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2 High-Yielding Dividend Stocks to Buy in November

By David Jagielski – Nov 3, 2021 at 8:24AM

Key Points

  • Shares of Walgreens and AT&T are both down more than 10% over the past six months.
  • Despite the bearishness surrounding these businesses of late, both are stable investments that will look even better in the future.
  • Both companies are coming off some impressive quarterly results.

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They both pay over 4%

Looking for a dividend stock that pays a solid yield and isn't incredibly risky? If so, two stocks that should be on investors' radar this month are Walgreens Boots Alliance (WBA 1.84%) and AT&T (T -0.25%).

They are both paying much more than the 1.3% yield one would collect with the average S&P 500 stock. And with solid businesses behind them, investors don't need to worry about the safety of their payouts.

A couple counting money.

Image source: Getty Images.

1. Walgreens

Retail pharmacy Walgreens has been benefiting from a surge in COVID-19 traffic to its stores this year. And with booster shots on the way, it's a trend that may not be slowing down just yet. 

In its fourth-quarter results (period ending Aug. 31), the company reported adjusted earnings per share (EPS) of $1.17 which soundly beat analyst expectations of $1.02. Revenue of $34 billion was also better than analyst projections of $33 billion. A big reason for the surprising performance was that Walgreens said it administered twice the number of vaccines it thought it would. 

But even if investors think there will be a slowdown to that trend in the coming quarters, this is still a great time to invest in Walgreens. The stock has fallen 10% in the past six months while the S&P 500 has increased by 10%. It hasn't gotten much love despite performing well this year -- it has beaten earnings expectations in each of the past four quarters. Plus, with the company investing $5.2 billion into primary care provider VillageMD to diversify its business, there are more opportunities for growth down the road. The two businesses plan to launch 1,000 co-located primary care practices by 2027. That continued growth could make its dividend much safer in the long run.

Walgreens announced an increase to its dividend in July for the 46th year in a row. Four more rate hikes and it becomes a Dividend King. Today, the company's annual dividend is $1.91 per share, which is 83% of the $2.30 EPS Walgreens reported for fiscal 2021. Although ideally, that rate would be a bit lower, it's still a sustainable payout, especially if the expansion opportunities with VillageMD pay off. Not only does Walgreens look like a safe, high-yielding dividend stock to buy this month, but there's a strong likelihood that investors will also benefit from more rate hikes in the future.

2. AT&T

AT&T's current yield of 8.2% definitely looks too good to be true. However, that shouldn't dissuade investors as there will be a change to the company's dividend policy once it splits off from WarnerMedia, which will be joining media company Discovery. For dividend investors, this could come as welcome news as the spinoff means streaming service HBO Max will also be leaving AT&T.

While this will lead to fewer growth opportunities for AT&T, it will also mean the company isn't going up against Walt Disney and Netflix in the battle over content and fighting for streaming subscribers. It would have been difficult for the telecom giant to continue paying a high dividend while also pursuing growth objectives for HBO Max.

Once the deal is complete, AT&T says it will "re-size" its dividend to a sustainable 40% to 43% of free cash flow. How that will shape out is a bit of a question mark but historically, AT&T has usually been able to pay a high yield with its payouts sitting comfortably above 4% in each of the past five years. Even though the payout will likely end up smaller in the future, AT&T looks to be a safe bet to continue providing its shareholders with an above-average payout -- especially in light of an encouraging performance this past quarter.

In its latest results (for the period up until the end of September), AT&T delivered strong growth, with CEO John Stankey saying, "we had our best postpaid phone net add quarter in more than 10 years." The 928,000 net adds were 18% higher than the 789,000 postpaid phone net adds that the company reported in the previous quarter. In its mobility segment, revenue grew by 7% and consumer wireline sales also rose by more than 3% year over year. 

AT&T is doing well amid the economy opening back up and with the company moving away from the streaming business, it will once again be a boring (but stable) telecom stock that can be counted on for dividends. Its shares are down 19% in six months and this could be an opportune time for investors to buy the stock as I don't believe the recent sell-off is warranted.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool recommends Discovery (C shares). The Motley Fool has a disclosure policy.

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