Dividend stocks are a great way to navigate volatile markets. Not all income-generating equities are equal, however. History has shown that companies with solid balance sheets, diverse revenue streams, and a rich tradition of increasing annual distributions to shareholders tend to be the best vehicles when it comes to staving off the negative effects of economic downturns.
With this insight in mind, my top two dividend stocks to buy right now are Icahn Enterprises (IEP 1.53%) and Takeda Pharmaceutical Company (TAK -1.12%). Below is a brief overview of the reasons these two high-yield dividend stocks ought to appeal to risk-averse investors right now.
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Icahn Enterprises: A 16% annual yield with room to grow
Icahn Enterprises is a diversified holding company with interests across a wide swath of the global economy. The company owns positions, through its various subsidiaries, in energy, automotive, food packaging, real estate, home fashion, pharmaceuticals, metals, and various investment funds.
As things stand now, Icahn Enterprises pays out a nearly 16% annualized dividend yield, which is among the highest in its immediate peer group. And thanks to its sky-high yield, its stock has produced an average annualized return of approximately 15% over the past 21 years -- topping the return of every major U.S. stock index, along with that of Berkshire Hathaway's class A shares.
The company's largest shareholder and guiding light from an investment standpoint is billionaire Carl Icahn. Icahn's activist approach to investing has been a key reason the company's stock has been dramatically outperforming the broader markets during the current bear market.
The bottom line: Icahn Enterprises is a rock-solid dividend play with an all-star manager at the helm, making it a must-own stock in this turbulent market.
Takeda Pharmaceutical: A high-yield healthcare play
While pharmaceutical stocks have largely struggled this year, shares of the Japanese drugmaker Takeda Pharmaceutical have yielded a respectable 5.65% total gain for shareholders through the first half of 2022 (when including dividend payments). Takeda's ability to shine in this tough environment can be attributed to a couple of inter-related factors.
First off, the drugmaker's shares have been trading at one of the lowest valuations among major drug manufacturers for several years now. Investors previously shunned this name due to its high debt load and middling growth prospects. But as the company's business development plans have slowly started to produce fruit, Takeda's shares have seemingly regained favor among biopharma investors and bargain hunters alike.
Second, the company's newer growth products, like the post-transplant cytomegalovirus infection drug Livtencity and the niche lung cancer medication Exkivity, have helped it return to high levels of revenue growth quicker than anticipated. In turn, this strong revenue growth over the prior year has led to better-than-expected free cash flows. As a result, the company's dividend and share-buyback programs are now on solid financial ground.
The third reason investors have bid up Takeda's shares this year is the company's generous 5.58% annualized dividend yield. Takeda, in fact, sports one of the highest dividend yields within the entire large-cap healthcare space right now.
All told, this Japanese pharma stock appears poised to continue beating the bear market for the foreseeable future, thanks to its strong top-line growth prospects, healthy free cash flows, and top-notch dividend program.
