Are the market's ups and downs getting to you? You'll be glad to know there's more than one way to get rich with stocks.
Growth stocks are lots of fun to watch from a safe distance. Savvy investors know that dividend-paying stocks tend to outperform shares of companies that don't share their profits.
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The steady cash flows that dividend stocks can provide makes them so attractive that high yields like these aren't easy to come by. This is why investors should tread carefully whenever they see stocks suddenly offering unusually high yields.
All three of these stocks have a history of offering juicy payouts. There's also a good chance they can continue making and raising those payments for the long haul.
| Company (Symbol) | Industry | Dividend Yield |
|---|---|---|
| Philip Morris International (PM 1.39%) | Tobacco | 4.9% |
| Annaly Capital Management (NLY -0.32%) | Mortgage REIT | 9.9% |
| Mobile TeleSystems (MBT) | Telecoms | 11.2% |
Philip Morris International
Cigarette sales have been sliding for over a decade in Western Europe and North America so it's easy to understand why most investors shy away from Philip Morris. Peek under the hood, though, and you'll find a business poised to deliver steadily growing dividend payments for decades to come.
While sales of tobacco products that produce smoke have declined, this is working in Philip Morris' favor. This is because nicotine's popularity hasn't changed much and the company's heated but not burnt tobacco product, IQOS is an increasingly popular alternative method of delivery.
In the first quarter, IQOS helped push total sales 2.9% higher year over year, but this isn't the whole story. The arguably safer mode of nicotine delivery comes with a much higher profit margin than cigarettes and it shows on Philip Morris' bottom line. Adjusted earnings soared 21.5% higher in the first quarter which will make it relatively easy to continue raising its dividend payout.
This isn't the highest-yielding stock on this list at the moment, but it's rising at a steady pace. Over the past decade, Philip Morris has raised its dividend payout by 56% and further success with IQOS could make the next 10 years even more memorable.
Annaly Capital Management
If you'd rather have a high yield now than steady dividend raises year after year, you'll want to look at the world of real estate investment trusts (REITs) that buy and sell mortgages. Annaly Capital Management is one of America's largest mortgage REITs and it currently offers an eye-popping 9.8% dividend yield.
As a REIT, Annaly Capital Management gets to avoid paying taxes as long as it distributes at least 90% of profits to shareholders. Dividends from Annaly and its peers are taxed as normal income, but most individual investors can easily avoid those taxes by purchasing REIT stocks through a Roth IRA.
As a mortgage REIT, Annaly earns the spread between its own costs of capital and the interest it earns on its portfolio of mortgages. By using its portfolio as collateral for short-term low-interest loans, Annaly was able to boost its net interest spread to an impressive 3.34% during the quarter ended March 31, 2021.
When the gap between yields on long and short-term debt are at their widest, Annaly Capital Management and its peers can really clean up. Economic uncertainty or anticipation of interest rate hikes from central banks can quickly erase this gap, though.
Annaly's exposure to interest rate fluctuations usually leads to swings in its stock price when the Federal Reserve Board meets. Buying this stock on its recent post-meeting dip then patiently reinvesting the dividend payouts could lead to huge returns on your original investment.
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Mobile TeleSystems
This Russian telecom giant is looking at a fortuitous economic cycle that we've seen work for its international counterparts. Mobile TeleSystems or MTS is already the largest mobile operator in Russia and the company is using its position in this space to become a leading provider of media, fintech, and digital services.
Unlike its counterparts to the west, this telecoms giant is still upgrading customers in major cities to 5G and expanding 4G coverage throughout the suburbs. This means MTS' main operation has plenty of room to grow on its own.
With a gigantic portfolio of assets to use as collateral and an investment-grade credit rating, MTS has been able to expand its web of related operations without dipping into the red. In fact, operating income before depreciation and amortization rose 6.7% year over year to reach $747 million in the first quarter.
In 2020, MTS returned a whopping $1.4 billion to shareholders in the form of dividends and share buybacks. With a growing web of successful businesses, investors can expect plenty more in the years come.
Spread it around
While you might be tempted to put everything you have on MBT for that juicy 11.2% dividend yield, it's important to remember past performance doesn't guarantee future returns. All three of these companies probably have what it takes to continue meeting their present dividend obligations. Betting too heavily on any single high-yield dividend stock, though, can be a recipe for disaster.
