There are three main categories of investors: growth investors, income investors, and value investors. I’d classify myself as a mix of all three, except my focus is on future income rather than current income.
My desire for future income to help fund retirement down the road has made dividends more important to me than ever. Here are three high-yield dividend stocks I’m buying hand over fist.
1. Enterprise Products Partners LP
Enterprise Products Partners LP (NYSE: EPD) is a leading U.S. midstream energy company. Its platform includes over 50,000 miles of pipeline transporting natural gas, natural gas liquids (NGLs), crude oil, and petrochemicals.
Even though I’m not relying on its distribution for income now, I like Enterprise’s distribution yield of 7.2%. And I absolutely love the company’s track record of 25 years of consecutive distribution increases with a compound annual growth rate of roughly 7%.
This lofty yield means that Enterprise doesn’t have to deliver much unit price growth to provide strong total returns. However, unit price growth probably won’t be too difficult. U.S. natural gas, NGL, and oil production is projected to increase through the rest of this decade — and the fundamentals are in place for this trend to continue over the longer term. Enterprise is preparing for growth with nearly $7 billion of major projects under construction.
Valuation shouldn’t get in the way of Enterprise’s growth either. The stock trades at only 10.7 times forward earnings.
The main downside to buying Enterprise Products Partners, in my view, is the tax hassle associated with investing in a limited partnership. However, the advantages this stock offers make the extra tax filing requirements worth the effort to me.
2. Pfizer
Pfizer (NYSE: PFE) ranks as one of the world’s biggest biopharmaceutical companies. Its products include blockbuster drugs targeting cancer, infectious diseases, rare diseases, and more. Pfizer is also well-known for its vaccines.
The company’s impressive lineup of products generates enough cash flow for Pfizer to pay a juicy dividend yield of over 5.8%. Management remains committed to maintaining and growing the dividend while reducing debt and reinvesting in the business.
Pfizer’s forward price-to-earnings ratio is below 13. That’s a much more attractive valuation than the S&P 500 healthcare sector’s forward earnings multiple of 18.4.
Two dark clouds are hovering over Pfizer, though. The company’s COVID-19 product sales have plunged. Pfizer also faces a major patent cliff over the next few years with key patents expiring for multiple drugs. However, I still like Pfizer’s overall growth prospects despite these challenges thanks to its new product launches and recent acquisitions.
3. Verizon Communications
I haven’t started buying shares of Verizon Communications (NYSE: VZ) hand over fist just yet but plan to do so soon. The company, of course, is a leading global telecommunications provider with millions of customers.
I’d be lying if I said Verizon’s dividend yield of 6.6% wasn’t a big factor in my decision to buy the stock. As with Enterprise Products Partners and Pfizer, Verizon’s dividend gives it a solid leg up on delivering attractive total returns. Another big plus: The telecom giant has increased its dividend payout for 17 consecutive years.
Many stocks are expensive right now. Not Verizon. The stock trades at less than 8.8 times forward earnings.
What’s the biggest knock against Verizon? Sluggish growth. The company’s revenue increased by only 0.2% year over year in the first quarter of 2024. Earnings slipped to $4.7 billion from $5 billion in the prior year period.
However, Verizon continues to generate strong free cash flow. Its balance sheet is getting stronger. I expect the stock will move higher over the next several years even if the company’s sales growth isn’t impressive.
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Keith Speights has positions in Enterprise Products Partners and Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Enterprise Products Partners and Verizon Communications. The Motley Fool has a disclosure policy.
3 High-Yield Dividend Stocks I’m Buying Hand Over Fist was originally published by The Motley Fool