The spike in COVID-19 cases and rising inflationary pressures are threatening the current bull market. These concerns have led analysts to anticipate a stock market correction soon, with an expected retreat of more than 10% from recent highs. Consequently, dividend stocks could be ideal bets now.
Over the past couple of months, declining Treasury yields amid the continuing near-zero interest rate environment have made high-yielding dividend stocks AT&T Inc. (T) and Altria Group, Inc. (MO) solid bets. These stocks have impressive payout histories.
Conversely, we think it could be risky to bet on dividend-paying stocks Iron Mountain Incorporated (IRM) and B&G Foods, Inc. (BGS) because of their weak balance sheets and hefty losses.
Stocks to Buy:
AT&T Inc. (T)
T is a provider of telecommunication, media, and technology services worldwide. The company operates through Communications, WarnerMedia, and Latin America segments.
On July 21, Grupo Werthein and T announced that Grupo Werthein would acquire T’s Vrio Corp. business unit. The CEO of AT&T Latin America expects this transaction to sharpen further the company’s focus on investing in connectivity for customers.
Also last month, T and JBG SMITH Properties (JBGS) signed a letter of intent to deliver the first 5G Smart City at scale in National Landing in Northern Virginia. Such network infrastructure deployments should allow T to become one of the largest 5G carriers in the U.S.
T’s $2.08 annual dividend yields 7.38% at the stock’s current price. On June 25, the company approved a $0.52 quarterly dividend. T’s dividend payouts have increased at a 1.5% CAGR over the past three years. The company has a record of 37 consecutive years of dividend growth.
T’s total operating revenues increased 7.6% year-over-year to $44.05 billion in its fiscal second quarter, ended June 30. Its net income attributable to the company grew 22.6% from its year-ago value to $1.57 billion. The company’s EPS has increased 23.5% year-over-year to $0.21.
Analysts expect T’s revenues to increase 2.8% year-over-year to $176.57 billion in the current year. The company’s EPS is expected to rise 6% year-over-year to $3.37 in the current year. In addition, T surpassed the Street’s EPS estimates in three of the trailing four quarters, which is impressive.
T has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has a B grade for Growth and Stability. Of the 23 stocks in the Telecom – Domestic industry, T is ranked #2.
To see additional T ratings for Value, Sentiment, Quality, and Momentum, click here.
Altria Group, Inc. (MO)
MO manufactures and sells cigarettes, oral tobacco products, and wine. The Richmond, Va., company sells its tobacco products primarily to wholesalers, including distributors, and large retail organizations, such as chain stores.
On July 9, MO announced that its subsidiary, UST LLC, had entered a definitive agreement to sell its Ste. Michelle Wine Estates business in an all-cash transaction for approximately $1.2 billion. The transaction is expected to close in the second half of 2021. MO plans to use the proceeds for additional share repurchases subject to board approval.
MO’s $3.44 annual dividend yields 7.14% at the current share price. MO’s dividend payouts have increased at an 8.1% CAGR over the past three years. The company has delivered 17 consecutive years of dividend growth.
MO’s net revenues increased 8.9% year-over-year to $6.94 billion in its fiscal second quarter, ended June 30. Its operating income grew 13.9% from its year-ago value to $3.19 billion, while its net income climbed 10.6% from the same period last year to $2.15 billion. The company’s EPS increased 11.5% year-over-year to $1.16.
A $21.29 billion consensus revenue estimate for the current year indicates a 2.2% increase year-over-year. The Street expects the company’s EPS to rise 6% from the prior year to $4.62 in the current year. MO has an impressive earnings surprise history as well; it beat the consensus EPS estimates in three out of the trailing four quarters. Shares of MO have gained 7.1% over the past six months and 17.6% year-to-date.
It’s no surprise that MO has an overall rating of B, which equates to Buy in our POWR Ratings system. In addition, MO has an A grade for Momentum, and B for Stability and Quality. Among the 11 stocks in the Tobacco industry, MO is ranked #6.
Click here to view additional MO ratings for Growth, Value, and Sentiment.
Stocks to Avoid:
Iron Mountain Incorporated (IRM)
Boston-based IRM is the global leader of storage and information management services. The company stores and protects billions of valued assets, including critical business information, highly sensitive data, and cultural and historical artifacts.
IRM’s $2.47 annual dividend yields 5.41% at the current share price. On August 5, the company approved a $0.62 quarterly dividend. IRM’s dividend payouts have increased at a 2.3% CAGR over the past three years.
For the six months ended June 30, IRM’s cash flow from operating activities declined 11.4% year-over-year to $389.20 million. Also, its cash and cash equivalents balance decreased 65.2% year-over-year to $315.93 million. Shares of IRM declined marginally in price in intraday trading to close yesterday’s trading session at $45.77.
IRM is part of the F-rated REITs – Data Centers industry. Get IRM ratings for Growth, Value, Stability, Momentum, Sentiment, and Quality, here.
B&G Foods, Inc. (BGS)
BGS manufactures, sells, and distributes a portfolio of shelf-stable and frozen foods and household products in the United States, Canada, and Puerto Rico. It sells and distributes its products directly and through a network of independent brokers and distributors. BGS is headquartered in Parsippany, N.J.
BGS’s $1.90 annual dividend yields 6.53% at the current share price. On August 3, the company approved a $0.48 quarterly dividend. BGS’ dividend payouts have increased at a 4.3% CAGR over the past five years.
BGS’s net sales declined 9.4% year-over-year to $464.40 million in its fiscal second quarter, ended July 3. Its net income decreased 45.3% year-over-year to $24.60 million over the period. The company’s EPS decreased 45.7% year-over-year to $0.38.
A $493.77 million consensus revenue estimate for the fiscal third quarter, ending September 30, 2021, indicates a marginal decline from the same period last year. In addition, analysts expect the company’s EPS to come in at $0.65 in the current quarter, indicating a 12.2% fall year-over-year.
BGS has shed 7.1% in price over the past six months. Over the past five days, the stock has slumped 4.5% to close yesterday’s trading session at $29.10.
The company has an overall D rating, translating to Sell in our proprietary rating system. In addition, BGS has an F grade for Sentiment, and D for Momentum, Quality, and Growth. It is ranked #74 among the 82 stocks in the Food Makers industry.
Beyond what we’ve stated above, we have also rated BGS for Value and Stability. Click here to view all BGS ratings.
T shares rose $0.04 (+0.15%) in after-hours trading Wednesday. Year-to-date, T has gained 0.53%, versus a 20.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More…
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