On Sept. 18, the Federal Reserve announced a 50-basis-point cut to its benchmark interest rate. This was its first rate reduction in more than four years, and a more aggressive move than the 25-basis-point cut that many economists had expected. As of this writing, analysts believe the Fed is set to cut rates again in both its forthcoming November and December 2024 meetings, setting a much easier monetary policy framework into place.
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Investors should prepare for this policy shift now. Interest rates will fall on fixed-income investments as the Fed carries out this strategic change. For investors that count on solid yields as part of their portfolio strategy, it could be time to take action now before the macroeconomic environment totally shifts. These 15 dividend stocks to buy now offer much higher yields than the S&P 500 and will keep pumping out solid income regardless of how much the Fed cuts rates in the months to come:
— United Parcel Service Inc. (ticker: UPS)
— Pfizer Inc. (PFE)
— Fomento Economico Mexicano SAB de CV (FMX)
— Ecopetrol SA (EC)
— Canadian Natural Resources Ltd. (CNQ)
— Toyota Motor Corp. (TM)
— Magna International Inc. (MGA)
— Hormel Foods Corp. (HRL)
— Rexford Industrial Realty Inc. (REXR)
— Realty Income Corp. (O)
— British American Tobacco PLC (BTI)
— Estee Lauder Cos. Inc. (EL)
— Vail Resorts Inc. (MTN)
— Washington Trust Bancorp Inc. (WASH)
— Grupo Aeroportuario del Pacifico SAB de CV (PAC)
United Parcel Service Inc. (UPS)
United Parcel Service is a gigantic freight and logistics company. With more than 500 planes and 100,000 vehicles, UPS is an integral part of the world’s supply chain and is a key player in the e-commerce fulfillment arena. Investors have shunned UPS stock for a variety of reasons.
First, it was worries about Amazon.com Inc. (AMZN) stealing logistics market share, though these fears have abated as Amazon has pulled back on new capital expenditures. Then it was worries around higher inflation and labor costs. Now, analysts have moved on to fretting around a potential economic slowdown, which could lower demand for e-commerce fulfillment services. That said, UPS has proven to be resilient in the face of prior threats, and investors that buy today can unwrap a 4.8% dividend yield heading into the holidays.
Pfizer Inc. (PFE)
The pharmaceutical industry is caught in a boom-and-bust phenomenon. For companies with novel GLP-1 therapies for treating diabetes and obesity, times have never been better. Eli Lilly & Co. (LLY) has an $830 billion market capitalization based on the strength of its weight loss drugs, to give one example. But valuations have plunged for pharmaceutical companies that missed out on the GLP-1 boom.
Take Pfizer, for example. The company grew tremendously over the past five years, in part driven by windfall revenues from its COVID-19 vaccine. As those revenues trailed off, however, investors grew frustrated with Pfizer and dumped the stock. Shares, which went for nearly $40 each five years ago, are now trading for less than $30. This doesn’t make much sense, given that the company’s profitability and revenues are higher now than before. This puzzling market reaction has created a situation where PFE stock is paying a 5.7% dividend yield today.
Fomento Economico Mexicano SAB de CV (FMX)
Fomento Economico Mexicano, more commonly known as FEMSA, is one of Mexico’s largest conglomerates. It operates a variety of businesses, including convenience stores, gas stations, pharmacies, soft drink bottling and financial services. The company’s crown jewel is its OXXO convenience store chain, which has more than 20,000 locations in Mexico and thousands more in South America.
FEMSA is now leveraging its OXXO store base to offer customers fintech services through its Spin digital wallet and payments platform. Spin recently passed 10 million active users, and OXXO’s massive store network gives it tremendous reach for offering financial services to Mexican clients who often lack access to the traditional banking system. FEMSA has also launched a fast-growing discount grocery chain, which has the potential to be the company’s next home-run asset. FMX stock has slumped 30% since its peak earlier this year, creating an appetizing entry point today.
Ecopetrol SA (EC)
Ecopetrol is Colombia’s state-managed oil company. The Colombian government owns 88.5% of the company, while the other 11.5% is publicly traded. Historically, this alignment has worked out well for shareholders, as the Colombian government counts on Ecopetrol to pay huge dividends to help fund the national treasury. Ecopetrol is responsible for the lion’s share of oil production in Colombia, and it controls 100% of the country’s oil refining capacity. It also owns transmission lines, renewable energy generation capacity and toll roads. EC stock has slumped to fresh 52-week lows recently due to weakness in oil prices and dissatisfaction with the current Colombian president. All this has pushed EC stock down to less than five times earnings.
Ecopetrol has a variable dividend policy based on the company’s annual profits. In the past year, it paid $1.60 per share in dividends, which amounts to a greater than 19% yield on the current stock price. Keep in mind that this rate will fluctuate wildly due to the variable dividend, but investors can be certain that whatever dividend EC distributes, it will be high.
Canadian Natural Resources Ltd. (CNQ)
Sticking with oil, Canadian Natural Resources is one of Canada’s largest energy companies. The firm has built its business on its expertise in the oil sands. This oil resource, found primarily in the province of Alberta, is a dense, viscous form of petroleum. Producing it is more akin to hard-rock mining than drilling oil wells. This means that Canadian Natural Resources’ oil sands reserves have a massive operational lifespan and do not see year-over-year production declines in the same way that traditional oil wells or fracking would.
A big concern for energy investors is sustainability, particularly in a world where regulators have made it more difficult to start new oil production. Canadian Natural’s unique oil sands position allows it to avoid much of this political risk while delivering steady, predictable returns to shareholders. Canadian Natural just hiked its dividend by 7% in October, and it is also continuing its large share buyback program, which helps supercharge shareholder returns.
Toyota Motor Corp. (TM)
Toyota Motor is one of the world’s dominant automakers. It enjoys more than 50% market share in Japan and approximately 15% share in the U.S. In total, Toyota sold more than 11 million vehicles in its 2024 fiscal year. There had been concerns that Toyota might get left behind as electric vehicle manufacturers such as Tesla Inc. (TSLA) took off.
However, EVs have lost steam recently, and Toyota’s diversified mix of conventional and hybrid vehicles has shined in the changing market landscape. Toyota has a fantastic balance sheet, and its world-renowned manufacturing prowess positions it well to operate efficiently in a potential market slowdown. Analysts are worried that auto sales will slump, but Toyota can ride out any near-term weakness, and shares are attractively priced today at only seven times earnings.
Magna International Inc. (MGA)
With more than $40 billion in annual revenues, Magna International is one of the world’s most important auto parts makers. Like with the auto manufacturers, investors are also concerned that a weakening economy will hit the companies that make up the supply chains for original equipment manufacturers. Magna has a diversified business, with operating segments that include body exteriors and structures, power and vision, seating systems, and complete vehicles.
It’s not inconceivable that Magna could see a meaningful downturn in business during a prolonged recession. But the market already reflects that, with shares down more than 20% over the past year. In addition, Magna shares are selling well below their pre-pandemic levels. This seems like a serious overreaction, with shares now trading for just 12 times earnings and offering a 4.6% dividend yield.
Hormel Foods Corp. (HRL)
Minnesota’s Hormel Foods was founded back in 1891. The company came to prominence during World War II when its canned pork product, SPAM, became invaluable in feeding troops serving overseas. Some investors may still associate Hormel with this older history and think the company is past its prime.
However, the company has quietly reinvented itself. Legacy products such as SPAM and Hormel Chili now constitute a modest portion of overall sales, while the company has pivoted to healthy protein-centric food options that appeal to millennials and Gen Z consumers. Hormel’s nut butters, guacamole, organic and naturally raised meats, and other products are right on target with current nutritional trends. Hormel is also a Dividend King, with a stunning 57-year track record of increasing its dividend annually. Hormel stock now offers a dividend yield of 3.6%, which is far above its historical average.
[SEE: 9 Highest Dividend-Paying Stocks in the S&P 500]
Rexford Industrial Realty Inc. (REXR)
Rexford Industrial is a large real estate investment trust
(REIT) devoted to the ownership and operation of industrial properties throughout Southern California. The company’s portfolio is made up of approximately 371 properties with about 45 million square feet of rentable space. Southern California logistics has been a strong market historically thanks to the high population density in that region, proximity to key railroads and seaport connections, and Southern California’s sizable industrial base. This has given Rexford many opportunities for growth, particularly in the field of logistics, where it rents out properties to firms that are key in e-commerce fulfillment and last mile delivery services.
Industrial REITs had been a blazing hot category, but REXR stock has cooled off since 2022. The recent pullback gives investors a second chance at this growth and income story, and upcoming rate cuts should give a further boost to the REIT sector.
Realty Income Corp. (O)
Realty Income is another REIT that can cash in on the forthcoming interest rate cut cycle. Realty Income was a pioneer in the triple-net space, a specific type of lease where the tenant, rather than the landlord, is responsible for major costs including maintenance and taxes.
Triple-net lease contracts were useful for REITs during the recent inflationary period as they insulated the owners from escalating costs. While inflation has now started to let up, Realty Income should benefit from rate cuts as it will enjoy lower borrowing costs of its debts going forward. In addition, the firm’s generous 4.9% dividend yield — which it pays monthly — will look more attractive as yields drop on fixed-income products. Realty Income is one of the rare Dividend Aristocrats available within the REIT sector, and the company just raised its dividend again in October.
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 surged this summer on an improving outlook and investors warming up to the company’s massive dividend yield. However, since September, BTI shares cooled back off as a round of profit-taking hit the tobacco sector. In October, British American Tobacco reaffirmed its prior full-year 2024 guidance and confirmed that the company has now returned to positive organic revenue and earnings growth. With the company having successfully turned itself around, shares should resume their rally. For now, the stock yields 8.3%.
Estee Lauder Cos. Inc. (EL)
Chinese stocks have been volatile recently, as investors digest proposed stimulus measures that seek to jumpstart that nation’s economy. Estee Lauder offers investors a chance to profit if China’s economy gets going again. While the cosmetics giant is based in New York City, in recent years it has invested heavily in emerging markets such as China and Latin America. That had been a great bet thanks to the rising global middle class, but emerging markets have struggled more recently.
In fact, an ongoing cosmetics sales slump in markets such as China and South Korea has hit Estee Lauder’s profit margins badly and led shares to drop as much as 80% from their prior all-time highs. However, Estee Lauder remains meaningfully profitable, and its revenues and profits have already begun to recover from last year’s trough. The share price is still near its lows though, giving investors a chance to own this higher growth company at a decent starting dividend yield of 2.9%.
Vail Resorts Inc. (MTN)
Colorado-based Vail Resorts is the world’s largest operator of ski resorts. It owns 42 mountain resorts, with properties located in the U.S., Canada, Australia and Switzerland. It is known for resorts such as Vail, Beaver Creek, Keystone and Whistler Blackcomb. Vail has traditionally enjoyed tremendous growth as it consolidated the ski industry, acquiring a variety of resorts around the world. This has given Vail scale benefits and made its seasonal pass offerings more attractive to potential customers.
Skiing enjoyed a boom during the pandemic as it was a good way to get leisure fun in a socially distanced environment. Spending momentum has faded since then, leading to a meltdown in Vail shares. But long-term growth should return in due time, and for now, the current investor apathy has led to shares trading at a greater than 5% dividend yield.
Washington Trust Bancorp Inc. (WASH)
Founded in 1800, Washington Trust Bancorp is one of the nation’s oldest operating regional banks. Originally established to provide credit to the farming and milling operations springing up along the Pawcatuck River, today Washington Trust is the largest regional bank headquartered in Rhode Island. The bank has paid dividends for more than a century, and it remained profitable even during the 2008 financial crisis, which demonstrated its conservative and proven business model.
WASH stock has underperformed in recent years as the inverted yield curve limited the bank’s profitability. That is changing now, however, as WASH stock has jumped sharply over the past six months. There should be more gas in the tank, however, as the Fed’s rate cuts could greatly improve the bank’s profitability outlook. Even after the share price rally, shares still yield a juicy 6.7%.
Grupo Aeroportuario del Pacifico SAB de CV (PAC)
Grupo Aeroportuario del Pacifico, or “Pacific Airport Group” in English, is a Mexican airport operator. The company controls 12 Mexican airports, including its flagship Guadalajara location, along with industrial cities like Tijuana and tourist destinations like Puerto Vallarta and Los Cabos. It also operates two airports in Jamaica. Airports are an incredibly attractive industry due to rapid tourism growth along with the high profit margins found on non-aeronautical airport revenues from businesses like advertising, concessions and retail, and car rentals.
Pacifico has been on a tremendous growth trajectory, with shares roughly quintupling since 2012. This growth is set to continue, as Mexico is enjoying a massive manufacturing boom tied to the “reshoring” phenomenon. Long story short, multinational firms have grown increasingly skeptical about investing in China and are increasingly picking Mexico instead. Pacifico’s flagship Guadalajara airport just got a huge boost in October, as Taiwanese electronics giant Foxconn announced it will be constructing a massive factory in Guadalajara to build Blackwell AI chips for Nvidia Corp. (NVDA). This should drive further growth for this fast-expanding airport operator.
[READ: 5 Ways to Build Passive Income Through Investing]
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15 Best Dividend Stocks to Buy Now originally appeared on usnews.com
Update 10/17/24: This story was previously published at an earlier date and has been updated with new information.
