If you want a good dividend, you can aim much higher than the 1.4% yield that the S&P500 averages. In some cases you can earn much more than average without even having to take much more risk. Although high-yield stocks sometimes have connotations of risky investments, that is not always the case.
Three stocks I could confidently rely on for dividend income yielding more than 6% today are AT&T (NYSE:T), Enbridge (NYSE: ENB)And Western Union (NYSE: WU). Here’s how high their yields are today and why these could be great income stocks to buy and hold.
AT&T
Telecom giant AT&T hasn’t gotten much love from investors in recent years, and that created an attractive buying opportunity. At 6.1%, the stock offers a high payout and its valuation remains cheap. AT&T’s stock trades at just ten times the company’s earnings.
However, AT&T’s free cash flow has increased, which is important to investors because it indicates how much money the company has available to invest in its own operations or return to shareholders. It has raised free cash flow guidance and through the first three months of the year, free cash flow was $2.1 billion. higher than in the period last year. AT&T’s payout ratio based on earnings is also encouraging, now around 60%.
Not only does the dividend look safe, but I also wonder if the company will increase its payout again this year given how well the company has been doing lately. AT&T stock is up 8% this year, but it could go much higher once interest rates fall. But even if that doesn’t happen until next year, this is an excellent buy and hold stock to hold on to for the long term.
Enbridge
Another good dividend stock to own is Enbridge. The pipeline company plays a major role in the oil and gas industry, with long-term contracts giving the company a lot of stability. It has also expanded its position with the purchase of several companies Dominion Energywhich management refers to as a “one-time opportunity.”
However, not all investors are enthusiastic about the $14 billion acquisition of the Canadian-based company At a time when interest rates and borrowing costs are high, Enbridge shares are down 1% this year despite a strong year for the markets. But Enbridge is a company that guarantees investor confidence, having met its guidelines for eighteen consecutive years. The company has also raised its dividend for 29 years in a row, and CEO Greg Ebel says it is “well positioned to grow earnings and dividends for shareholders for years to come.”
Although the return on shares is up to 7.5%, Enbridge is not as risky an investment as it may seem at first glance. Over the trailing twelve months, it generated free cash flow totaling CA$8.6 billion and paid out CA$7.8 billion in dividends during that period.
Western Union
Western Union is a big name in cross-border payments and transfers. The brand has become synonymous with transferring money. But in recent years, there have been more ways for consumers to do that as technology companies have launched more apps to make it easier to send cash, making growth a challenge for Western Union.
But the company has innovated with a banking app that allows users to send money to more than 200 countries and territories. Through the first three months of the year, Western Union’s revenues grew 1% to about $1.1 billion. But branded digital revenue saw 9% year-on-year growth. And there was a 13% growth in digital brand transactions.
Despite increasing competition, Western Union is still not done growing. This could make for an undervalued stock, especially when you factor in the dividend, which currently yields 7.3%. The stock has a manageable 56% payout ratio, is cheap to own, and trades at less than 8 times earnings.
Should You Invest $1,000 in AT&T Now?
Consider the following before buying stock in AT&T:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and AT&T wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $740,886!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.
3 High-Yield Dividend Stocks That Pay More Than Four Times the S&P 500 Average Originally published by The Motley Fool
