3 Dividend Stocks With Yields Over 5% to Buy Before September Ends


  • When a bear market hits, some investors start looking for dividend stocks with yields over 5%.
  • Verizon Communications (VZ): A solid history of annual dividend increases makes the beaten-down telecom attractive.
  • Pioneer Natural Resources (PXD): As long as energy prices remain elevated, so will its dividend.
  • Realty Income (O): The company is on the cusp of becoming a Dividend Aristocrat.
Dividend stocks - 3 Dividend Stocks With Yields Over 5% to Buy Before September Ends

Source: Shutterstock

When a bear market hits, investors seek comfort in higher-quality companies and lower-volatility stocks. Oftentimes, this means dividend stocks, as these companies tend to have stronger cash flows. In times of trouble, cash flow is king. Yet, as interest rates rise, bond yields are becoming more competitive with dividends. Therefore, investors may want to focus on dividend stocks with yields over 5%.

While high-yield dividend stocks carry a certain amount of risk, they also offer opportunity. That’s particularly true when the company delivers consistent payouts, and especially true when they increase their payouts.

Here are three dividend stocks with yields over 5% that I like right now.

VZ Verizon Communications $42.76
PXD Pioneer Natural Resources $248.68
O Realty Income $67.60

Verizon Communications (VZ)

5G stocks, VZ stock
Source: Ken Wolter / Shutterstock.com

The major telecom stocks have been a mixed bag this year. T-Mobile (NASDAQ:TMUS) is up more than 25% year to date. AT&T (NYSE:T), while down for the year, has outperformed the market. Meanwhile, Verizon Communications (NYSE:VZ) has been the worst performer of the bunch.

Unfortunately, T-Mobile doesn’t pay a dividend, so we can’t include it on our list of dividend stocks with yields over 5%. AT&T does yield more than 5%, but we’re skipping over it due to the fact that the company cut its dividend by 45% earlier this year following its spinoff of WarnerMedia.

While VZ stock is down 19% in 2022, shares have a forward annual yield of 6.3%. Verizon has raised its payout for 17 straight years and has averaged 2.1% annual dividend growth for the past five years. The most recent increase came a few days ago when management raised its quarterly payout to $0.6525 a share. Finally, Verizon has a payout ratio of less than 50%, giving it a lot of cushion to meet its quarterly cash obligation.

Now, readers may point out that Verizon reported disappointing second-quarter earnings in late July. Management also lowered its earnings forecast for the full year, pointing to no growth in 2022. And analysts expect just 1% to 2% annual earnings growth through 2025.

Verizon is not a growth stock, though. It’s a cash-flow consistency story and an income play. While its growth doesn’t blow the roof off, its dividend certainly does.

Pioneer Natural Resources (PXD)

Pioneer Natural Resources Company (PXD) logo seen on a smartphone with a green and yellow background
Source: rafapress / Shutterstock

Energy has been the best-performing sector in the S&P 500 this year, as well as over the past 12 months. That’s what happens when crude oil and natural gas prices spike higher and a bear market hits equities. Energy stocks like Pioneer Natural Resources (NYSE:PXD) have come off the highs, which could present a great opportunity for investors in the market for dividend stocks with yields over 5%.

The independent oil and gas exploration company has been printing cash thanks to the sharp rise in energy prices. It generated free cash flow of $2.7 billion in the second quarter. What’s more, management returned more than 95% of that free cash flow to investors, proving their commitment to the company’s dividend.

In early August, Pioneer Natural Resources declared a quarterly dividend of $8.57 a share, and shares currently yield 8.5%. This payout may not be sustainable over the long term. Yet, shares should continue to throw off an attractive yield as oil prices remain elevated.

Best of all, the stock’s valuation isn’t egregious. While analysts expect 50%-plus revenue growth this year, they are anticipating a mild retreat in both earnings and revenue in 2023. PXD stock trades at just 7.5 times this year’s earnings estimates and 8.5 times 2023 estimates.

If energy prices collapse, so too will PXD. But for investors looking for dividend stocks with yields over 5% in the energy space, it’s the name to focus on.

Realty Income (O)

realty income logo highlighted by a magnifying glass on a web browser
Source: Shutterstock

Realty Income (NYSE:O) has become a bedrock holding in REIT and dividend investors’ portfolios. Simply put, Realty Income — which also calls itself “The Monthly Dividend Company” — is one of the most consistent dividend payers out there. According to the company, it has “declared 626 consecutive common stock monthly dividends, and increased dividends 116 times since our 1994 public listing.”

That’s 99 straight quarters of dividend growth, or one quarter shy of 25 years. One more quarter of growth and Realty Income will become a Dividend Aristocrat.

Investors in this name tend to be in it for the long term. However, there are occasional periods of underperformance that open the door for potential buying opportunities. In the past four weeks, shares are down 9% to around $67-$68. The $62-$63 area has been a strong support zone for the stock and may give dividend investors an attractive risk/reward buying opportunity. Plus, at that price point, the stock’s forward annual yield will be right around 5%.

On the date of publication, Bret Kenwell 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/dividend-stocks-with-yields-over-5-percent/.

©2024 InvestorPlace Media, LLC