3 Stocks That Pay You to Own Them: Spring 2024 Edition


  • Stocks are the best assets for generating income, especially those that offer dividend yields.
  • AT&T (T): Has a high dividend yield and a low beta making it ideal for capture-the-dividend trading.
  • Dow (DOW): Has strong institutional ownership so writing options can be profitable.
  • United Parcel Service (UPS): Has a dividend yield of 4.5%, more than twice the average of the S&P 500.
dividend stocks to buy - 3 Stocks That Pay You to Own Them: Spring 2024 Edition

Source: Shutterstock

One-third of your wealth should be in securities, one-third should be in real estate, and one-third should be in jewelry and art. So went an investment maxim of the Rothschild family, “arguably the most successful (in a financial sense) in history.”

Securities, especially stocks, are the best, both from the buy side and the sell side. Buying securities online in my Bank of America account would be commission-free. I just listed my house for sale at a 5% commission. For commercial real estate, it can be 10%. Art commissions are in the double digits. A friend owns a small art gallery in Charleston and her commission is 40%, as many collectibles are very thinly traded, resulting in a much higher commission. 

As for carrying costs, insurance for real estate, jewelry and art can be very expensive. There are no such costs for a stock. And stocks are far superior to real estate or collectibles in generating income! 

Even better, if the stocks are in a retirement account, which cannot hold art or other collectibles, the income produced is tax-free! These three dividend stocks to buy will pay you to own them, whether you want to follow the Rothschild maxim or not.

AT&T (T)

A photo of an AT&T office building.
Source: Roman Tiraspolsky / Shutterstock.com

If there was a dating app for stocks ideal for generating income, everyone would be swiping right on AT&T (NYSE:T). No need for a good personality when there is a 6.6% dividend yield! 

The company is also a Dividend Aristocrat, meaning it has increased its dividend annually for more than 25 years. AT&T also has a high level of institutional ownership, which means there is a demand for the options. Hedge funds, pension groups and other institutional investors use options to protect their stock holdings against swings in the market. 

This high level of institutional ownership is why the beta for AT&T is so low at 0.55x. This facilitates capture-the-dividend trading, where the stock is bought and sold just for the dividend, as there are limited concerns about wild price swings making this unprofitable if the share price heads south.

Daily volume is over 38 million shares so there is plenty of liquidity to buy and sell into without moving the price or distorting the market.

Dow (DOW)

DOW Chemical sign outside of a corporate building
Source: JHVEPhoto / Shutterstock.com

Dow (NYSE:DOW) is another company with solid institutional ownership. The dividend yield is nearly 5%, which appeals to both individuals and institutions! The higher the dividend yield, the more profit potential for capture-the-dividend trades, too. What makes writing options even more appealing is that the dividend income and the option premium go to the investor as they are listed as the shareholder of record. This is all tax-free if in a retirement account! 

Dow does have a high dividend payout ratio. This is actually a good sign for income investors as it shows the commitment of the company to maintaining the dividend.

Earnings have increased more than 30% this year, with a more-than-40% increase projected over the next five years. The payout ratio is expected to decline significantly as earnings rise, which is a good thing! 

United Parcel Service (UPS)

Close up of UPS logo printed on a delivery truck; partial view of the driver sitting at the wheel, waiting at a red traffic light in south San Francisco bay
Source: Sundry Photography / Shutterstock.com

There is more than enough bearish sentiment, by contrast, for United Parcel Service (NYSE:UPS). UPS stock is down for the last quarter, year and year-to-date. That adds to its appeal for generating income as the dividend yield is higher when the price is lower.

More to the point, legendary investor Warren Buffett looks for a return on equity of at least 14%. For UPS, it is over 32%. At 4.5%, the dividend yield should please all income investors! Coupled with the high dividend, earnings per share are expected to increase by about 18% next year and over 10% the next five years which will reward shareholders. UPS is trading near a 52-week low, and you have to love the economic moat of a cargo carrier. 

Aerospace consultant Dr. Mike Heil, who headed the Ohio Aerospace Institute told InvestorPlace that “there are significant, but not insurmountable, challenges to starting an air cargo delivery company. This is a mature market with well-established competitors and the capital requirements are large.” 

In terms of the competition for market share by revenue, UPS is No. 1 at 37%. It controls 70% of the market with FedEx (NYSE:FDX). Amazon Air, a cargo airline from Amazon (NASDAQ:AMZN) is at 12%, with the U.S. Postal Service at 17%. Even more bullish news for Big Brown is that UPS is taking the USPS business away from FedEx!

On the date of publication, Jonathan Yates did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/3-stocks-that-pay-you-to-own-them-spring-2024-edition/.

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