Any season is the right season to invest in high-yield dividend stocks. However, which stocks are the best to pick can change. With fall now here, several dividend stocks look especially attractive.
I'd put AT&T (T 1.19%), Enterprise Products Partners L.P. (EPD +0.92%), and International Business Machines (IBM 2.55%) at the top of the list. Here's why these three stocks are great choices for income investors seeking to add to their portfolios this fall.
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AT&T
AT&T's dividend yield of more than 5% should catch the eye of any income investor. So should the fact that the telecommunications giant has raised its dividend for 33 consecutive years. Is there anything not to like about this high-yield dividend stock? Yes, but I don't think it's enough to scare away investors.
A growing debt could make some think twice before buying AT&T stock. As of the end of June, the company's long-term debt totaled $132.8 billion. The debt will get even bigger with its pending acquisition of Time Warner. However, AT&T has a strong cash flow that should allow it to service the debt and keep dividends flowing. The company also is reportedly contemplating selling off its Latin American pay TV business, a move that could generate over $8 billion to reduce the debt somewhat.
AT&T's acquisitions, including DirecTV, Time Warner, and additional wireless spectrum licenses, position the company well for growth over the long run, in my view. To effectively compete in the changing telecommunications landscape requires integration of technology and content. AT&T has the technology. With Time Warner, it will get a huge library of TV shows and movies. This all adds up to more cash flow to fund those dividends that investors love.
Enterprise Products Partners
Enterprise Products Partners claims an even tastier dividend than AT&T, although as a limited partnership, it's technically a distribution rather than a dividend. The midstream energy company's yield currently stands at 6.45%. And its distribution has grown for 52 quarters in a row and annually for 20 consecutive years.
You might wonder how Enterprise has been able to increase its distribution during a time when the oil and gas industry has suffered due to low prices. The answer is that the company makes most of its money from fees from customers who use its pipelines, processing facilities, and ships. Those fees are largely insulated from fluctuating prices of oil and gas.
The best news for investors is that Enterprise Products Partners should be able to grow earnings over the next few years, which means higher distributions. Enterprise appears poised to grow distributions by 5% annually, along the lines of its historical track record.
IBM
There are three key reasons to like IBM stock. Its dividend yield of nearly 4.2% is definitely one of them. Not only does the big technology company have a high yield, but IBM has also increased its dividend for the last 22 consecutive years.
The second reason to like IBM stock is its valuation. Shares currently trade at only 10.5 times expected earnings. That's a low level for IBM historically.
Before we get to the third reason to like IBM, it's appropriate to mention what is probably the biggest knock against the stock: IBM's revenue has fallen for 21 quarters in a row. However, I think the final reason to like IBM stock is that the company should return to growth. IBM is a leader in several of the most talked about technologies around, including artificial intelligence, blockchain, cloud computing, and data analytics. In addition, the company is launching a new mainframe system that should boost sales. Even if it takes a while to return to solid, sustainable growth, IBM's dividend should be safe -- making this a great high-yield stock to buy this fall.
