Buying and holding dividend stocks is the best way to predictably generate long-term wealth. But not all dividend stocks are created equal.
To that end, we asked three top Motley Fool writers to each pick a high-yield dividend stock that they believe investors would be wise to consider buying today. Read on to learn why they like Tanger Factory Outlet Centers (SKT 0.78%), Orange (ORAN +0.15%), and Pfizer (PFE 1.87%).
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Shopping for the highest dividends
Steve Symington (Tanger Factory Outlet Centers): Retail stocks might seem like a scary place to put your money to work nowadays, especially when the underlying business relies on physical locations to fill its coffers. But as a public mall real estate investment trust (REIT) focusing on upscale outlet centers, Tanger Factory Outlet Centers has found a more difficult-to-disrupt niche to that end.
To be sure, the company renewed 84% of its consolidated portfolio space that was scheduled to expire in 2017. And it ended the year with an enviable portfolio occupancy rate of 97.3%, marking its 37th straight year at above 95% for the metric -- an achievement CEO Steven Tanger touted as proof of the resiliency of the outlet center model.
"Tanger continues to have the lowest cost of occupancy among all public mall REITs," Steven Tanger stated last quarter, "and many of the company's tenants report that outlet stores remain one of their most profitable and important retail distribution channels."
All the while, Tanger steadily implements remerchandising projects at select centers to enhance its tenant mix and, in turn, increase shopper traffic, drive demand from additional tenants, and boost overall portfolio productivity.
And of course, REITs are required to pay 90% of their income to shareholders in the form of dividends, which means Tanger Factory Outlet Centers offers a juicy 6.4% annual yield as of this writing.
4.2% yields and international growth -- what more do you want?
Anders Bylund (Orange): Many American investors are unfamiliar with Orange. Formerly known as France Telecom, it is the largest provider of landline and mobile phone services in France, with a large and growing presence in developing markets around the world. All told, the company serves 273 million customers.
Orange's stock comes with a generous 4.35% yield at today's share prices. The dividend policy is very European in nature, as Orange adjusts the quarterly payments up and down as circumstances allow, not worrying about boosting the payouts without fail every year. The resulting dividend chart may feel a bit unusual:
ORAN Dividend data by YCharts
More to the point, Orange is working through an ambitious cost-savings program while expanding its presence in the promising telecom markets of Eastern Europe. Those attractive dividends are backed by free cash flows, which covered all of Orange's payouts last year with some room to spare.
I'm a big fan of telecoms chasing growth in underdeveloped markets, and Orange is doing exactly that while producing stellar dividends and rock-solid cash flows. In fact, I like this company so much that I own the stock myself.
Pick up this big pharma for its big yield
Todd Campbell (Pfizer): Investors have been waiting for Pfizer's new drugs to finally offset declining demand for Lipitor, and this could be the year in which their patience is rewarded.
Pfizer finished 2017 with solid momentum that includes a return to organic growth and full-year EPS of $2.65, up 11% from 2016. The company's forecast for 2018 is for revenue growth of 4% and EPS growth that matches last year's 11% improvement. If it can hit those targets, it will be the first year of non-organic revenue growth at the company since Lipitor lost patent protection in 2011.
Driving the company's improving outlook is a slate of important drugs, including the breast cancer drug Ibrance, the autoimmune-disease drug Xeljanz, the prostate cancer drug Xtandi, and the anticoagulant, Eliquis. In 2017, increasing demand for those drugs resulted in an 8% increase in sales at Pfizer's innovative-health segment.
A return to growth would be great news for income investors because Pfizer already yields a market-beating 3.8%. If its sales growth accelerates, then operating leverage will give it additional wiggle room to boost its dividend payout.
The bottom line
We can't absolutely guarantee that these three dividend stocks will beat the market. But between Tanger Factory Outlet Centers' enviable retail industry position, Orange's growth and cost-savings initiatives, and Pfizer's impressive drug pipeline -- as well as attractive dividend yields from all three companies -- we think there's a good chance they'll do just that.
