While stocks beat out every other asset class in generating wealth, dividend stocks are the premier investment strategy. Over the four decades between 1972 and 2012, companies that initiated and raised their dividends outperformed all other stocks that didn’t pay dividends. Income-generating stocks returned 9.5% annually over the study period, compared to the meager 1.6% returns of non-payers.
Those results were backed up by the asset managers at Hartford Funds. They found dividend stocks on the S&P 500 never had a losing decade going as far back as the 1930s, even through the Great Depression.
There is a reason for this outperformance. Companies that pay dividends tend to be profitable and successful over many years. Having been tested in the crucible of numerous business cycles, they know how to maneuver through turbulent times.
Investors preferably want the highest yield possible from their dividend stocks but with the lowest risk. Striking a balance between the two can be tricky. Simply chasing yield can be risky because a high yield can often be an indication that a company is in trouble. But not always. Careful due diligence can lead you to excellent income stocks that can generate enormous returns.
What follows are three safe but sure ultra-high-yield stocks you should scoop up in November that feature average yields of 7%!
Telecom giant Verizon (NYSE:VZ) is the first surefire high-yield dividend stock investors should consider. It’s 7.3% yield is among the highest levels in over a decade due to a stock that began cratering in late 2020.
Shares only bottomed out this past October with the stock rebounding 20% over the past few weeks. While inflation and high interest rates played a role in the stock’s decline, Verizon’s business was also weak.
The telecom experienced difficulty in attracting customers to its wireless plans. Only in the third quarter did it really impress with 100,000 new additions to its service. Better has been its business wireless division, which added 400,000 subscribers over the past 12 months.
Also, Verizon is under pressure from liability concerns after The Wall Street Journal reported on old, buried lead-lined cables potentially leaching into surrounding ground and waterways. The report sank AT&T (NYSE:T) too.
Verizon is looking to the ongoing national rollout of 5G networks. It’s the most important upgrade to the telecom grid in over a decade. Because Verizon generates most of its profits from data usage, look to blazing fast download speeds to encourage greater online time.
The stock is super cheap today. It trades at just 7 times earnings and 9x the FCF it produces. That’s bargain-basement territory for a company like Verizon, which produced over $13 billion in FCF in the past year.
Leggett & Platt (LEG)
Innerspring coil manufacturer Leggett & Platt (NYSE:LEG) is next up on the list of high-yielding dividend stocks to buy. Sure, you just finished yawning after reading it makes bed springs.
But Leggett & Platt is the industry leader with a better than 23% share of the market based on revenue. Bedding accounts for 46% of its revenue. Also, the spring maker makes critical components for the automotive industry, and flooring is another essential component of its operations. Together, the three segments account for 81% of total revenue.
Companies in sleepy industries that fly under the radar are just the sort of investments Peter Lynch looked for when he steered Fidelity Magellan to decade-long record returns. It was even better if the companies were in distasteful industries. Leggett & Platt’s business is much more benign, but its stock is just as attractive to investors.
Shares go for 15 times earnings, a fraction of its sales, and less than 7x FCF. The dividend is yielding 7.6%, making it one of the highest-yielding Dividend Aristocrats. The stock is down 27% in 2023 on concerns about housing and the auto industry.
Interestingly, mattresses tend to go hand-in-hand with new home sales. While high interest rates make getting a mortgage more expensive, the Census Bureau reports new single-family home sales were up 34% year over year in September and 12% higher than August. People expect doom and gloom, but it’s not materializing. That creates an unique opportunity for enterprising investors.
For under-the-radar high-yield stocks, then Universal (NYSE:UVV) is a good pick dividend stock. Because Altria (NYSE:MO), British American Tobacco (NYSE:BTI), and Philip Morris International (NYSE:PM) grab all the headlines for cigarettes, few realize just how much of a dominating force Universal is in the global tobacco market.
Universal is the world’s largest importer and exporter of leaf tobacco. Its largest customers include the three cigarette giants above, as well as China Tobacco International, itself the world’s largest cigarette company. It has a virtual monopoly on cigarettes in China with a 96% share of the market. It sells more cigarettes in a year than the entire output of Philip Morris, British American, and the next 11 largest tobacco companies combined.
Those customers account for 60% of Universal’s revenue. And despite a secular decline in smoking in the U.S., cigarettes continue to have a strong presence in many other countries. Also, pricing remains robust for tobacco leaf with Q2 prices for green leaf higher than they were last year.
Universal’s dividend yields 6.1% annually. It has increased the payout every year for over 50 years making it a Dividend King. In 2018 the tobacco trader raised its dividend 36% and continues lifting it today. The payout is currently $3.20 per share.
In fact, the stock just rocketed 20% higher on third quarter results, but it still trades at 10 times earnings, a fraction of its sales and book value, and an absurd 4x FCF. Universal is a smoking hot high-yield dividend stock to buy hand over fist this month.
On the date of publication, Rich Duprey held a LONG position in in LEG, T, and MO stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.