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3 High-Yield Stocks at Rock-Bottom Prices

By Matthew Frankel, CFP® – Jun 9, 2020 at 6:52AM

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High dividends and great value is an excellent combination for long-term investors.

The stock market has rallied tremendously in recent weeks, fueled by stronger-than-expected economic data and general optimism surrounding the reopening of the U.S. economy. And many of the hardest-hit parts of the market during the coronavirus crash have been the strongest performers in the recent rebound, making it more difficult to find attractively priced stocks.

Having said that, even with the stock market significantly more expensive than it was just a few weeks ago, there are still some bargains to be had for long-term investors. Here's why Wells Fargo (WFC -2.47%), STORE Capital (STOR -0.16%), and ExxonMobil (XOM 2.97%) -- all of which have dividend yields greater than 5% -- could be worth a closer look now.

Businessman with money falling around him.

Image source: Getty Images.

This big bank could finally be ready to turn a corner

It shouldn't be too surprising that Wells Fargo was the worst performer out of the big banks during the COVID-19 market crash. Unlike the rest of the "big four" (JPMorgan Chase, Bank of America, and Citigroup), Wells Fargo is almost exclusively focused on consumer and business banking. The others have large investment banks, many aspects of which actually perform better during tough times. This makes Wells Fargo more vulnerable to an extended recession than its peers, and is why the bank has handily underperformed the other big banks this year.

JPM Chart

JPM data by YCharts

That said, there are some good reasons to take a closer look at Wells Fargo. For one thing, the bank has done a great job of addressing its corporate culture problems that led to the infamous "fake accounts" scandal and other issues in recent years. And, Wells Fargo has a strong history of responsible lending and excellent asset quality, and this hasn't changed. At just 83% of its book value, Wells Fargo could be a great bank stock for patient long-term dividend investors.

Despite short-term headwinds, this beaten-down REIT should be just fine

STORE Capital is a net-lease real estate investment trust, or REIT, that primarily invests in single-tenant properties occupied by tenants in the retail or service industries. (Note: STORE stands for "single tenant operational real estate.")

Net-lease REITs are often regarded as some of the safest in the real estate sector, and rightfully so. Tenants typically sign long-term leases with annual rent increases built in, and most net-lease tenants are in businesses that are rather recession-resistant. However, when the COVID-19 pandemic worsened, STORE was one of the worst performers in real estate. The reason? STORE Capital has a large group of tenants that were forced to close during the pandemic. Restaurants, day care centers, health clubs, movie theaters, and family entertainment centers combine for one-third of STORE's portfolio.

Now that it is increasingly looking like we're going to experience a V-shaped recovery in the U.S. economy, STORE Capital should be just fine. Some of its tenants could certainly fall into hard times, but I don't see this happening on a wide scale. With shares still about 35% off the highs, STORE Capital could be a great way to add reliable dividend income to your portfolio for years to come.

Oil has rebounded, but this stock is still a huge bargain

ExxonMobil is the largest U.S. oil company. It not only has the advantages of scale, but it also has a highly diverse revenue stream that is designed to make money whether the price of oil is high or low. The company has done an excellent job of cutting expenses since the pandemic began and has a far stronger balance sheet than most of its peers.

Having said that, it looks like the worst pain in the oil markets might be over. After demand cratered to the point where oil futures actually turned negative at one point, OPEC cuts and gradually rising consumer demand has sent crude prices rising by more than 55% over the past month alone, giving some relief to oil producers like ExxonMobil.

Not only is Exxon well-positioned to make it through any tough times, but the company has a fantastic track record of delivering for its investors. ExxonMobil has a 6.4% dividend yield and a 37-year streak of annual dividend raises. And while oil has certainly rebounded lately, ExxonMobil is a long way off its highs, so now could be a good time for long-term investors to consider the stock.

These stocks could provide steady income for years to come

These three stocks could certainly experience some near-term volatility as the COVID-19 pandemic and economic recovery continue to play out. However, these are all rock-solid businesses that could provide reliable income as well as long-term appreciation for investors.

Matthew Frankel, CFP owns shares of STORE Capital. The Motley Fool owns shares of and recommends STORE Capital. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$102.06 (2.97%) $2.94
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$42.24 (-2.47%) $-1.07
STORE Capital Stock Quote
STORE Capital
STOR
$31.43 (-0.16%) $0.05

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

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