Inflation continues to decelerate. The consumer price index fell on a month-over-month basis in June, marking the indicator’s first outright decline in several years. Meanwhile, the annual inflation rate has slipped to just 3%. This has set the stage for a series of Federal Reserve interest rate cuts, with credit markets pricing in near certainty around forthcoming cuts by the end of 2024.
[Sign up for stock news with our Invested newsletter.]
This could set the stage for a major rotation out of growth and momentum stocks and back into more blue-chip stocks paying dividends. Investors tend to prefer more stable, predictable cash-flow-generating companies in times of economic weakness and potential recession.
Dividend stocks have been out of favor for years now, meaning that they are also, by and large, selling at attractive valuations today compared to the overall market. That makes it a great time to snap up these 15 top dividend stocks:
| Stock | Dividend yield |
| Verizon Communications Inc. (ticker: VZ) | 6.4% |
| Pfizer Inc. (PFE) | 5.7% |
| United Parcel Service Inc. (UPS) | 4.4% |
| First American Financial Corp. (FAF) | 3.6% |
| BP PLC (BP) | 5.0% |
| Enbridge Inc. (ENB) | 7.4% |
| Grupo Aeroportuario del Pacifico SAB de CV (PAC) | 4.8% |
| Tyson Foods Inc. (TSN) | 3.3% |
| Realty Income Corp. (O) | 5.6% |
| British American Tobacco PLC (BTI) | 9.3% |
| Stellantis NV (STLA) | 8.2% |
| Kenvue Inc. (KVUE) | 4.4% |
| United Micro Electronics (UMC) | 5.6% |
| American Tower Corp. (AMT) | 3.1% |
| Public Storage (PSA) | 3.9% |
Verizon Communications Inc. (VZ)
After years of disappointment, the telecom industry is starting to regain investor confidence. Earlier this month, Goldman Sachs started coverage on the major U.S. carriers with buy ratings, suggesting that the industry is now in a positive transformational period. For Verizon, specifically, it spent heavily to deploy its industry-leading 5G network. With that network now in place, Verizon is reaping the rewards as its subscriber numbers are picking up and customer satisfaction improves. Verizon’s best-in-class infrastructure gives it other opportunities as well, such as a recent 10-year, $2.67 billion contract that it won with the U.S. Navy.
While VZ stock has rallied with its improving outlook, it still offers a greater than 6% dividend yield while trading at a single-digit forward price-earnings ratio.
Pfizer Inc. (PFE)
Right now, the pharmaceutical industry is caught between boom and bust. For companies that have a leading GLP-1 drug for managing diabetes and weight loss, the sky is the limit. In fact, Eli Lilly and Co. (LLY) appears set to enter the trillion-dollar market cap club based on the success of its Mounjaro and Zepbound drugs that treat these conditions. For pharma companies without GLP-1 drugs, however, things are looking grim.
Pfizer is the quintessential example. Despite developing a blockbuster COVID-19 vaccine, PFE stock has failed to benefit. In fact, the stock dropped from $37 at the start of 2020 to the $30 range now. This makes little sense, as Pfizer has wisely reinvested its profits from the past few years. In fact, the company is projected to bring in $61 billion in revenue this year, which is up sharply from the $41 billion in generated in 2019. Shares trade for less than 13 times forward earnings and offer an outsized dividend yield.
United Parcel Service Inc. (UPS)
United Parcel Service is the world’s largest package delivery company. Using a fleet of more than 100,000 vehicles, including 500 cargo jets, UPS delivers an average of 22 million parcels per day. Needless to say, UPS is an integral part of the country’s logistics and supply chain network. After years of robust growth driven by e-commerce, investors started to worry about UPS. In theory, Amazon.com, Inc.’s (AMZN) heavy investments in its own logistics could lower demand and pressure profit margins. However, Amazon has seemingly pulled back on its spending in this field over the past couple of years. There’s opportunity for investors now, as UPS stock has dropped about 20% over the past year. That leaves shares at a reasonable 18 times forward earnings.
First American Financial Corp. (FAF)
First American Financial is the nation’s second-largest title insurance company. This form of insurance protects the lender from any potential defects or liens against a deed. Title insurers offer a vital service because most lenders will only underwrite a mortgage if the prospective borrower has purchased title insurance. Title insurers make money both on new mortgage underwriting and also refinancing transactions. In addition, First American has a commercial real estate title business.
Title insurers have underperformed the market dramatically over the past few years. That makes sense, as they are greatly exposed to higher interest rates. New housing sales lose steam in a higher rate environment, and refinancing transactions have also slowed to a trickle. As the Federal Reserve starts slashing rates, however, refis will come back into vogue and the new housing market should improve as well. FAF stock is still available for less than 10 times forward earnings today.
BP PLC (BP)
Energy stocks have been left out 2024’s market euphoria. The economic slump in China and other pivotal emerging markets has limited demand for crude oil, and fears of a broader economic slump have investors wondering if the oil and gas industry will face oversupply once again going forward. That’s an understandable concern given the bust the industry went through in the mid-to-late 2010s.
However, the large diversified energy firms seem overly discounted on these concerns. Take BP, for example. The integrated energy giant is trading for just eight times forward earnings while offering an attractive 5% dividend yield. And BP has been a pioneer in investing in renewable energy, electric vehicle charging and other such futuristic endeavors. While the prices of oil and gas will undoubtedly remain volatile, income investors can sleep well at night with blue-chip names like BP.
Enbridge Inc. (ENB)
Enbridge is one of North America’s largest midstream energy companies. It controls a vast array of pipelines and other energy logistics assets across Canada, the U.S. and Mexico. Pipelines might seem like a stodgy business, but they have taken on increasing importance in recent years. That’s thanks to the shale and fracking boom, which has created a growing supply of oil and natural gas to transport around North America.
While oil and gas producers are frustrated with the recent dip in energy prices, this is of less concern to pipeline producers who typically get paid based on volumes transported. Due to increasing regulation and environmental concerns, it’s difficult to get permits for new pipelines. This dramatically increases the value of existing pipeline infrastructure. Enbridge’s toll-road-style business is a dividend gusher, currently spitting out a 7.4% dividend yield.
Grupo Aeroportuario del Pacifico SAB de CV (PAC)
Grupo Aeroportuario del Pacifico, or “Pacific Airports” in English, is a Mexican airport operator. The company controls 12 Mexican airports, including its flagship Guadalajara location, along with those in industrial cities like Tijuana and tourist destinations including Puerto Vallarta and Los Cabos. It also operates two airports in Jamaica. Airports are an incredibly attractive industry both thanks to the surge in emerging market aviation services along with the high profit margins found on non-aeronautical airport revenues from advertising, concessions and retail, car rentals and so on.
Pacifico has been on a tremendous growth trajectory, with shares roughly quintupling since 2012. But that has currently come to a pause. Boeing Co.’s (BA) 737 Max issues have taken capacity out of the industry. And a Pratt & Whitney engine recall has grounded dozens of airplanes operated by Mexican airlines. The recent presidential election in Mexico caused another kneejerk sell-off, pushing shares of this rapidly growing company down to 18 times forward earnings. Pacifico has a variable but generous dividend policy, with the stock currently yielding nearly 5%.
[READ: 8 Best Warren Buffett Stocks to Buy in 2024]
Tyson Foods Inc. (TSN)
Tyson Foods is a packaged foods company primarily focused on the commodity meats business, though it offers some higher-margin branded food products as well. Tyson’s earnings slumped over the past few years due to the unprecedented disruptions in global supply chains and large increases in grain and livestock prices.
As a result, Tyson has faced significant margin pressure resulting in shares dramatically underperforming. However, at least in the agriculture space, inflation has abated a bit as the world has replaced lost grain from Eastern Europe with new crop plantings in the Americas. Costs in areas such as packaging materials and labor have also stabilized. This paves the way for improving profit margins. Analysts forecast that Tyson’s earnings per share should nearly double in 2024 compared to last year’s trough levels, and then earnings are expected to grow another 41% in 2025. Dividend stock investors can lock in a solid price now before Tyson’s stock rebounds.
Realty Income Corp. (O)
Realty Income is a triple-net real estate investment trust, or REIT. The phrase “triple net” refers to a type of real estate contract where the tenant, rather than the landlord, is responsible for major costs including maintenance and taxes. This insulates the landlord from higher inflationary periods like the past few years.
Realty Income combines that trait with its superior capital allocation decisions. The REIT shrewdly spun off its office properties several years ago before the bottom fell out of that market. While shifting out of offices, Realty Income has moved into entertainment-related venues that are benefiting from the current boom in consumer spending. Realty Income has turned this into an admirable dividend growth track record; it is now a Dividend Aristocrat that has increased its payout for 26 consecutive years. The REIT just announced its latest dividend increase on June 11. Realty Income currently pays a 5.6% dividend yield.
British American Tobacco PLC (BTI)
British American Tobacco is one of the world’s largest tobacco companies. For most people, tobacco is synonymous with cigarettes. For completely understandable reasons, many investors are uncomfortable with the idea of investing in this industry. But don’t write off British American Tobacco prematurely. That’s because it has been the fastest player within the industry to invest in newer and safer nicotine delivery options such as vaping and “heated not burned” products.
BTI stock underperformed over the past year. That’s primarily due to the company taking a massive write-off on the value of its legacy cigarette business. But that’s by design; management is pivoting from cigarettes to its safer nicotine delivery products, and that transition is ahead of schedule with the new product categories’ growth exceeding prior expectations. BTI stock has rallied over the past quarter following an upbeat earnings report and positive news on the regulatory front. Even so, shares are still available at just over seven times forward earnings while offering a 9.3% dividend yield.
Stellantis NV (STLA)
Stellantis is a multinational car manufacturing company that offers brands such as Chrysler, Dodge, Jeep, Maserati, Ram and Peugeot. Stellantis is a massive company, generating about $200 billion in annualized revenues. Investors don’t seem to give Stellantis much credit for its size or impressive brand lineup, however. In fact, Stellantis shares trade at just 3.6 times forward earnings.
To be certain, there are risks here. The automobile industry is notoriously cyclical. Higher interest rates are a drag on market demand. And if the electric vehicle producers regain their earlier momentum, Stellantis may have to adapt its marketing and business strategies to retain its market shares. Regardless, at this valuation and with an amazing 8.2% dividend yield, STLA stock is a deep value at today’s price.
Kenvue Inc. (KVUE)
Kenvue is a new publicly traded consumer health care company. It came about when Johnson & Johnson (JNJ) spun off its personal wellness division in 2023. Johnson & Johnson gave the new company well-known brands including Tylenol, Motrin, Benadryl and Nicorette. This set Kenvue up with a solid portfolio of steady, if unexciting, cash-flow-generative products.
So far, the market hasn’t shown too much interest in KVUE shares. The stock has traded down from around $26 at the time of the spinoff to less than $19 per share today. Investors have left these sorts of stable, recession-proof consumer products companies behind amid the roaring bull market. But when tough times hit and folks reach for safer, more conservative picks, Kenvue should enjoy a solid recovery.
United Micro Electronics (UMC)
United Micro Electronics is a global semiconductor foundry firm. It produces chips for other semiconductor companies that don’t wish to manufacture their own designs. Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) has overwhelming market share in the foundry market. However, given its dominant size and the political risks that TSM faces, some companies have been looking to diversify their foundry suppliers, which offers an opportunity for United Micro Electronics.
Despite that, UMC stock has barely appreciated over the past year, almost entirely missing out on the semiconductor industry boom. Some of UMC’s end markets, such as chips for vehicles and consumer electronics, have been weak. But with the stock at less than 14 times earnings and paying a 5.6% dividend yield, this is an attractive entry point.
American Tower Corp. (AMT)
American Tower is the world’s largest telecom and communications assets-focused REIT. It owns and operates more than 224,000 communication sites globally. While the company was founded with a focus on the North American market, nowadays it has grown its business tremendously in emerging markets such as India and Latin America. American Tower has also been one of the all-time great performers in the REIT space. Its stock rallied from a low of $2 around the turn of the century to more than $200 per share now.
That said, AMT stock has basically gone sideways over the last five years. Despite continuing growth in the firm’s underlying business and operating cash flows, the share price stalled out due to high interest rates. Investors understandably shunned REITs like American Tower as higher debt costs hampered profitability. But with the Federal Reserve seemingly set to begin interest rate cuts imminently, this obstacle will soon be resolved. Additionally, American Tower’s move into the data center business offers further upside while simultaneously diversifying the business.
Public Storage (PSA)
Public Storage is the largest U.S. REIT within the self-storage properties category. The firm has a storied history, being a pioneer in its category and building a veritable empire of storage properties. Shares have risen twentyfold over the past 30 years — and that doesn’t even include the returns from dividends.
Like with many REITs, however, PSA stock has underperformed in recent years, having traded up only slightly dating back to 2016. High interest rates have weighed on sentiment here, and in addition there was overbuilding in the self-storage space in the 2010s. However, new unit supply has leveled off. At the same time, self-storage tends to perform well in recessionary times as foreclosures, job losses and other such events spur new storage rental demand.
More from U.S. News
10 Highest Dividend-Paying Stocks in the S&P 500
Artificial Intelligence Stocks: The 10 Best AI Companies
7 Best High-Dividend Stocks to Buy Under $10
15 Best Dividend Stocks to Buy for 2024 originally appeared on usnews.com
Update 07/17/24: This story was previously published at an earlier date and has been updated with new information.
