Stocks across industries hitting new lows this year have many investors rattled on the best dividend stocks to buy. However, rock-bottom rates should not serve as an end to your dividend strategy but a sign to be more selective with the types of stocks you choose to buy and hold.
In the grander scheme of things, high dividend stocks are actually great long-term buys. Companies that pay out dividends historically outperform those that don’t.
While the volatility in the current economic environment can make it harder to find the right stocks, investors just need to look a little closer to find those hidden opportunities.
However, it’s worth considering the trade-off that comes with holding high-dividend stocks. Yield and risk go hand-in-hand, meaning a rise in one leads to a subsequent increase in the other. As they say “no risk, no reward.”
With that in mind, there are plenty of high-yield stocks out there that have stood the test of a volatile market. Here are our top three picks:
Dividend Stocks: Pfizer (PFE)
With the race toward a novel coronavirus vaccine underway, healthcare companies are having a major moment. Pharmaceutical giant, Pfizer, saw a 35% rally in its stock price after recouping its losses from lows in March. Like many of its peers, Pfizer suffered from a decline in the sale of its generic drugs at the onset of the pandemic. But with recent success in its vaccine trials and restructuring initiatives, the company is headed toward brighter days.
Pfizer currently provides an annual yield of about 4%. Experts believe this payout will continue to remain stable as long as demand for its products and cash flow continues to rise.
However, the company experienced stagnant sales growth in recent years with many of its drugs losing their exclusivity to competitors. Pfizer plans to combat this decline with the development of new therapies and newly approved biosimilars. This could push the company to greater heights in the biopharma sector.
While many of Pfizer’s drugs and vaccines are still in their development phase, a dividend yield of 4% at a stock price of $37.20 makes this a great dividend stock to buy in any investing environment.
U.S. Bancorp (USB)
Next up on the list is Minnesota-based, U.S. Bancorp, the parent company of U.S. Bank. The bank currently manages $500 billion in assets and holds the title as the fifth-largest bank in the U.S.
USB has a wide presence across the nation and serves everyone from individuals to government entities. Having a market capitalization of $56 billion doesn’t hurt either.
While the pandemic served as a death-knell for most major industries, big banks saw stellar earnings during this past quarter and U.S. Bancorp was no different. The company recorded a net income of $3.22 billion and revenue increased to $5.84 billion during the period. Many investors have put their support behind the bank stocks historically known to outperform the markets in the long term.
In addition to its impressive earnings, U.S. Bancorp has an annual dividend payment of $1.68, which puts its yield at 4.47%. With one of the highest yields across major banks, USB stock is a top stock for investors looking for some solid returns. Analysts remain confident in the bank’s ability to keep its dividend rate up and its recent investments in its technological capabilities have been a boon for its valuation.
With its stock price in the $30s, USB is a great bargain dividend stock to buy in today’s volatile economy.
Last, but certainly not least, is AT&T, a stock with one of the highest dividend yields on the market. The company boasts an impressive yield of 7% and its dividend has seen a consecutive increase over the last 36 years. For the purpose of comparison, the S&P 500 average yield is just 1.8%.
However, AT&T was not immune to the effects of the Covid-19 pandemic. AT&T saw a rapid decline in its share price as the pandemic took its toll on the economy. However, it’s worth noting that while prices did fall, the company’s dividend continued to rise. This provided many investors with the opportunity to buy the stock at a low price.
Experts believe that despite a dim economic outlook, AT&T’s dividend incline is likely to continue. The company has made some bold moves this year such as the roll-out of its new 5G network, which will be a major catalyst for growth. Revenue numbers will see an upward trend as more consumers adopt this new technology. AT&T is also lowering its debt levels through the sale of assets. This will help the firm continue its dividend growth streak.
Although AT&T’s current share price is trending low at around $30, the company’s solid dividend yield and potential for growth make this dividend stock an attractive investment. There is a good chance that AT&T’s value will appreciate in the coming months as investments in its 5G network and streaming platforms pay off. If you are looking for a stable stock with safe returns, this is a good dividend stock to buy.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.