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3 High-Yield Dividend Stocks That Are All About Giving

By Sean Williams - Nov 28, 2019 at 7:51AM

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These income stocks do right by their shareholders.

The holidays are great for the food, friends, and family. But the true gift that keeps on giving is a top-shelf dividend stock.

Historically, dividend stocks have a knack for running circles around their non-dividend-paying peers. That's not really a big surprise considering that dividend stocks are often profitable and have time-tested business models. This makes them sort of a beacon for income-seeking investors.

Furthermore, income stocks provide payouts that can help calm the nerves of skittish investors by hedging against inevitable stock market corrections.

And, best of all, a recurring dividend can be reinvested back into more shares of stock via a dividend reinvestment plan. Drips are a commonly used strategy by money managers to compound the wealth of their clients.

If you're truly in the season of giving, and receiving, consider these three high-yield dividend stocks as companies you should own.

A man in a suit placing crisp one hundred dollar bills into two outstretched hands.

Image source: Getty Images.

AT&T

I've often said that boring is beautiful when it comes to investing, and no company fits that ethos more than AT&T ( T 0.93% ). This is a company that's the equivalent of a plodder. It grows at a relatively slow pace, and it's been mostly left in the dust by high-growth tech stocks in recent years. But if you're all about the safety of income and slow but steady share price appreciation potential, then it pretty much doesn't get better than AT&T, which has increased its payout for 35 consecutive years.

The beauty of AT&T's business model is its wireless division. Since this wireless segment is fueled by subscriptions, there's little worry about excessive churn when the economy hiccups. It's also worth noting that a smartphone is practically viewed as a necessary good these days, which bodes well for AT&T's wireless prospects.

What else bodes well for wireless is the ongoing upgrade to 5G networks. AT&T has rolled out its 5G network to more cities in the very early going than its peers, putting it on track to see a significant spike in data usage in the years to come. This is the first major infrastructure upgrade in almost a decade, and with data being a significant margin driver for AT&T's wireless segment, we should see ongoing margin improvement.

Other factors, such as the addition of Time Warner and its core assets (TNT, TBS, and CNN), along with the push for streaming, should continue to drive strong, yet predictable, operating cash flow. AT&T's 5.4% yield is about as rock-solid as they come.

A small pyramid of cigarettes lying atop a bed of dried tobacco.

Image source: Getty Images.

Philip Morris International

There may not be an industry that's less popular at the moment than tobacco, but that hasn't made the companies within the industry any less profitable. This is why high-yield income seekers should really considering owning Philip Morris International ( PM 0.17% ).

What makes this 5.7%-yielding stock so incredible is its geographic diversity. Philip Morris operates in more than 180 countries worldwide, and the United States isn't one of them. That's a good thing considering that smoking rates for adults in the U.S. have plunged to an all-time low. Even with the company encountering tougher regulatory environments in a number of developed markets, such as Australia, it has a bounty of emerging markets, like India and China, where burgeoning middle classes are stepping up to buy tobacco products.

Philip Morris International has also been listening to the concerns of consumers and has worked to develop safer alternatives to consume nicotine. The IQOS heated tobacco system is just getting off the ground on a worldwide basis, but nevertheless saw heated tobacco unit shipment volume rise nearly 85% in the third quarter. IQOS has also increased its heated tobacco market share to 5.1% in IQOS markets, excluding the United States. 

Tobacco isn't the sexy investment it once was, but Philip Morris still possesses plenty of pricing power and has quite a bit of innovation on its side.

A large crude refinery with its lights on at sunset.

Image source: Getty Images.

ExxonMobil

High-yield income seekers can also count on integrated oil and gas giant ExxonMobil ( XOM 1.16% ) to continue its giving ways. Currently boasting a 5% yield, ExxonMobil has bucked weakness in oil and gas prices and increased its dividend for an impressive 37 consecutive years.

What makes ExxonMobil so special is the company's business setup. Although it's primarily known for drilling for oil and gas around the globe, it also has midstream and downstream assets, such as pipelines, refineries, and chemical operations. When oil and gas prices rise, ExxonMobil can shift its focus to high-margin exploration. Meanwhile, when crude and natural gas prices weaken, the company can lean on its downstream refineries, which should be busy as retail consumption picks up. It's this integrated, balanced business model that keeps ExxonMobil from faltering.

This is also a company with a smorgasbord of investment opportunities around the world. The Permian Basin, for example, should allow for the production of over 1 million barrels of oil equivalent per day by 2024. This, along with a number of offshore projects, should result in projected earnings growth of approximately 140% between 2017 and 2025, according to the company.

While it might be common for energy investors to do some nail-biting when oil and gas prices drop, there's little concern that ExxonMobil will continue giving back to its shareholders.

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.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$23.30 (0.93%) $0.21
Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$62.99 (1.16%) $0.72
Philip Morris International Inc. Stock Quote
Philip Morris International Inc.
PM
$90.56 (0.17%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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