In a world of low interest rates, investors have had to be creative to find a return. One of the places they have found cash gains is in dividend stocks, particularly those that offer a relatively high payout. However, the higher the return, the greater the risk to investors.
Fortunately, some high-yield dividend stocks remain well positioned to maintain their dividends. The stocks below offer generous cash earnings backed by growing companies. The following companies should make increasing profits and further increase payments over time.
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AbbVie
AbbVie (NYSE: ABBV) spent most of its history as a subsidiary of Abbott Laboratories before becoming an independent company in 2013. Consequently, it also benefits from an Aristocratic Dividend status that it obtained from Abbott.
Its annual dividend, which is now $ 4.72 per share, yields about 4.8% at the close on Thursday. Also, this payment seems stable. Thanks to a dividend payout rate of just under 60%, the company is positioned to sustain annual increases while it has more than enough earnings to invest in its drug portfolio.
Pipeline remains a major concern. AbbVie’s shares benefited from a five-year run for most of the past decade. However, 2018 passed and most of 2019 in decline, as investors worried about where the company would find revenue as the patents for its successful drug Humira began to expire worldwide.
ABBV data by YCharts
AbbVie’s outlook improved when addressing that concern. Hematology medications from drug maker Imbruvica and Venclexta have seen massive increases in revenue in the past year. Additionally, your acquisition of Allergan should increase your offerings. Also, with a forward P / E ratio of just under 10, investors can buy this cash flow at a reasonable valuation.
AT&T
AT&T (NYSE: T) It has struggled for years amid intense competition and expensive construction. In addition, its pay-line and pay-TV businesses have been the victims of technological change. This has caused the company’s actions to suffer. It sells at a leading P / E ratio of around 9.4 (as of Thursday’s close) and trades at a price it first reached in the 90s!
T data by YCharts
The reluctance about AT&T’s actions is understandable. Its purchase of DirecTV and what is now WarnerMedia left the company with long-term debt of $ 147.202 billion as of the last quarter.
However, years of stagnation coupled with a Dividend Aristocrat statement have brought the annual dividend to $ 2.08 per share, a return of about 7%. In addition, the dividend payout ratio measured against quarterly income stands at almost 82%. While that may seem high, the forecasts are aimed at improving earnings, which can significantly reduce that ratio.
Also, one of your costly investments could be profitable for the company. In recent years, he has spent tens of billions building a 5G network nationwide. As consumers switch to 5G technology, AT&T will become one of three 5G service providers. This increases the probability of increasing profits and increasing payments in the coming years.
Innovative industrial properties
Innovative industrial properties (NYSE: IIPR) is a real estate investment trust (REIT) that provides properties in the US designed to facilitate the growth of cannabis. Since it does not directly produce or sell marijuana, it is not subject to regulations that affect most of the industry.
Also, as a REIT, you must pay a dividend of your net income to maintain that status. The current annual payment of $ 4.24 per share yields about 4.5%. This payment has increased every year since 2017.
Also, the company will most likely have to increase dividends. In the most recent quarter, net income increased 249% year-over-year, and income increased 210%. Such increases have helped drive growth in stock prices in recent years.
IIPR data by YCharts
The growth trend should continue for the foreseeable future. According to Grandview Research, the compound annual growth rate (CAGR) of the marijuana industry is 18.1% globally. Plus, with legal hemp in all 50 states, Innovative Industrial can operate anywhere in the country.
In addition, in the previous quarter, it reported $ 1.12 per share in working capital funds (FFO). This would give REIT a price / FFO ratio of approximately 21.1, assuming a stable FFO income. Therefore, the company offers a low cost multiple considering its growth. This should continue to feed both Innovative Industrial and its dividend for the foreseeable future.
IBM
International business machines (NYSE: IBM) It recently increased its dividend for the 25th consecutive year, making it the newest Aristocrat Dividend. Your current annual payment of $ 6.52 per share gives this stock a return of 5.4%. Still, despite this generous payment, IBM shares are still trading at a forward P / E ratio of just under 11.
Years of stagnant income and profit can help explain this low multiple. At the time of this writing, IBM sells for almost 45% less than its peak in 2013.
YCharts IBM data.
However, the IBM bulls have cause for optimism. The company named the leader of its cloud division, Arvind Krishna, as its new CEO in April. In Krishna’s last quarter as head of cloud computing, cloud revenue increased 19% year-over-year. This occurred when overall revenue fell 3.4% from the same quarter last year. Both results and Krishna’s focus point to IBM becoming more of a cloud company.
Additionally, IBM’s dividend payout ratio is approximately 64%. Although the dividend is not in trouble at the moment, this relationship indicates that IBM will need a revenue increase to sustain the payment increases.
However, with a more cloud-oriented approach, IBM will likely be able to continue its dividend increases. Furthermore, it could also inspire long-awaited growth in IBM’s stock price.
Financial Prudential
Financial Prudential (NYSE: PRU) offers wealth and retirement management products for individuals and institutions alike. The company has steadily increased its annual payment since 2008, exceeding $ 4 this year, and you should have no problem keeping it. Despite the fact that today its performance exceeds 7%, its pay rate is 57% manageable.
However, the risk with this share may come from the share price. It has decreased by more than 30% in the past five years, and the coronavirus pandemic caused most of this decline. As a result, the forward P / E ratio is now around 6.4.
PRU data by YCharts
Despite Prudential’s low P / E, investors should not rely on significant multiple expansion for profit. However, earnings increased by an average of almost 7.1% per year over the past five years. Although earnings growth turned negative in the most recent earnings report, both Prudential’s dividend and its share price should register growth as the economy recovers.
