaning shareholders get more for their money.

Here are two top companies that pay high yields that can reward shareholders for years to come.

1. Hershey

Actions of The Hershey Company (NYSE: HSY) they are down 28% from their previous peak. Inflation and higher cocoa prices led to lower consumer demand and reductions in retail inventory levels. That has made growing sales difficult, but it also offers a rare opportunity to buy shares in this dominant confectionery business at a high dividend yield.

Hershey’s sales and adjusted earnings per share fell 16% and 36% year-over-year, respectively, in the second quarter, but those numbers are somewhat misleading. After adjusting for planned inventory adjustments and a shift in retail shipments expected to move into the second half of the year, adjusted sales were roughly flat from the prior-year quarter.

Shares have held up well in 2024 despite selling pressure, reflecting the intrinsic value of the Hershey brand and its leading share of the more than $100 billion chocolate confectionery market. Hershey should do well with its new seasonal releases later this year, such as Shaq-a-licious Gummies in partnership with former NBA star Shaquille O’Neal and new Halloween-themed products from Reese’s.

People won’t stop buying chocolate. Even with high inflation over the past few years, Hershey generated net income of $1.8 billion on sales of $11 billion over the past four quarters. This isn’t the first time the 125-year-old brand has seen poor sales, and it won’t be the last.

The company pays out 55% of earnings as dividends. It increased its dividend by 15% earlier this year to a quarterly payout of $1.37 per share. At this rate, its forward yield is 2.74% — more than double S&P 500 average of 1.32%.

2. UPS

Actions of UPS (NYSE: UPS) are down 45% from their previous peak as the delivery company struggles with higher labor costs and counter revenue. Second-quarter revenue was down slightly from the year-ago quarter as more customers opted for lower-priced shipping services. However, UPS is still a profitable business that will continue to pay dividends to support an attractive dividend yield of 5% — the highest in history.

The story continues

Over the past year, UPS generated $5.2 billion in profit on $89 billion in revenue. The business works in the challenging environment by identifying options to reduce costs. Its Fit to Serve initiative should save the company about $1 billion by the end of 2024.

To counter the shift of customers to lower-priced services, UPS is exploring other revenue opportunities. It is looking to serve more package volume from small businesses and make price adjustments to improve its revenue per piece.

The second quarter showed a notable improvement in US average daily volume, which rose for the first time in over two years. UPS expects to generate full-year free cash flow of $5.8 billion and pay dividends of $5.4 billion. The cost savings and pricing measures it plans to take should improve profitability over the next year and allow for further dividend increases.

UPS increased its quarterly dividend by $0.01 to $1.63 per share over the past year. That brings the forward yield to 5.05% — more than triple the S&P 500. The stock’s high yield suggests it’s undervalued given the long-term headwinds of online shopping, which offers more delivery opportunities for the delivery leader of packages.

Should you invest $1,000 in Hershey right now?

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hershey. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.

2 High-Yield Dividend Stocks to Buy Hand Over Fist was originally published by The Motley Fool