There are three main categories of investors: growth investors, income investors and value investors. I would classify myself as a mix of all three, except my focus is on future earnings rather than current earnings.
My desire for future income to finance my retirement has made dividends more important to me than ever. Here are three high-yield dividend stocks I’m buying hand over fist.
1. Enterprise Products Partners LP
Enterprise Products Partners LP (NYSE:EPD) is a leading American midstream energy company. The platform includes more than 50,000 miles of pipelines transporting natural gas, natural gas liquids (NGLs), crude oil and petrochemicals.
Even though I don’t rely on its distribution for income right now, I like Enterprise’s distribution yield of 7.2%. And I absolutely love the company’s track record of 25 years of consecutive distribution increases at a compound annual growth rate of about 7%.
This high return means Enterprise doesn’t need to achieve much unit price growth to deliver strong total returns. However, unit price growth is unlikely to be too difficult. U.S. natural gas, NGL and oil production is expected to continue rising through the remainder of this decade – and the fundamentals are in place to continue this trend over the longer term. Enterprise is preparing for growth with nearly $7 billion in major projects under construction.
Valuation should also not hinder Enterprise’s growth. The stock trades at just 10.7 times forward earnings.
The main disadvantage of buying Enterprise Products Partners, in my opinion, is the tax hassle associated with investing in a limited partnership. However, the benefits this stock offers make the additional tax filing requirements worth it to me.
2. Pfizer
Pfizer (NYSE:PFE) is one of the largest biopharmaceutical companies in the world. Its products include blockbuster drugs targeting cancer, infectious diseases, rare diseases and more. Pfizer is also known for its vaccines.
The company’s impressive range of products generates enough cash flow for Pfizer to pay a juicy dividend yield of over 5.8%. Management remains committed to maintaining and growing the dividend while reducing debt and reinvesting in the business.
Pfizer’s forward price-to-earnings ratio is below 13. That is a much more attractive valuation than the S&P500 the healthcare sector’s forward earnings multiple is 18.4.
However, there are two dark clouds hanging over Pfizer. Sales of the company’s COVID-19 products are down. Pfizer will also face a major patent cliff in the coming years, with important patents for several drugs expiring. However, despite these challenges, I’m still pleased with Pfizer’s overall growth prospects, thanks to new product launches and recent acquisitions.
3. Verizon Communications
I haven’t started buying stocks yet Verizon Communications (NYSE: VZ) not yet, but I plan to do so soon. The company is, of course, a leading global telecommunications provider with millions of customers.
I’d be lying if I said Verizon’s 6.6% dividend yield wasn’t a big factor in my decision to buy the stock. As with Enterprise Products Partners and Pfizer, Verizon’s dividend gives the company a solid lead in delivering attractive total returns. Another big plus: the telecom giant has increased its dividend payout for seventeen years in a row.
Many stocks are expensive at the moment. Not Verizon. The stock trades at less than 8.8 times forward earnings.
What’s the biggest blow to Verizon? Slow growth. The company’s revenue rose just 0.2% year over year in the first quarter of 2024. Profit fell to $4.7 billion from $5 billion in the same period last year.
However, Verizon continues to generate strong free cash flow. The balance sheet becomes stronger. I expect the shares to rise in the coming years, even if the company’s revenue growth isn’t impressive.
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Keith Speights holds positions at Enterprise Products Partners and Pfizer. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool recommends Enterprise Products Partners and Verizon Communications. The Motley Fool has a disclosure policy.
3 High-Yield Dividend Stocks I’m Buying Hand Over Fist was originally published by The Motley Fool
