Investing in dividend stocks is a good way to fight inflation and a bear market. Receiving a recurring dividend payment can strengthen your financial position and improve your portfolio returns.
And there are plenty of high-yield stocks that pay a lot more than the S&P500 dividend yield of 1.8%. Gilead Sciences (BROWN 1.88%), AT&T (T -0.60%)and TC Energy (TRP -0.87%) all pay more than double this amount. And if you invest in all three, you can ensure that you receive a high dividend every month of the year.
1. Galaad Sciences
Healthcare company Gilead Sciences makes most of its money from HIV drugs, though it also has a growing oncology business. Cancer drug Trodelvy generated $305 million in sales in the first six months of the year, representing 90% year-over-year growth. But it’s still in its early stages, as the drug could generate up to $3 billion in revenue at its peak.
Overall, the company’s revenue after the first two quarters of 2022 totaled $12.9 billion and increased 2%, driven by sales of Trodelvy and HIV, which increased 5% from a year to year. Year-to-date earnings of $1.2 billion are down from the $3.3 billion the company generated a year ago, but that’s largely due to an ongoing writedown. the $2.7 billion research and development Gilead recorded earlier this year, resulting from a 2020 acquisition. The charge is one-time and shouldn’t distract investors from what is still a solid business.
Gilead’s dividend currently pays 4.5% and the company makes payments every March, June, September and December.
Telecommunications company AT&T spun off WarnerMedia earlier this year (which is now part of Discovery of Warner Bros.) because it was looking to simplify its business. Combining streaming with telecoms could have made it difficult for the company to both balance its dividend while pursuing a growth strategy that would have seen it come up against big names like waltz disney and netflix.
Following the split, AT&T is in the midst of a transition and investors may be worried about the dividend. However, management projects that by the end of the year, it will be able to reduce its annualized book costs by more than $4 billion. That would go a long way to reassuring investors about the dividend, which costs the company more than $8 billion over a 12-month period.
This year, AT&T forecasts free cash flow of about $14 billion. There’s already a buffer between the dividend and free cash flow, but additional cost savings will help make AT&T a more viable investment for risk-averse investors.
There’s some risk with AT&T’s 7.4% return, especially after the company said its customers were taking longer to pay their bills when it last reported earnings in July. But until that situation deteriorates further and the company manages to hit its cost-cutting targets for the year, AT&T could be an underrated and contrarian buy right now. The telecommunications giant pays dividends in February, May, August and November.
3. TC Energy
Energy infrastructure company TC Energy is a safe and solid income investment to own. It transports oil and natural gas on its pipelines, which help connect Canada, the United States and Mexico. It also has power generation facilities that power millions of homes.
The company’s business has been relatively flat, with TC Energy expecting comparable earnings per share this year to be in line with what it reported last year. In the first six months of the year, TC Energy’s comparable earnings total C$2.1 billion and are down less than 3% from what the company generated a year earlier.
The consistency of TC Energy’s business makes it a reliable dividend stock to own; in each of the past four years, its annual revenue has been between C$13 billion and C$13.7 billion. And at 6.3%, investors can perceive a fairly high yield from the stock.
TC Energy has also increased its dividend for more than 20 consecutive years, averaging a compound annual growth rate of 7% during that time. The company normally pays dividends every January, April, July and October.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Gilead Sciences, Netflix and Walt Disney. The Motley Fool recommends Warner Bros. Discovery, Inc. and recommends the following options: January 2024 Long Calls at $145 on Walt Disney and January 2024 Short Calls at $155 on Walt Disney. The Motley Fool has a disclosure policy.