With sell-offs hitting the market in recent months, many top income-generating stocks have seen their prices slashed and their yields elevated. In this roundtable article, we've put together a panel of three Motley Fool contributors and asked each member to spotlight a dividend stock that's worth buying today and owning for the long haul -- even with the recent uptick in uncertainty. Read on to see why they identified Altria Group (NYSE:MO), The Children's Place (NASDAQ:PLCE), and Apple (NASDAQ:AAPL) as stocks for income-focused investors to load up on. 

Stacks of coins.

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A high-yield cannabis stock

George Budwell (Altria Group): American tobacco titan Altria Group has had a rough 2018. Thanks to the Food and Drug Administration's (FDA) multipronged initiative to lower tobacco use in the U.S., the company's shares have lost nearly a quarter of their value this year.

On the bright side, Altria's sharp downturn this year has caused its dividend yield to hit a remarkable 6.1% at current levels. That's an unusually high yield for a company with a $100 billion market cap and an outstanding balance sheet. 

Altria's stock, though, may not come across as a particularly strong buy to most investors due to the FDA's push to basically eradicate smoking in the U.S. -- despite the company's staggeringly high yield. But recent developments have radically altered Altria's underlying investing thesis.  

The big-ticket item is Altria's recent $1.8 billion equity investment in Cronos Group (NASDAQ:CRON). Cronos is a Canadian cannabis company that sports a premium brand known as Cove, as well as two mainstream brands called Original BC and Spinach, respectively. The company also has an ongoing partnership with Ginkgo Bioworks to manufacture rare cannabinoids that could lead to the development of several derivative products in the years ahead.

That being said, the real value behind this hefty equity investment in Cronos is the sheer size of the North American cannabis market. Industry insiders, for example, expect the legal weed market in the U.S. to grow to more than $100 billion in annual sales over the next decade. If this line holds, Altria should have little trouble offsetting the forthcoming declines in its combustible cigarette franchise.

Now, the company will need some luck on the regulatory front to realize the full potential of its investment in Cronos. But Altria's aggressive move into the fledgling cannabis space should eventually pay off in a big way for shareholders. 

An under-the-radar retail stock

Jeremy Bowman (Children's Place): At a dividend yield of 2.2%, Children's Place may not win any awards for the highest yield, but this widely ignored dividend stock has a lot going for it.

After first introducing a dividend payout in 2014 at $0.1325 a quarter, the company has quickly ramped it up to $0.50 a quarter in 2018, and it's likely to hike its dividend in early 2019 when it declares its next payout in March. If that hike is in line with the last one, which was from $0.40 to $0.50, shareholders will be getting a dividend of $0.60 a share, or effectively a 2.6% yield at today's price.

There are other good reasons to consider picking up Children's Place shares. The stock has tumbled sharply in recent weeks on broader retail woes and then fell 13% when its earnings report came out last week. Children's Place posted comparable sales growth of 9.5% and digital sales growth of 38%, which made up 29% of revenue. However, the market didn't like that Children's Place cut its full-year earnings guidance, but it did so because it is pursuing market share gains aggressively as rivals like Gymboree and Sears falter. In other words, the company is making a short-term sacrifice for long-term gains, and Wall Street is making a mistake by not seeing it that way.

The sell-off, which has wiped out more than a third of the stock's value since the beginning of November, presents dividend investors with an opportunity to get a best-in-class retailer at a P/E of just 12, based on this year's expected earnings, and a fast-growing dividend payout that should soon yield 2.6%. 

Dividend growth at a discount

Keith Noonan (Apple): Indications that demand for the latest iPhones is weaker than initially anticipated and sell-offs for the broader tech sector have dinged Apple stock, and shares have been trading down nearly 30% from the highs that they hit earlier this year. However, the stock now trades at just 12.5 times this year's expected earnings and comes with a dividend yield of roughly 1.8%. That yield might not look like a lot right now, but the company's last payout increase came in at nearly 16%, and Apple's recent dividend history and strong financial position suggest that shareholders can look forward to substantial payout growth.

Apple resumed paying a dividend in 2012 and has raised its payout in each subsequent year, boosting it roughly 93% over the stretch. Even after that rapid dividend growth, the cost of covering the company's forward distribution comes in at roughly 23% of trailing free cash flow and roughly 25% of trailing earnings. Those low payout ratios suggest that the company should be able to continue delivering big payout increases while still reinvesting to develop new growth engines for its business. 

Investors should certainly weigh the risk posed by a potential slowdown for the iPhone business, but Apple still has incredible brand strength in the consumer electronics space, and it's got promising growth catalysts in varying stages of development. The company's services segment, which consists of business generated from its own subscription services and a cut of third-party business conducted through its app store, is on a tear and looks primed for more strong growth. Meanwhile, wearables, connected cars, and other Internet of Things devices are at even earlier stages relative to their long-term potential and could turn into bigger growth drivers for the company.


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.