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

Unlock stock picks and a broker-level newsfeed that powers Wall Street.

Bret Kenwell

Mon, Sep 12, 2022, 6:10 PM 4 min read

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.

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

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

Verizon Communications (VZ)

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)

The energy sector 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 (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 will become a Dividend Aristocrat.

Investors in this name tend to be in it for the long term. However, there are periods of underperformance that may be noteworthy, as it opens 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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

The post 3 Dividend Stocks With Yields Over 5% to Buy Before September Ends appeared first on InvestorPlace.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice

More Info