Dividend stocks can be solid pillars for your portfolio. They can generate a lot of recurring income for your portfolio over the years while also providing you with some stability. Three safe stocks which can be strong options for any portfolio and that offer high yields are Verizon Communications (VZ 1.17%), Bank of America (BAC -0.21%), and United Parcel Service (UPS 0.14%). Here's why these three stocks can be anchors for your portfolio for the long haul.
1. Verizon Communications
Verizon makes for an excellent and dependable dividend stock to own. The telecom giant won't generate massive returns or experience incredible top-line growth, and you also shouldn't expect that from Verizon. You'll want this stock primarily for the dividend income you can collect from it.
Its dividend yield of 6.7% is far higher than the S&P 500 average of 1.5%. And what's even more impressive is that Verizon has also increased its payouts for 17 consecutive years. As long as the company continues to post strong earnings numbers, investors can expect to see that streak continue, which is why there's plenty of incentive to buy and hold shares of Verizon as this can be an investment you just add to your portfolio and forget about, knowing that it will be fine.
On Tuesday, the company released its fourth-quarter results for the last three months of 2023. Total operating revenue of $35.1 billion for Q4 was relatively stable, declining by a modest 0.3% year over year. More importantly, full-year free cash flow of $18.7 billion was notably higher than in the previous year, when free cash totaled $14.1 billion.
With strong financials, lots of stability, and an incredibly high yield, this is a stock that could be suitable for any type of investor.
2. Bank of America
Another solid dividend stock to build your portfolio around is Bank of America. The top bank stock yields 3%, allowing investors to collect an above-average payout from this investment. Investing in Bank of America stock is a good way to bet on the economy, and bet on the country in general. That's because if the economy is in good shape, people have more money, and businesses are growing and taking out loans. That's more business for the bank. Betting on America is what billionaire investor Warren Buffett always advocates for, and holding shares of this bank stock is an excellent way to do just that.
Despite paying a relatively high yield, the bank stock has a small payout ratio of just 30%, making its dividend fairly safe, even if the economy struggles this year. For the last quarter of 2023, Bank of America's revenue declined by 4% to $10.3 billion but it grew its consumer checking accounts for a 20th consecutive quarter. Net income of $2.8 billion was down from $3.6 billion a year ago, but a big reason for that was the bank increased its provision for credit losses ($1.4 billion versus $944 million) in anticipation of potentially tougher times ahead. But as economic conditions improve, those provisions will come down, and the bank's financials should look much better.
While Bank of America may be feeling the effects of an economy that isn't in great shape right now, this is an investment that is ideal for the long haul. There will be bumps along the way as recessions and downturns are inevitable, but they are also temporary. In the long run, the country is likely to continue to grow and do well, and Bank of America will benefit from that.
3. United Parcel Service
Investing in United Parcel Service (UPS) can be a great way to bet on the long-term growth and success of e-commerce. UPS is a leading logistics company and it plays an important role in e-commerce, by ensuring packages get to where they're going to quickly.
The company has been struggling of late due to challenging macroeconomic conditions and a decline in demand as revenue in its most recent quarter, which ended on Sept. 30, 2023, totaled $21 billion and was down 13% from the prior-year period. But for long-term investors, this shouldn't be a big concern as UPS will likely bounce back as economic conditions improve.
Analysts from Mordor Intelligence estimate that the e-commerce market, which is worth nearly $9 trillion today, will grow to be worth nearly $19 billion by 2029, growing at a compounded annual growth rate of 15.8% until then. While UPS may be experiencing a slowdown today, it's not likely to last over the long term as demand for its services should continue to rise.
UPS offers an excellent dividend yield of 4.1% and with the stock trading at a relatively modest 16 times its trailing earnings, now can be an optimal time to invest in this strong business.
