The Federal Reserve has made a dramatic move to raise interest rates and tighten liquidity as part of its efforts to rein in inflation. After having held interest rates at or near zero for the greater part of the past decade, the effective federal funds rate has now topped 5%. In August, the surge in interest rates has accelerated. Average 30-year mortgage rates have reached 7.5% nationally and yields on long-term government bonds continue to rise. This is sending jitters through financial markets, but it should get dividend investors salivating.
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With interest rates on the move like this, a ton of bargains are developing across higher-yielding parts of the market. Here are 15 of the best dividend stocks to buy today:
| Stock | Forward dividend yield |
| Exxon Mobil Corp. (ticker: XOM) | 3.4% |
| Coca-Cola Co. (KO) | 3.1% |
| Pfizer Inc. (PFE) | 4.5% |
| Wells Fargo & Co. (WFC) | 3.4% |
| Verizon Communications Inc. (VZ) | 7.8% |
| American Tower Corp. (AMT) | 3.5% |
| TC Energy Corp. (TRP) | 8.0% |
| National Storage Affiliates Trust (NSA) | 6.7% |
| Kimberly-Clark Corp. (KMB) | 3.7% |
| Grupo Aeroportuario del Pacífico SAB de CV (PAC) | 4.4%* |
| Consolidated Edison Inc. (ED) | 3.6% |
| Ecopetrol SA (EC) | 7.5%* |
| Discover Financial Services (DFS) | 2.9% |
| Tyson Foods Inc. (TSN) | 3.6% |
| Northwest Natural Holding Co. (NWN) | 4.9% |
*Indicates trailing yield
Exxon Mobil Corp. (XOM)
Exxon Mobil is a dominant integrated oil major. It has operations spanning much of the globe covering oil, gas, refining and chemicals. This diversity of assets and geographic positioning has allowed Exxon to perform well despite a rocky pricing environment for oil and gas over the past decade. Notably, Exxon didn’t cut its dividend during the 2020 oil price crash, even as most of its peers greatly reduced their dividend payouts. Income investors can sleep well at night because Exxon has one of the world’s strongest balance sheets.
Exxon also continues to invest in growth. For example, its offshore oil field in Guyana has been one of the biggest discoveries in the industry since the turn of the century. During a time when many energy companies have pulled back on oil, Exxon has continued advancing its business and paving the way for rising dividends for decades to come.
Coca-Cola Co. (KO)
One of Warren Buffett’s all-time greatest investments has been his firm’s position in Coca-Cola. Berkshire Hathaway Inc. (BRK.A, BRK.B) started buying shares in the soft drink giant following the stock market crash of 1987. Berkshire has held shares loyally over the decades and has been rewarded with countless billions of dollars in capital gains and dividends as a result. Buffett appreciates Coca-Cola for its consistency and investors should too as the company has offered investors an annual dividend increase dating back to 1961. The beverage sector also holds up well in recessions, making this a timely purchase for folks who are worried about the storm clouds on the economic horizon.
Pfizer Inc. (PFE)
Pharmaceutical giant Pfizer has gotten caught in a tailspin. The company saw its business reach record heights during the pandemic as its COVID-19 vaccine generated tens of billions of dollars in revenue. Investors had been bracing for the end of that revenue stream, but a recent uptick in COVID-19 cases may cause renewed interest in the vaccines. Even discounting future vaccine revenues, Pfizer is in a better place now than in 2019. Analysts project that the company will bring in $67 billion in revenue next year; that’s light years ahead of 2019’s $41 billion. Long story short, Pfizer successfully invested its vaccine windfall into a variety of new growth opportunities. Nonetheless, shares are trading back down to pre-pandemic levels, creating a prime buy-the-dip opportunity.
Wells Fargo & Co. (WFC)
Many investors still have Wells Fargo in the penalty box. After all, the company became infamous for its fake accounts scandals in the late 2010s. Wells Fargo paid heavy fines and its reputation suffered as a result, but there was an unexpected silver lining. The Federal Reserve placed an asset cap on Wells Fargo as punishment for its misdeeds. This kept Wells Fargo from deploying as much capital as its peers in the early 2020s, and the bank didn’t load up on the low-interest-rate securities and loans that sunk smaller rivals such as First Republic and Signature Bancorp.
In fact, Wells Fargo’s balance sheet is well positioned for the current interest rate environment, and its earnings results have outperformed many of its peers in 2023. Despite the positive signs, shares are merely flat for the year due to broader industry worries, making for a good buying opportunity.
Verizon Communications Inc. (VZ)
Verizon is one of the three dominant U.S. wireless carriers. Investors have long counted on these blue-chip stocks for steady income streams. Rival AT&T Inc. (T) shocked investors with a dividend cut in the aftermath of its ill-fated Time Warner acquisition. And while Verizon is in better shape than AT&T, the industry faces rising competition and high costs from 5G network rollouts. For Verizon, though, it’s at the peak of its capital spending cycle now, with management anticipating a significant improvement in its cash flows starting in 2024.
On the sentiment front, though, things went from bad to worse recently, with reports surfacing that the telecom companies could face legal liabilities related to lead in old telephone cables. The potential liability remains to be determined, but investors fear the worst. However, this appears to have driven Verizon to an unsustainably low share price with the stock at just seven times forward earnings and offering a nearly 8% dividend yield.
American Tower Corp. (AMT)
As one of Verizon’s landlords, American Tower operates as a real estate investment trust, or REIT, and controls more than 226,000 communications sites. These are primarily cell phone towers but also some other assets such as data centers. Many REITs have tumbled over the past year for two primary reasons: One is that investors are demanding higher dividend yields as the rates on low-risk, fixed-income instruments rise. Another is that REITs will pay more interest on their debts as rates increase. However, things are getting blown out of proportion. American Tower stock has lost about a third of its value over the past year on these worries. That leaves the stock at less than 18 times forward funds from operations, or FFO, and offering its highest dividend yield in five years.
[SEE: 7 of the Best High-Dividend ETFs.]
TC Energy Corp. (TRP)
TC Energy is one of Canada’s largest energy companies. It is primarily known for its U.S. and Canadian oil and gas pipelines. However, the firm is broadly diversified. TC Energy has a large power generation business based around low-cost nuclear energy. TC’s investments in Mexican gas pipelines are seeing considerable success as Mexico goes through a rapid wave of industrialization.
Despite the successful business, TRP stock has gotten hammered over the past 18 months amid rising interest rates and investor jitters. Activist investors took aim at the company, and management responded by announcing a split on July 27. The oil pipeline business will form one company, and the rest will go into a greener, more ESG-friendly entity. This should unlock shareholder value. In the meantime, thanks to the share price plunge, shares now yield about 8%.
National Storage Affiliates Trust (NSA)
Storage REITs are another area that is under fire from rising interest rates. Even with a wave of mergers and acquisitions across the sector this year, the publicly traded storage REITs are hitting fresh 52-week-lows week after week. That sets up a compelling opportunity for income investors. National Storage Affiliates is one of the industry’s best growth stories. Founded in 2013, it has already grown to generate more than $800 million in annual revenues. Its shares had seen steady appreciation since its IPO in 2015, but have declined since the start of 2022. Over the past year, the stock is down about 35%, even with decent underlying earnings results. Shares now sell for just 12 times FFO and offer a 6.7% dividend.
Kimberly-Clark Corp. (KMB)
Kimberly-Clark is America’s leading consumer paper products company. It offers a wide range of toiletries, cleaning products and other assorted goods. The stock briefly spiked in the early days of the pandemic as folks stocked up on essentials. Shares plunged in 2022, however, amid a sales slowdown combined with a surge in commodity prices that hit the company’s profit margins. However, things are lining up nicely for Kimberly-Clark going forward. Sales are returning to normal and the inflationary wave has started to subside, giving the company relief on that front as well. Shares are up just 10% over the past five years and are down slightly from where they were heading into 2020. This has created a relative value in KMB stock today with shares at about 21 times forward earnings and offering a 3.7% dividend yield.
Grupo Aeroportuario del Pacífico SAB de CV (PAC)
Pacific Airport Group, as the name translates, is a Mexican airport operator. It runs 12 airports in Mexico and two in Jamaica. Prized concessions include the big city of Guadalajara, industrial hub Tijuana and beach resorts such as Puerto Vallarta and Los Cabos. Concessions for the Mexican airports run until 2048 and can potentially be renewed for an additional 50 years. Mexican tourism has been booming in recent years, and that has been reflected in the airports’ results.
For 2022, Pacifico saw airport traffic surge 16% versus 2019, meaning that traffic easily surpassed pre-pandemic levels. And the growth continues. In July 2023, traffic rose an additional 11.5% versus the same month last year. PAC stock has rallied more than 20% year to date but still sells for less than 17 times forward earnings. That’s a bargain for a company growing this quickly. The company also has a variable dividend policy where it pays out nearly all its free cash flow to its shareholders. Due to the lumpiness of dividend payments, its trailing yield is shown in the chart above. The trailing yield, represents dividend payments over the last 12 months divided by the most recent share price.
Consolidated Edison Inc. (ED)
Consolidated Edison’s predecessor was founded in 1823 as the New York Gas Light Company. The company became one of the world’s first electric utilities in 1882 when Thomas Edison began supplying electricity to customers in lower Manhattan. As is befitting for a company with such a storied history in America’s largest city, Consolidated Edison has been a rock-solid, blue-chip stock over the decades. While the stock’s performance is rarely flashy, Consolidated Edison regularly gives its shareholders dividend checks. Based in New York City, the utility company never lacks customers or growth opportunities.
In recent years, it became one of the biggest solar operators in the country before selling that business in 2023. ED stock has been flat since 2019 as investors have shunned utilities in the rising interest rate environment. Shares should be set to rally to new highs once interest rates start to decline once again.
Ecopetrol SA (EC)
Ecopetrol is a state-managed Colombian oil company. The Republic of Colombia owns 88% of the company’s outstanding stock, with outside minority shareholders having the other 12% of the firm. This alignment has worked out surprisingly well for Ecopetrol’s investors. The Colombian government relies on Ecopetrol to fund its treasury with significant dividends, and as such, Ecopetrol pays the majority of its earnings out as dividends.
Ecopetrol stock crashed in recent years amid a leftward turn in the country’s government. But while the government has cast aspersions toward private oil companies, not surprisingly, it has let the state oil company continue to operate its business as usual. Despite all the political noise, the company is generating record profits and sells for just three times earnings. Ecopetrol has a variable dividend policy depending on each year’s earnings; it currently has a trailing yield of more than 7%.
Discover Financial Services (DFS)
Most investors know Discover for its namesake credit card network. And that’s a big piece of the business to be sure. However, unlike Visa Inc. (V), Discover engages in lending rather than offloading that service to third parties. This makes Discover one of the nation’s largest high-yield lenders. Discover also operates a large Federal Deposit Insurance Corp.-insured bank to gather deposits for its credit card lending.
Given the chaos in the banking industry this year, along with general fears about how credit will perform in a recession, these sorts of high-yield lenders have sold off. Discover, for its part, also got caught up in a regulatory hiccup related to what it charged in merchant fees. All this has sent Discover stock tumbling to 52-week-lows recently. Investors can take advantage of the correction. Discover shares trade for just six times earnings. The company also has one of the most aggressive capital return programs in the S&P 500: It has bought back more than half of all its outstanding stock since 2010 and the dividend yield is on the rise as well.
Tyson Foods Inc. (TSN)
Tyson Foods is a packaged foods company focused on meat products. The firm primarily sells goods such as chicken, pork and beef. Given that most of Tyson’s product mix leans away from higher profit margin branded products, investors treat it as a commodity company and offer it an accordingly low valuation. Even so, things have gotten out of hand with the stock down more than 40% since its 2022 highs. Admittedly, Tyson is currently barely profitable given the spike in livestock prices that have hammered profit margins. But with crop prices down sharply, it’s only a matter of time until livestock prices also return to normal and Tyson’s margins stabilize. In 2019, Tyson earned $5.40 per share. Assuming Tyson merely returns to pre-pandemic levels of profitability, shares go for just 10 times that level of earnings today. In the meantime, shares offer a generous dividend.
Northwest Natural Holding Co. (NWN)
Northwest Natural is a natural gas utility and a so-called dividend king — defined as a company that has increased its dividend payout for at least 50 consecutive years. Understandably, companies must have stable operations with long track records of steadily rising earnings to be able to raise their dividends so consistently through all sorts of economic storms. Despite Northwest Natural’s admirable track record, shares have gotten battered over the past three years, falling more than 40% since their all-time high reached back in 2020. Shares are now flat since the 2008 Great Recession, even as earnings and dividends have grown considerably. This sets up a nearly 5% dividend yield from this reliable utility firm.
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15 Best Dividend Stocks to Buy Now originally appeared on usnews.com
Update 08/28/23: This story was previously published at an earlier date and has been updated with new information.
