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Dividend income can boost your overall returns, and also provide you with some recurring cash flow for your portfolio. That’s a good thing, because it means you don’t have to sell your investments if you need cash — you can just wait for the dividend income to roll in. And while the S&P 500 is performing well this year, there are still many good, cheap dividend stocks out there to buy right now that offer high yields.
Three safe long-term dividend stocks investors can load up on today are Kraft Heinz (NASDAQ: KHC), AT&T (NYSE: T), and Pfizer (NYSE: PFE). Below, I’ll show you how you can invest $25,000 across these three stocks to collect $1,500 in dividend income next year.
1. Kraft Heinz: $5,000
Food and beverage company Kraft Heinz makes for a promising long-term investment. With strong consumer brands in its portfolio, including Kraft, Heinz, Philadelphia, Oscar Mayer, and many others, the company’s operations are more resilient than those of most other consumer businesses. The strong brand power it enjoys is a key reason this is also a Warren Buffett stock, with Kraft Heinz being one of Berkshire Hathaway‘s top 10 holdings.
Over the past nine months, the business showed its resilience with sales of $19.8 billion rising by 4% year over year. Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) profit has also increased by 9%. Kraft Heinz’s strong brands have enabled it to raise prices and pass on rising costs to consumers, allowing it to still post good results despite inflation.
The stock pays a dividend that yields 4.4% — that’s close to three times the S&P 500 average of 1.5%. Investing $5,000 into the stock would mean you could collect $220 in annual dividend income.
2. AT&T: $10,000
Telecom giant AT&T makes for another good place to invest in for next year. With a yield of 6.7%, investors can get a lot of bang for their buck with this dividend stock. On a $10,000 investment, you can expect to collect $670 in dividend income next year.
Investors have been concerned about the company’s dividend, but with AT&T posting encouraging results of late, the risk isn’t as high anymore, and that’s reflected in the stock’s price — shares of AT&T have been rising in recent months.
For the period ending Sept. 30, the telecom giant reported stable year-over-year revenue growth of 1% as its top line reached $30.4 billion. The company also bumped up its guidance for free cash flow this year to $16.5 billion (versus its previous forecast of $16 billion). While it’s not a huge increase, the more important takeaway for investors is that the business is doing better than expected, and cash flow isn’t a problem, which is a great sign for safety and stability of the dividend.
3. Pfizer: $10,000
One of the best deals on the market right now may be for Pfizer’s stock. Trading down 47% this year, investors have punished the stock for its lackluster financials of late. But it’s a scenario investors should have expected given the declining demand for COVID-19 vaccine revenue. And in the long run, the company plans to build up and diversify its business via its pipeline and acquisitions. It recently closed on a key acquisition of cancer company Seagen, which Pfizer projects will help add $10 billion in annual revenue by the end of the decade.
It will be a bumpy road for Pfizer as it incurred a net loss of $2.4 billion last quarter (for the period ending Sept. 30), but as the business scales down its operations in light of lower-than-expected COVID-19 vaccine demand, its financials should improve.
Investors are heavily discounting Pfizer’s stock, as it is trading at just 9 times its estimated future earnings. By comparison, the average stock on the S&P 500 trades at more than 21 times future profits.
Not only is Pfizer not concerned about the safety of its dividend, but it also recently increased it. Last week the company hiked its quarterly per-share dividend to $0.42 — a modest one-cent increase from its previous quarterly payout.
Today the stock yields 6.2%. Another $10,000 invested in Pfizer’s stock would result in $620 in annual dividends for your portfolio. Combined with the other investments on this list, that would put your total annual dividend income at approximately $1,510.
Should you invest $1,000 in Kraft Heinz right now?
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Pfizer. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.
Want $1,500 in Dividend Income in 2024? Invest $25,000 in These 3 Top Income Stocks was originally published by The Motley Fool
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