If we let history guide us, the best thing to do with cash in times of market turbulence like we're seeing is to buy dividend stocks. Numerous studies also underscore the fact that dividend stocks outperform stocks that don't pay a dividend by a wide margin.
J.P. Morgan Asset Management found that stocks that initiated and then raised their payouts over a 40-year period between 1972 and 2012 returned an average of 9.5% annually, versus just 1.6% for nonpayers. Moreover, over rolling three-year periods, dividend stocks with higher yields beat stocks with low yields or no dividend payment at all about two-thirds of the time.
Similarly, the asset managers at Hartford Funds found dividend-paying stocks contributed 41% to the total return of the benchmark S&P 500 going all the way back to 1930. Even during the so-called "lost decade" of the 2000s, when the tech stock bubble burst, 9/11 happened, and the financial markets crashed -- leaving the S&P 500 index with negative returns -- dividend stocks still gained 1.8%.
To help protect your own portfolio from the market's gyrations, here are three high-yield dividend stocks to consider investing in right now.
Altria (Yield: 7%)
While Altria (MO 1.26%) offers investors the confidence of a high-yield dividend in troubled times, its business also tends to do well when the economy goes south. If the Federal Reserve carries through on its plans for dramatic increases in interest rates that cause the economy to grind to a halt and even decline, the tobacco giant's operation will still likely fare well.
Its leading Marlboro brand retains a near-43% share of the U.S. market and, through its agreements with Philip Morris International, has a dominating 9.5% share in the rest of the world, or about twice the share of the next-closest brand. Marlboro also happens to be the world's most valuable cigarette brand, at more than $35 billion.
At the onset of the pandemic, cigarette shipment volumes soared as consumers hoarded them, and though the pace of growth has eased as volumes fell in the latest quarter, revenue still rose because of the pricing power it commands. Due to its ability to impose price hikes to offset tax increases and rising costs, operating income is also rising, ensuring that its dividend payment will remain secure for years.
AT&T (Yield: 5.7%)
Although you might have missed the spinoff of Warner Bros Discovery stock, AT&T (T -0.88%) is still a good deal and a stock with a high yield. After the separation, it can narrowly focus on its telecom business.
AT&T's stock has been held back by the entertainment unit, not least because of the massive amount of debt it incurred as a result of its acquisitions. Now that it got $43 billion from the deal, it can pay down a good portion of the total while still investing in the rollout of its 5G networks.
Analysts estimate the entire consumer 5G network market will be worth $31 trillion by 2030. AT&T is expected to receive an estimated $3.7 trillion of it as consumers spend more on enhanced video, augmented and virtual reality, and digital gaming over 5G networks.
With a business better positioned than it has been in years and a still-hefty yield on a solid dividend payment, AT&T can readily be placed in your portfolio for the long haul.
The Williams Companies (Yield 5%)
According to the U.S. Energy Information Administration, natural gas consumption will increase from 17% of the total of all energy sources to 18% by 2040, even as oil falls from around 40% to 37%.
Williams has some of the leading pipelines in the Gulf of Mexico region and elsewhere around the country as well as having a number of projects in its backlog, plus the pending $950 million acquisition of Trace Midstream that will give it positioning in the Haynesville Shale region of east Texas.
Williams did hack its dividend back in 2016 after its acquisition of Energy Transfer fell through but since then has steadily increased the payout, as it did most recently in February by raising the dividend by almost 4%.
With a healthy business in store, The Williams Companies should fuel a dividend investor's portfolio for years.