The S&P 500 is near its all-time high. The deadline for funding the U.S. government is rapidly approaching with no budget deal finalized yet. Inflation rose more than expected in January. Many economists predict that President Trump's tariffs could cause inflation to increase even more.
Am I selling stocks hand over fist in light of all the uncertainty? Nope. Here's why I've backed the truck and loaded up on these three high-yield dividend stocks.
1. Honda Motor
If I were focused only on the near term, I might not touch shares of Honda Motor (HMC 0.43%) with a 10-foot pole. The auto stock is down 20% over the last 12 months. Honda's planned acquisition of Nissan fell through. Tariffs could negatively impact the company, too.
NYSE: HMC
Key Data Points
However, I think Honda's long-term prospects remain strong. The 2024 Axios Harris Poll 100 ranked Honda as the most reputable vehicle brand in the U.S. market. Honda's brand came in seventh place overall in the survey. Like its vehicles and power equipment, Honda is built to last.
There are reasons to like Honda in the short term, too. Its forward dividend yield of 5.15% is a big plus for the stock. The company is also committed to stock buybacks, recently repurchasing nearly 121.5 million shares.
I also suspect that tariffs won't hurt Honda as much as some expect. President Trump paused his planned 25% tariffs on imports from Mexico. If this delay becomes permanent (which I think is likely), Honda's shares could rebound since around 80% of the company's vehicles made in Mexico are sold in the U.S.
2. Prudential Financial
I also recently got a bigger piece of the rock and added to my position in Prudential Financial (PRU +1.31%). It gives me comfort knowing the financial services company has been in business for over 145 years and is still going strong.
NYSE: PRU
Key Data Points
This longevity isn't the main reason I invested more in Prudential, though. I like the stock's valuation with shares trading below 7.6 times forward earnings. That's much lower than the average forward price-to-earnings ratio of 17.4 for the S&P 500 financial sector.
I'd be lying if I said Prudential's juicy forward dividend yield of 4.87% wasn't enticing. So is the company's track record of 17 consecutive years of dividend increases. Prudential's stock buybacks (almost $3 billion last year) add to the attraction.
Could President Trump's focus on deregulation help Prudential? The chances look pretty good to me. The first Trump administration lifted Prudential from extensive government oversight as a systemically important financial institution. I wouldn't be surprised if the company benefits from further relaxation of regulations in Trump's second term.
3. Verizon Communications
I'll readily admit that I bought more shares of Verizon Communications (VZ 0.35%) largely because of its dividend program. The telecommunications giant has increased its dividend for 18 consecutive years. Verizon's forward dividend yield stands at 6.7%, which gives it a big head start in delivering double-digit percentage total returns.
NYSE: VZ
Key Data Points
Valuation was another key consideration. Verizon's shares trade at below 8.7 times forward earnings, which is significantly cheaper than the multiple of top rival AT&T.
Importantly, Verizon's business is strong. Total broadband connections jumped 15% year over year during Q4. Wireless service revenue rose 3.1% year over year in Q4, marking 18 consecutive quarters of sequential growth.
I also think artificial intelligence (AI) is important to Verizon's growth strategy. The company is using AI to increase its operational efficiency and boost profitability. It's offering AI tools to personalize customer experiences. Edge AI apps running close to the edge of networks could also provide a major tailwind for Verizon. CEO Hans Vestberg said in the Q4 earnings call that edge AI "has already created an opportunity for us as we had revenue and EBITDA impact in the fourth quarter."
