3 High-Yield Dividend Stocks to Buy Hand Over Fist in May
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Investors have enjoyed higher Treasury yields, serving up passive income over the past couple of years. However, there's still an abundance of quality dividend stocks that offer potential price appreciation and stellar dividend income.
High dividend yields can be a red flag sometimes, but there are exceptions. Here are three of them: Altria (NYSE: MO), AT&T (NYSE: T), and Enbridge (NYSE: ENB).
I'll detail what makes them stand out as high-yield dividend stocks you can buy this month and hold for those juicy dividends. You might even score some solid capital gains, too.
1. This stock packs a smoking-hot 8.8% yield
Tobacco giant Altria is the perennial "dying company" that seemingly won't die. While it's true that smoking rates in America have collapsed over the span of decades, people underestimate how much price increases and population growth can support Altria's core Marlboro business. That's why Altria remains a Dividend King to this day, and frankly, the dividend faces little stress thanks to a manageable 75% dividend payout ratio.
The company's presumed demise has shares trading at a modest valuation of less than 9 times earnings. Management felt that was a good enough value to begin selling off a piece of its multibillion-dollar stake in Anheuser-Busch to do an accelerated share repurchase program. That's called putting your money where your mouth is!
Earnings are growing at a low-single-digit rate, so this isn't a story of quick riches. Still, you only need low-single-digit growth to hit double-digit returns when your stock yields almost 9%. Enjoy this rock-solid dividend stock, which could produce sneakily good total returns if shares become popular on Wall Street again.
2. A telecom bargain yielding 6.5%
U.S. telecom giant AT&T is another supposed yield trap with the goods to keep cashing those fat dividend checks. The company's core business is doing great; AT&T picked up a healthy 1.6 million new subscribers in Q1, and the business is poised to generate between $17 billion and $18 billion in free cash flow this year. The dividend costs AT&T just over $2 billion per quarter, so that's a meager payout ratio that funds the dividend and leaves enough money to continue paying down debt.
It took a dividend cut a couple of years ago to put the company in this position. So, while investors may be traumatized by the prior cut, it shouldn't be something to lose sleep over moving forward -- meanwhile, shares trade at a price-to-earnings ratio of just under 8 today.