This is a tough time for income-oriented investors. Since the beginning of the year, dividend yields have been squeezed to the breaking point. The S&P 500 just notched a new all-time high. Plus, the Federal Reserve seems intent on keep interest rates where they are. Just last week, the Fed once again decided to leave interest rates unchanged.
But don’t be fooled. There are some high-quality stocks that still deliver rich yields. It just takes a little digging to find them. Here’s a simple 10-stock portfolio that currently yields over 4.2%. I’ve listed each stock and its current yield.
- AT&T (T), 6.6%
They don’t get much more blue chip than AT&T, but today’s AT&T is quite a different animal from the widow and orphans stock of decades past. Today’s AT&T is a mass media conglomerate.
Last year, the company bought out Warner Media. It’s now the largest media company in the world in terms of revenue. Oddly enough, this AT&T came to life as one of the Baby Bells when the company was ordered to break itself up. This unit was Southwest Bell which later changed its name to SBC. The company then bought out its parent, AT&T, and adopted the old name for itself.
- Bristol-Myers Squibb (BMY), 3.4%
Bristol-Myers Squibb is one of the largest drug companies in the world. The company makes pharmaceuticals designed for several different areas such as cardiovascular disease, rheumatoid arthritis, diabetes and cancer.
The company just beat Wall Street’s consensus by one penny per share. Last month, BMY made big news when it announced that it was buying Celgene. Bristol-Myers expects this deal to close in Q3.
- Campbell Soup (CPB), 3.7%
When Andy Warhol was told to paint what he liked, he painted a can of soup. But not just any soup. Warhol chose the world’s most famous brand of soup, Campbell’s.
Today, Campbell’s is a lot more than soup. The company also owns Pepperidge Farm and V8. This year, the company is celebrating its 150th birthday. The soup folks are due to report earnings again on June 5. Wall Street expects 47 cents per share.
- Chevron (CVX), 4.1%
Chevron is one of the descendants of Standard Oil. The company recently released a very good earnings report for Q1. For the first three months of this year, Chevron made a cool $2.65 billion. On an earnings-per-share basis, the company made $1.39. That was nine cents more than the consensus on Wall Street.
Last month, Chevron shocked the world of high finance by making a $33 billion bid, in cash and stock, for Anadarko Petroleum. Then it got interesting. Occidental Petroleum has made a rival bid, and Warren Buffett is partnering with Occidental. This could launch an old-fashioned bidding war.
- Coke (KO), 3.3%
The soft drink powerhouse rakes in over $30 billion each year in revenues. The company is one of the bluest blue chips on Wall Street. Coke has been a member of the Dow Jones Industrial Average for over 30 years.
Last month, Coke said that it made 46 cents per share for Q1. That topped Wall Street’s view by two cents per share. For the year, I think Coke can easily make $2.10 per share, which is a nice increase over the $1.91 per share the soft drink king made in 2018. This also tells me that Coke can cover its current dividend of $1.60 per share. The company has raised its dividend every year for the last 56 years.
- ExxonMobil (XOM), 4.5%
ExxonMobil is another descendant of John D. Rockefeller’s Standard Oil. The Supreme Court busted up the company over 100 years ago, and ExxonMobil is the largest remaining block.
Thanks to lower oil prices, shares of XOM have consistently lagged the market for the last ten years. But that could be good news for value-oriented investors. ExxonMobil is currently going for less than 14 times next year’s earnings. That’s not a bad deal. Two weeks ago, the company raised its quarterly payout to 87 cents per share.
- IBM (IBM), 4.6%
For 110 years, Big Blue has been a major player in office machinery. Interestingly, IBM was born by a cobbling together of several different businesses. Charles Flint, a New York businessman, made a holding company called the Computing-Tabulating-Recording Company, better known at C-T-R. He later hired a general manager named Thomas Watson to run the thing. In 1924, Watson renamed the business International Business Machines.
In the postwar era, IBM’s legendary corporate culture was the envy of American business. The company recently reported better-than-expected earnings, although the revenue line disappointed investors. The shares are currently going for less than 10 times next year’s earnings estimate. Last week, IBM bumped up its dividend by 3.2%.
- Pfizer (PFE), 3.5%
Pfizer is one of the largest pharmaceutical companies in the world. Last year, Pfizer had total revenue of more than $50 billion. In December, the company said it will merge its consumer health division with GlaxoSmithKline.
In recent years, the criticism of Pfizer is that they don’t have much in the way of a pipeline of new drugs. That criticism isn’t so accurate anymore. Under the guidance of a new CEO, Pfizer is looking to get 15 new drugs approved by 2022. The company hopes they can bring in $1 billion in sales each year. Things look promising. Pfizer just beat earnings and raised its full-year 2019 guidance.
- Philip Morris (PM), 5.3%
Philip Morris is one of the largest tobacco companies in the world. It’s the company behind Marlboro. Until 2008, PM operated as a division of Altria. While some investors eschew tobacco stocks, that doesn’t diminish the fact that this is a very profitable enterprise. Last year, Philip Morris had an operating income of $11 billion.
Perhaps due to the controversy of its industry group, shares of PM often sport a generous yield. Last June, the company boosted its dividend and I’m expecting another dividend hike in a few weeks. The current quarterly payout is $1.14 per share. I think PM could raise it as high as $1.20 per share.
- Verizon (VZ), 4.2%
Verizon is another Baby Bell. After the spinoff, Bell Atlantic merged with NYNEX. Then in 2000, the company acquired GTE and rebranded itself Verizon. Verizon is betting a lot on the rollout of 5G. The Q1 earnings report beat analysts’ expectations by three cents per share.
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