The goal of investing is to make money. It sounds simple and straightforward, but that's exactly how it should be. Granted, that's easier said than done, but it doesn't have to be complicated. At a minimum, your investments should be keeping up with inflation, so you're not losing purchasing power.
You can't predict how stock prices will move, but one thing you can count on is safe dividend stocks that provide reliable income and are in a position to keep providing it.
If you're looking for safe dividend stocks, look no further than the two below. Both have dividend yields far exceeding the recent 3.4% year-over-year inflation recorded in December 2023.
1. Altria Group
Altria Group (MO 0.86%) is the country's largest tobacco company, owning brands like Marlboro, Copenhagen, and Black & Mild.
NYSE: MO
Key Data Points
Altria also possesses one of the most lucrative dividends on the stock market. Its quarterly dividend is $0.98, with a yield of around 9.5%. That's more than six times the S&P 500 average and one of the highest in the index.
It's a good thing Altria has a generous dividend because its stock price has struggled over the past few years. The stock price is down over 13% in the past five years, but dividends have lifted its total returns to close to 30% during that span.
Investors have been concerned about declining smoking rates among U.S. adults and how that will affect Altria's cigarette volume. While the company's cigarette volume has decreased in recent years (8.5% industry decline in the third quarter alone), tobacco is an industry with high pricing power. When cigarette prices increase, people don't generally stop smoking cold turkey. Altria has used that to its advantage.
MO Net Income (Quarterly) data by YCharts
Concerns over declining smoking rates are legitimate, but investors shouldn't worry about that affecting Altria's dividend. The company makes more than enough to handle its dividend obligation and has increased the yearly dividend 58 times in the past 54 years.
I don't see that changing anytime soon, as Altria's dividend is its main selling point for investors. Without it, many investors can easily justify jumping ship and investing in a company that operates in a less-scrutinized industry.
2. AT&T
Telecom giant AT&T (T 3.21%) had well-documented struggles in recent times, and its stock price woes reflect that.
NYSE: T
Key Data Points
Even after cutting its dividend in half as part of its WarnerMedia spinoff in 2022, AT&T has one of the highest dividends in the S&P 500. Its quarterly dividend is only $0.28, but its yield is around 6.75%.
AT&T's balance sheet has been weighed down by debt, which hasn't pleased investors. The company had $138 billion in debt as of Sept. 30, 2023, but believe it or not, that's a major improvement from early 2022, when its debt was well over $200 billion. Still, $138 billion of debt isn't quite something to celebrate.
T Total Long Term Debt (Quarterly) data by YCharts
AT&T's high debt has worried investors because the dividend could be slashed or cut entirely if the company needs extra funds to pay its bills. However, AT&T's free cash flow should put these concerns to rest. When reporting its third-quarter 2023 results, AT&T said it expected to make $16.5 billion in free cash flow for its fiscal year 2023. Assuming this happens, AT&T's payout ratio would be well below 50%.
AT&T seems to be on the right track and returning to its core telecom roots. As one of the top players in an industry that's become indispensable to American society, AT&T is a dividend stock investors can feel comfortable holding onto -- especially with its current low valuation.
