If your gut tells you that now is a good time to add some safe dividend payers to your investment portfolio, you would be wise to listen. Between geopolitical turmoil, persistent inflation, unpredictable interest rates, rising loan defaults and political uncertainty, the near future may not be a great environment for some — or perhaps all — growth stocks.
However, these three high-yielding dividend stocks are capable of providing investors with solid returns, and they likely will continue to do so for some time to come.
1. Altria Group
The United States tobacco industry is living on borrowed time. That, at least, is the main takeaway from the World Health Organization’s (WHO) latest look at the issue, which suggests that just 18.2 percent of the country’s adult population will be regular tobacco users (smokers, primarily) by 2025. That’s down measurably from 23.3 percent in 2000.
However, the tobacco industry in the United States may still have more years ahead of it than you might expect. Also acknowledging that the smoking cessation movement is slowing, the same WHO report suggests that 16.5% of American adults will still be using tobacco regularly in 2030. Meanwhile, people are flocking to alternative vices like vaping and e-cigarette use. The National Center for Health Statistics reports that more than 4% of adults in the country regularly use vaping products, offsetting the declining number of smokers.
Connect the dots. Given the country’s projected population growth between now and then (and beyond), there are still plenty of opportunities to turn these common consumer habits into big bucks.
The background bodes well for Altria Group (NYSE: MO)parent company of Philip Morris USA, which owns well-known American cigarette brands such as Marlboro, Virginia Slims and others. And while cigarettes are still the best-seller, it also owns vaping brand NJOY and oral nicotine pouch maker Helix Innovations. These other initiatives help soften the impact of tobacco’s slow decline on Altria, which has adopted the motto “Beyond Smoking.” By accepting the gradual but inevitable decline of the cigarette market rather than fighting it, the company can continue to generate healthy earnings by managing and even directing the transition to other nicotine products. More importantly for shareholders, managing this evolution allows Altria to continue producing the profits that have supported 55 years of annual dividend increases.
It is important for investors to understand that there is unlikely to be any meaningful or sustainable capital growth. Altria does not even appear to be trying to generate growth. Its focus is entirely on maintaining the cash flow that funds its dividend payments.
With a forward yield of 7.7% and a dividend that can continue to grow and be paid for decades to come, that’s not a bad deal.
2. Real estate income
Contrary to popular belief, not all sectors of retail are in trouble. Most of the weakness is confined to department stores and shopping malls where they are typically found. Malls and community centers are actually doing quite well, catering to consumers where and how they like to shop.
Enter Real estate income (NYSE: O).
It’s not a retailer, though its fate is tied to much of that industry. It’s a real estate investment trust (REIT), which leases physical properties to retailers, sparing tenants some of the financial burden of owning all those buildings.
That may still seem like a risky proposition at first glance. The landlord is still leasing to businesses in a retail sector that is under pressure from the continued growth of e-commerce.
This overarching idea, however, ignores a few important details. One is that a large portion of retail consumption is still (for reasons of convenience and speed) conducted in person in stores. And the other reason? The majority of Realty Income’s tenants are among the most enduring retailers, such as Dollar General, Walgreens7-Eleven, and even WalmartOnce these chains establish a physical presence in a location, they are unlikely to abandon it.
At least that’s what this REIT’s dividend track record suggests. Not only has it paid out its monthly (yes, monthly) payments like clockwork since it began in 1969, it has also compounded those payments 127 times. Those buying the stock today would be getting in while Realty Income’s forward dividend yield is 5%.
3. Whirlpool
Last but certainly not least, add the manufacturer of household appliances Vortex (NYSE: WHR) to your list of dividend stocks to consider buying as long as the forward yield is 7%.
It’s a suggestion that might raise some eyebrows. Even if you’re not sure, it doesn’t seem intuitively like there’s much demand for home appliances right now. The growing competition from companies like SamsungBosch and LG further undermine the optimistic argument for owning a stake in this iconic brand.
Yet, in this regard, it may not be as much of a challenge as it seems.
Unlike other major purchases, buying a major appliance can’t always be postponed. Appliances are also more affordable than, say, cars or houses, so getting financing is less of an obstacle. To that end, the Conference Board’s consumer sentiment survey ticked higher in August, specifically because — in a seeming contradiction to the economic backdrop — more U.S. consumers said they planned to buy a refrigerator, washing machine or TV within the next six months. It was the fourth straight month that those purchase plans improved.
Investors who are already familiar with Whirlpool likely also know that while the company continues to pay a dividend, it hasn’t increased it since 2022, when it raised the quarterly payout to $1.75 per share.
Keeping things in perspective, though, the ability to maintain the payout was never in question. The decision to halt the long-established cadence of dividend growth was rooted in an abundance of caution during an extraordinary time in modern history. The COVID-19 pandemic and its knock-on effects not only temporarily disrupted appliance purchases, they also hampered companies’ ability to produce them. This year’s expected 14% drop in sales and subsequent earnings should mark the end of this misery, however, with analysts predicting Whirlpool’s business will continue to turn a corner next year. In the meantime, with the stock down 60% from its 2021 peak and worth less than 9 times next year’s estimated earnings, the worst-case scenario is already priced in… and then some.
Should You Invest $1,000 in Altria Group Now?
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income and Walmart. The Motley Fool has a disclosure policy.
Want Safe Dividend Income in 2024 and Beyond? Invest in These 3 Ultra-High Yield Stocks. was originally published by The Motley Fool
