The investment landscape has changed dramatically in the last year or so. The unprecedented era of near-zero interest rates is now over: Between March 2022 and March 2023, the Federal Reserve raised the federal funds rate from a target range of zero to 0.25% to a range of 4.5% to 4.75%. With inflation high and the risk-free 10-year U.S. Treasury bond now paying about 4%, investors are demanding more income from their stock holdings. There are plenty of dividend stocks to choose from, but far fewer boasting yields that compete with Treasurys. Unlike government bonds, equities offer both dividend income and the potential for capital gains. While not all of these stocks have made big gains in this year’s turbulent market, they offer relative stability combined with healthy yields.
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Here are nine of the best high-yield dividend stocks to buy:
|Company||YTD total return, which includes dividends, through March 10|
|OneMain Holdings Inc. (ticker: OMF)||17.3%|
|Icahn Enterprises LP (IEP)||3.4%|
|Verizon Communications Inc. (VZ)||-5.4%|
|Xerox Holdings Corp. (XRX)||6.7%|
|Newell Brands Inc. (NWL)||-4.9%|
|Blackstone Inc. (BX)||9.1%|
|Ambev SA (ABEV)||-5.1%|
|Cal-Maine Foods Inc. (CALM)||5.6%|
|AT&T Inc. (T)||1.5%|
OneMain Holdings Inc. (OMF)
While perhaps a bit off the beaten path, OneMain Holdings is a $5 billion mid-cap financial company based out of Evansville, Indiana. Now going strong for 111 years, OneMain underwrites personal loans and insurance, with a strong presence in auto loans, credit cards and life insurance. Rising rates are often good for businesses like OMF, which enjoys higher margins as a result. The stock looks cheap at about six times earnings, and its dividend rewards investors with a great income stream for holding the stock. Including dividends, OMF stock is up 17.3% year to date through March 10.
Icahn Enterprises LP (IEP)
Next up is Icahn Enterprises, a conglomerate whose majority owner is legendary Wall Street billionaire and one of the original “corporate raiders,” Carl Icahn. Serving as inspiration for the iconic fictional character Gordon Gekko, Icahn has a decades-long history as a successful activist investor. The vehicle through which Icahn makes many of his moves these days is IEP, although the company also has its hands in the energy, automotive, food packaging, real estate, home fashion and pharmaceutical industries. Structured as a master limited partnership, or MLP, owners technically own “units” of the company instead of shares, and the taxes are a bit more complicated, but this structure allows for favorable tax treatment that avoids the double taxation incurred by the typical dividend stock.
Verizon Communications Inc. (VZ)
The largest of the high-dividend stocks to buy on this list, the $150 billion-plus Verizon is a telecom giant in the oligopolistic telecom sector. With only two true competitors and high barriers to entry, Verizon enjoys all the benefits of a utility, as a mobile data and voice connection is essential for modern-day life and commerce. Conservative income investors are most likely to find VZ stock suitable to their needs — the business is unlikely to be disrupted, and generates predictable cash flows year-in and year-out. Make no mistake, VZ is unlikely to be the biggest gainer in your portfolio, and analysts expect more or less flat revenue growth this year and next, but its dividend yield will help make up for what VZ lacks in capital appreciation potential.
Xerox Holdings Corp. (XRX)
Next up is another household name: Xerox. Headquartered in Norwalk, Connecticut, and founded in 1906, Xerox was a prominent part of American industry in the 20th century. While its namesake copiers received the most mainstream attention, Xerox was also an innovator in graphic user interfaces and directly inspired later, more commercially successful uses of that technology by Apple Inc. (AAPL) and Microsoft Corp. (MSFT). While Xerox still makes its famous copiers, the company has also embraced the digital transformation and pivoted more heavily into fields like document digitization, workplace software and information technology services. As with Verizon, analysts don’t expect any near-term growth from the company, but its high yield makes it a standout income stock.
[SEE: 7 of the Best High-Dividend ETFs.]
Newell Brands Inc. (NWL)
Investors may also be familiar with Newell Brands, the $5 billion consumer products company based in Atlanta. Founded in 1903, Newell owns a range of popular brands including Rubbermaid, Sharpie, Paper Mate, Elmer’s, Yankee Candle, Coleman, Oster and Mr. Coffee. This strong portfolio makes the business fairly stable, although sales are expected to dip by about 10% in 2023 before rising 4% in 2024. Trading for about 14 times forward earnings, the stock is modestly valued, and investors will appreciate the hefty dividend yield to boot.
Blackstone Inc. (BX)
Blackstone is a roughly $100 billion asset management company with a particular focus on alternative assets. Unlike traditional asset managers who tend to predominantly invest in publicly traded stocks and bonds, Blackstone is a major player in real estate, private equity, hedge funds and other fields that should theoretically have a low correlation to the wider market. While high interest rates are expected to slightly hit revenue and earnings this year, analysts expect operations to bounce back in a major way in 2024, with revenue and earnings per share both expected to jump by nearly 30%.
Ambev SA (ABEV)
High dividends are great, but large yields are only as meaningful as the stability of the businesses backing them up. Thankfully for ABEV shareholders, few products have more robust long-term demand than alcohol. Ambev is the Brazil-based arm of Anheuser-Busch InBev SA (BUD), which counts brands such as Budweiser, Michelob Ultra, Stella Artois, Busch and Hoegaarden among its impressive collection of industry names. With a nearly immaculate balance sheet and solid yield, ABEV is a solid pick for dividend investors. Analysts expect revenue to rise more than 15% in 2023.
Cal-Maine Foods Inc. (CALM)
You might not know Cal-Maine Foods off the top of your head, but you’re certainly familiar with its product: eggs. Valued at around $2.5 billion, the Ridgeland, Mississippi-based Cal-Maine is one of the more modestly sized companies among these high-yield dividend stocks, but its business is currently undergoing a boom due to the skyrocketing cost of eggs. This is (hopefully) only temporary, but a rapid spread of avian flu in the U.S. has wiped out tens of millions of birds in the last year, and chickens have been hit hard. Cal-Maine enjoys a roughly 17% market share in the U.S. egg industry, and analysts expect CALM revenue to surge 70% in 2023 on the heels of soaring prices. Prices will eventually normalize, but in the meantime CALM is able to finance its hefty dividend by using just 18% of its earnings.
AT&T Inc. (T)
Last up is AT&T, another major U.S. telecom giant. Worth about $130 billion, the Dallas-based AT&T enjoys many of the same secular advantages that fellow dividend stock Verizon enjoys: low competition, high barriers to entry, and decades of capital-intensive infrastructure buildout that make it a force to be reckoned with among cellular networks and internet service providers. In April 2022, AT&T divested itself of its ill-considered move into content by combining CNN and HBO owner WarnerMedia into a newly public company, Warner Bros. Discovery Inc. (WBD). AT&T received $40.4 billion and shareholders received a fraction of WBD shares as a part of the transaction, which should allow AT&T to focus on its bread and butter business once again.
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9 High-Yield Dividend Stocks to Buy originally appeared on usnews.com
Update 03/13/23: This story was previously published at an earlier date and has been updated with new information.