The past few years haven't been kind to ExxonMobil Corporation (NYSE:XOM) investors. At last check, its share price was down almost 30% from the all-time high reached back in 2014. Over the same period, the S&P 500 has gained 32%. 2018 hasn't been any kinder to ExxonMobil investors, with its share price down 18% since February. If there's any "good" news to be found here, it's that the drop in ExxonMobil's stock price has pushed its dividend yield to 4.2% at recent prices, making it more attractive to dividend hunters with money to spend.
But before you buy ExxonMobil just to capture that yield, it's worth considering other stocks with even higher payouts first, including telecom giant Verizon Communications Inc. (NYSE:VZ), left-for-dead (but maybe stronger than you think) retailer GameStop Corp. (NYSE:GME), and high-growth, high-yield renewable energy company Pattern Energy Group Inc (NASDAQ:PEGI).
Keep reading below to learn why three different Foolish contributors favor these stocks over ExxonMobil.
Say hello to 5G
Daniel Miller (Verizon Communications): If you're looking for dividend stocks with a higher yield than ExxonMobil, Verizon Communications is an intriguing option. The company spent the majority of 2017 trying to regain lost customers as competitors AT&T and T-Mobile cranked their marketing efforts. Verizon has made some progress and topped estimates during the fourth quarter of 2017, and at a price-to-earnings ratio of 6.6 and a dividend yield of 4.8%, investors can scoop up shares on the cheap.
Verizon is still the largest U.S. carrier, and it ended 2017 with 116.3 million retail wireless connections. The wireless carrier even recorded a net increase of 1.2 million retail postpaid connections during the fourth quarter, including net phone additions of 431,000. And while Verizon protects its core business with those new customers, management is also looking toward the future.
That future is 5G, Verizon is a leader in deploying 5G networks (along with AT&T), and it will launch service in a handful of cities throughout 2018. Samsung's test at Mobile World Congress achieved speeds up to 4 gigabits-per-second (Gbps), which is insanely fast compared to the average U.S. internet connection of 18.75 Mbps.
Here's where 5G gets interesting, at least for Verizon investors: Currently, you can get a 500 Mbps plan from Verizon Fios that costs roughly $275 per month. And while we don't know what the ultimate 5G internet will cost -- or what the margin will be -- it's intriguing because providing wireless 5G internet doesn't require costly infrastructure, which should help margin. 5G networks could open the door for Verizon to expand its business beyond its core smartphone market; imagine if Verizon could package smartphone services with connected cars, smart TVs, or a list of other possibilities.
Verizon already dishes out a higher dividend yield than ExxonMobil, and if management capitalizes on 5G, it could greatly reward shareholders in the long term.
Big dividends? Game on
Keith Noonan (GameStop): GameStop's business isn't as sturdy as Exxon's, but its dividend is much larger, and the stock could warrant attention from risk-tolerant investors. Shares yield roughly 10% at current prices and trade at less than five times this year's expected earnings and one-fifth of expected sales.
GameStop has been pummeled over the last three years as the rise of digital-distribution for video games has eaten into its most important sales streams and cast a dark cloud over the company's outlook. Things took another undesirable turn over the recent holiday sales period as the growth story for the company's tech-brands segment seemingly came off the rails. These aren't small problems, and GameStop's stock is cheap for a reason, but the widely touted doom scenarios also minimize some positive developments at the company.
Same-store sales at the company's retail video game outlets and its ThinkGeek pop-culture merchandise chains, actually climbed 11.8% year over year in the holiday period, and this might not be a one-off show of strength. The company is poised to benefit from the ongoing success of Nintendo's Switch console, which is on track to become one of the best-selling game systems ever and doesn't encourage full-game downloads because of its scant storage space. The collectibles segment should also be able to pick up slack if the gaming business falters, with the unit on track to reach $1 billion in sales in 2019 and recording sales margin that routinely comes in higher than the company's new-software segment.
Returning to the income side of things, the cost of distributing GameStop's current dividend comes in at just 58% of trailing cash flow, suggesting that the company is in good position to maintain its payout even if the business hits a rough patch. The stock is not a low-risk investment, but it could be worth pursuing for value-focused investors seeking big yield.
The future of energy
Jason Hall (Pattern Energy): If you're looking for a better yield from an oil stock than you'd get from ExxonMobil, lots of companies in the oil patch offer a bigger payout. But if you're looking for an investment that also has potentially better long-term prospects, then I think Pattern Energy deserves a closer look.
Pattern Energy is an independent renewable energy producer. The company's legacy is building and operating wind farms, but it is also starting to invest in solar, energy storage, and transmission systems. And with technological gains steadily driving down costs and driving up capabilities, renewables are on track to take more and more market share from fossil fuels for decades to come. This is as much because of cost as it is being cleaner. Since its 2013 IPO, Pattern has nearly tripled its power capacity.
There are concerns worth noting. Rising interest rates will make capital allocation more challenging, since Pattern -- like most utilities -- utilizes substantial debt to fund projects. Furthermore, concerns over renewable tax credits and tariffs have investors concerned. These two things have played a big role in Pattern's stock price falling 31% from the 2017 peak. This big drop has pushed the dividend yield above 9%.
But looking at the bigger, long-term picture, I like Pattern Energy's prospects. It has an experienced and successful CEO in Michael Garland making the capital allocation decisions. Garland is also the CEO of Pattern's privately held affiliate Pattern Development, which has nearly a decade of success in developing renewable projects and gives Pattern Energy access to a strong pipeline of projects to invest in.
There is risk, as discussed above. But with that risk is a substantial dividend and prospects for decades of future growth.