The Dividend Delectables: 3 Stocks That Will Satisfy Your Hunger for Income

Stocks to buy

It’s true that, with the interest rate on 10-year Treasury bonds still trading around 4.2%, stock dividends aren’t nearly as important or valuable as they once were. After all, a risk-free yield of 4.2% makes even 5% dividend yields look unimpressive. And it is possible to buy low-risk corporate bonds that yield 6%-plus. Still, high-quality stocks with significant dividend yields offer a combination of yields and high, potential capital appreciation that bonds cannot match.

Moreover, recent economic data suggests that inflation is headed sharply downward, a trend that should enable the Federal Reserve to cut interest rates rather sharply in the next year. As a result, interest rates are likely headed down, and the stock market appears to be poised for further gains. Given this outlook, it’s a very good time to buy top-notch dividend stocks that can also benefit from the stock market’s gains going forward.

Verizon Communications (VZ)

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Verizon (NYSE:VZ) has a generous dividend yield of 6.7%. What’s more, the company is starting to benefit from price increases that it implemented in March. And despite those price hikes, it added a net total of 253,000 retail postpaid phone customers in Q1. Moreover, the company could get a slight lift from T-Mobile’s (NASDAQ:TMUS) recent acquisition of US Cellular (NYSE:USM), as Verizon will have one less low-cost carrier with which to compete.

Additionally, despite Verizon’s price hikes, its customer losses actually slowed in Q1 versus the same period a year earlier. Another important factor for income investors is that the company’s dividend is fairly secure, as it spent 60% of its free cash flow on dividends last year, and it is steadily reducing its debt.

Finally, over the longer term, Verizon could benefit from charging its customers extra for AI-related services, and it has a very low forward price-to-earnings ratio of 8.6 times. Given all of these points, I view Verizon as one of the best dividend stocks to buy.

Molson Coors (TAP)

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Molson Coors (NYSE:TAP) has a rather significant, attractive forward dividend yield of 3.45%. For some unknown reason, TAP stock sold off sharply after it reported very strong Q1 results on April 30.

The company’s sales jumped 10.6% versus the same period a year earlier to $2.6 billion, while its earnings before income taxes soared 37.4% year-over-year to a robust $320.6 million. In America, its income before taxes soared 160.5% YOY.

Molson’s growth is likely to slow in future quarters as its comparisons get tougher. That’s because it will lap the huge increase in its U.S. customer base that occurred in the wake of political/cultural controversies that ensnared one of its top competitors, Anheuser-Busch (NYSE:BUD). Still, I believe that Molson will be able to retain many of the new customers that it obtained as a result of this factor since consumers tend to be “creatures of habit.”

Molson Coors can also benefit from its increased emphasis on premium alcohol. There’s a good chance that this strategy will raise the company’s margins and profits over the longer term since consumers tend to be willing to pay much more for premium products. And there are some signs that its premium products have already become more popular, as it obtained 28% of its revenue from these offerings in 2022, up from 23% in 2019.

TAP stock has a very low forward price-earnings ratio of 9.2 times.

Citi (C)

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Citi (NYSE:C) has a fairly high dividend yield of 3.5%. The bank has rather elevated exposure to emerging markets, and emerging markets tend to suffer from high U.S. interest rates. That’s because high U.S. rates tend to make their debts costlier, while elevated U.S. rates can also cause them to have “capital flight” issues.”

Given these points, Citi’s emerging-market profits should increase meaningfully as U.S. rates fall. Perhaps partly because of this point, C stock rallied 22% between Dec. 13 and June 13.

Also likely to benefit Citi over the longer term, along with all of its large-bank peers, is regulators’ reported decision to lower the amount by which they will raise the institutions’ capital requirements to roughly 10% from the previously planned 20%.

C stock has a low forward price-earnings ratio of 10.4 times. while analysts, on average, expect its EPS to climb to $6.71 next year from $5.38 in 2024.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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