“Would you kindly do a piece on high dividend stocks,” a reader asked recently.
Happy to oblige. My favorite high-divided stock at the moment is Pfizer Inc. (PFE). In my view, Pfizer saved the U.S. from the Covid-19 pandemic by developing both a vaccine and a treatment for the disease.
That monumental achievement has paradoxically put a curse on Pfizer’s stock. From a high of about $159 in mid-2022, Pfizer shares have fallen to about $76 as the high tide of Covid-19 revenue has ebbed.
At this price, the dividend yield is 6%, which I regard as extremely attractive. It’s possible the dividend may need to be trimmed, since right now Pfizer is paying more in dividends than it’s earning in profits. Even if there is a cut, I expect the yield to remain substantial.
Pfizer isn’t a one-trick pony. It manufactures more than 350 drugs, of which more than 300 are approved in the United States. It also has more than 100 drugs in various stages of clinical trials.
Here are five other stocks with high dividend yields that I think deserve serious consideration.
Arch Resources
Arch Resources Inc. (ARCH) is the second largest U.S. coal producer by tons of coal mined, behind Peabody Energy Corp. (BTU). Headquartered in St. Louis, Missouri, Arch operates mines in seven states.
While its rival, Peabody, offers a 1.4% dividend yield, Arch stock yields 5.2%. It pays out about half its profits in dividends, and has a strong balance sheet with debt less than 11% of stockholders’ equity. It has more than twice as much cash as debt.
Wesbanco
Risky but interesting is Wesbanco Inc. (WSBC), a banking company based in Wheeling, West Virginia. It describes its service territory as the “Rust Belt region of the United States. It has branches in its home state plus Indiana, Kentucky, Maryland, Ohio and Pennsylvania.
Many of its loans are to commercial real estate, which is a troubled industry. Thus, there’s a risk that many of the loans could go bad, and the company could be on the ropes.
So far, however, it’s hanging in nicely. It has shown a profit in each of the past 30 years (perhaps more – I only have access to 30 years of history). I like to see banks earn a 1% return on assets or better. Wesbanco has done that in six of the past ten years. Its dividend yield is 5.4%.
Ethan Allen
With food and gasoline prices up, consumers have been cutting back on furniture purchases lately. Thus, Ethan Allen Interiors Inc. (ETD) has had a bad year, Revenue has dropped about 20% in the past four quarters. The stock is down 14% this year despite a rising stock market.
But current holders’ misfortune might be new buyers’ good luck. The stock now sells for less than 10 times earnings, compared to a ten-year average multiple of 17. The dividend yield is 5.4%; it’s usually about 3%.
Marine Products
Sporting a 5.6% dividend yield is Marine Products Inc. (MPX) of Atlanta, a maker of fiberglass sporting and fishing boats.
The boat industry has had a rough time in the past five years. The number of registered boats has been in a declining trend, except for 2021 when they got a temporary boost from Covid-19. Boats, after all, offer outdoor recreation in relative solitude, all good during a pandemic.
Marine Products was doing a pretty good job of bucking the downtrend until the past year, when its sales dropped more than 21% and earnings fell 27%.
Nonetheless, the company is still very profitable, with a 23% return on equity. And the stock is now cheap, selling for about 10 times earnings, in contrast to its usual multiple over the past decade, which was over 21.
Conagra Brands
Severely depressed is Conagra Brands Inc. (CAG), a packaged foods company whose brands include Banquet, Bird’s Eye, Chef Boyardee, Duncan Hines, Healthy Choice, Hunt’s, Marie Callender’s, Orville Redenbacher, Reddi-wip, Vlasic and Wish Bone.
The stock has barely advanced in the past five years, and is below its level of three years ago. The company has beaten analysts’ earnings estimates in four of the past five quarters, and analysts are beginning to warm up to the stock. It garners ten “buy” ratings out of 14 opinions.
Conagra’s dividend yield is 4.8%
Disclosure: I own Pfizer personally and for almost all of my clients. I own Arch Resources and Ethan Allen Interiors for one client who emphasizes dividends. Figures and ratios are as of June 21, 2024.
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