Are you looking for more income from your portfolio? Even with bond yields still near multiyear highs, plenty of dividend stocks are worth considering. Not only do some of them offer above-average yields at below-average risk, unlike bonds, their payouts are apt to grow as time marches on.
With that as the backdrop, here's a closer look at three high-yielding dividend stocks that might be at home in your portfolio in the near and distant future.
1. British American Tobacco
Just as the name suggests, British American Tobacco (BTI +0.34%) makes tobacco products. It's the parent to familiar international cigarettes brands like Kent, Lucky Strike, and Pall Mall, as well as the name behind Camels sold within the United States. Vaping brand Vuse and heated tobacco brand Glo are also part of the British American Tobacco family.
Sure, the war on tobacco and other related vices is finding traction. In tacit acknowledgment of the inevitable, in fact, British American Tobacco is publicly committed to "building a smokeless world" where vaping, smokeless tobacco, and heated-tobacco products are its core business. Given the stalled uptake of these alternatives, though, there may still come a time when this company can no longer fund its long-standing dividend payments.
That day is likely to be years and years down the road, however, with plenty of dividend income to be collected between now and then.
NYSE: BTI
Key Data Points
The numbers: The World Health Organization reports there are still well over 1.2 billion worldwide smokers, down only slightly from 2000's count of 1.36 billion. Meanwhile, although it's not yet a major profit center for the tobacco industry, the National Institutes of Health believes there are 35 million regular users of vaping products.
While there's no doubt that the global anti-smoking movement is chipping away at big tobacco's business, it's clearly not happening at a brisk pace. Plenty of consumers are going to continue enjoying their vices for a long time even if they know they are unhealthy vices.
Newcomers will be plugging into this stock while its forward-looking dividend yield stands at 7.1%. A stake in British American Tobacco also somewhat sidesteps the hottest part of current trade tariff war, by the way.
2. Pfizer
There's no denying Pfizer (PFE 1.42%) has struggled to offset the wind-down of what was once a booming COVID-19 vaccine business. The drugmaker's revenue is still well below its 2022 peak, for perspective, and as a result, Pfizer shares are still near the decade low reached in early April. Clearly shareholders are as frustrated as the company's management likely is.
NYSE: PFE
Key Data Points
Largely lost in the upheaval, however, is the fact that there's nothing unusual or permanent about the underlying situation.
While one could reasonably argue that Pfizer overcommitted to the development of its COVID-19 treatment Paxlovid as well as the co-development of a COVID-19 vaccine in partnership with BioNTech at the expense of other R&D with longer-term potential, this is a temporary challenge. Pfizer's current pipeline consists of more than 100 drug trials, more than 30 of which are in late-stage (phase 3) testing, and another five of which are now being considered for approval by the FDA. These prospects include Elrexfio (elranatamab) for the treatment of multiple myeloma, along with several other oncology drugs.
In the meantime, already-approved cancer-fighting Ibrance is being studied in a handful of additional clinical trials, while sales of heart disease drug Vyndaqel jumped 60% last year as caregivers increasingly embrace this older drug. Blockbuster blood-thinning drug Eliquis, of course, is a reliable workhorse for Pfizer, too.
The point is, every pharmaceutical company's business ebbs and flows, including Pfizer's. Although it admittedly dropped the developmental ball because of the coronavirus pandemic, it's made major investments in oncology drugs in the meantime that should start bearing fruit sooner than later.
The stock's big pullback from its late-2021 peak not only fails to reflect this bright future, but has pumped its forward-looking dividend yield up to an incredible 7.5%.
3. Realty Income
Finally, add Realty Income (O +0.21%) to your list of safe dividend stocks with unusually high yields. New shareholders will be plugging in while its forward-looking dividend yield stands at just under 5.7%.
It's possible you've never heard of it, although it's unlikely you've never stepped foot onto one of its properties. See, this real estate investment trust is landlord to some of the country's leading retailers and convenience store chains including Walmart, 7-Eleven, and Dollar General, as well as the owner of several properties in use by the likes of FedEx and Wynn Resorts.
No single tenant accounts for more than 4% of Realty Income's revenue, so it's very well diversified.
NYSE: O
Key Data Points
But aren't most brick-and-mortar and consumer-facing businesses struggling as people embrace online shopping and remote/mobile services? It's a challenge, to be sure. Suggestions that in-person retailing is on its deathbed, however, are greatly exaggerated.
The U.S. Census Bureau reports less than 17% of the nation's retail spending during the fourth quarter of last year was actually done online, which means the rest is still happening in-store. Moreover, while Coresight Research says 7,325 U.S. stores were shuttered last year, there were we also 5,970 new store openings. It's less of a retail apocalypse and more of a thinning of the herd that makes the remaining players stronger as a whole.
It's also worth pointing out that most of Realty Income's tenants are higher-quality companies with staying power and the fiscal wherewithal to continue paying their rent.
You can find higher-yielding stocks. You won't likely find many other income-producing investments with a comparable dividend profile, though.
Not only does Realty Income dish out its dividend on a monthly (rather than quarterly) basis, but the company has raised its annual per-share dividend payout every year for the past 30 years. Indeed, the real estate investment trust has now upped its monthly payment for 110 consecutive quarters, keeping up with inflation in real time.
