Dividend stocks are slowly cycling back into investors’ portfolio strategy after a few long years of elevated interest rates. They push traders into fixed-income alternatives to high-yield value plays. But, like many investment considerations today, the dividend stock landscape is a bit different than in years past.
For example, growth stocks demand greater financial and fundamental figures than in the zero interest rate policy (ZIRP) era. Back then, any company promising massive future gains couldn’t get enough investor cash, no matter its underlying financial strength. But today, investors are weighing choices more carefully and avoiding speculative stocks to a greater degree.
The same holds for dividend stocks, but somewhat in reverse. Whereas investors want greater stability in growth picks, they’re looking for long-term expansion from their value picks. We can still snag some short-term Treasuries and generate a 5%+ yield. Income-producing stocks must pick up the slack and offer a higher yield or long-term capital gain opportunities or, even better, both.
Let’s delve into three must-buy dividend stocks investors won’t want to miss out on this month.
Realty Income (O)
Realty Income (NYSE:O) consistently ranks at the top of the list of must-buy dividend stocks.
Income and dividend investors absolutely love it, thanks to its Dividend Aristocrat status, monthly distributions, and attractive 5.75% yield. Despite a nearly 20% decline over the past year, Realty Income’s fundamental strength remains unchanged. It presents a prime buying opportunity for long-term investors seeking to compound wealth.
The company maintains a high occupancy rate of more than 98% across its properties, with 80% of its retail tenants operating in recession-resistant sectors. Realty Income’s triple-net lease model offloads all operational risks and costs, including those for property maintenance, onto the tenants. This strategy insulates the company from the cost pressures associated with rising material and labor costs. Also, the company benefits from long-term leases, averaging over 15 years. Further, its current active average lease period remains close to 10 years.
Also, Realty Income is exploring growth opportunities, specifically via a new European sale-leaseback agreement with French company Decathlon SE. The combination of growth potential, low relative per-share price, and dividend aristocracy makes Realty Income one of the best must-buy dividend stocks on the market today.
H&R Block (HRB)
We’re in the middle of tax season, and H&R Block (NYSE:HRB) stands out among must-buy dividend stocks. As a cyclical company, it builds year-round revenue streams.
In a strategic pivot to mitigate the tax sector’s seasonal fluctuations, HRB introduced a mobile banking service called Spruce. This venture proved to be a hit, and HRB’s most recent filing reports more than $456 million in net customer deposits and 316,000 total customer signups. And, HRB is happy to explore new tech angles to efficient tax filing. They are developing an AI-powered tax assistance product in partnership with Microsoft (NASDAQ:MSFT).
HRB’s must-buy dividend stock status is reinforced by its total yield, which sits at a whopping 11.61%. This remarkable yield is supported by a modest 34% payout ratio, suggesting that HRB retains a significant portion of its earnings for growth initiatives while still generously rewarding its shareholders.
Like Realty Income, AT&T (NYSE:T) is a long-standing must-buy dividend stock, despite its 2022 fall from Dividend Aristocrat status. And, AT&T sets itself apart with a forward-looking, innovative perspective even as it extends its market maturity.
The company is a key investor in AST SpaceMobile’s (NASDAQ:ASTS) ambitious project to provide satellite-based cellular service. They aim for a 2024 commercial debut. While it may not be an overnight game-changer for AT&T, the investment and support indicate AT&T’s willingness to test new expansion avenues in a bid to remain competitive in a saturated market.
In a late-January earnings release, AT&T’s results missed some earnings targets but showcased robust growth sectors. A notable highlight is the nearly 4% year over year (YOY) growth in wireless service revenue. This point demonstrates the company’s effective navigation through economic challenges to retain and grow its subscriber base through strategic pricing. This is underscored by AT&T’s impressive addition of 526,000 postpaid phone subscriptions. The latte exceeds the anticipated 487,500, defying the odds in a highly competitive market.
Despite some skeptics labeling it a yield trap, AT&T maintains a dividend yield of 6.56% with a sustainable payout ratio of 56%. Therefore, it continues to be an attractive stock for dividend-focused investors.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.