Dividend stocks can be highly valuable investments to hold for the long term. In addition to dividend income, they have the potential to generate slow but modest gains over time. The problem these days is that with the stock market running as hot as it has in recent years, finding good, high-yielding stocks has become more challenging as rising valuations push yields down.
However, three of the best dividend stocks to buy this month are AT&T, Realty Income, and Campbell’s. All three pay well above 4%, and here’s why they look like great buys right now.
AT&T
Telecom giant AT&T pays a yield far above average, at 4.8%. By comparison, the average stock within the S&P 500 yields only 1.1%. For investors, that means considerably more dividend income with AT&T, which isn’t necessarily a riskier option despite its higher payout. In fact, tracking the broader index may be the more dangerous move these days, given its vulnerability to highly valued tech stocks.
AT&T, meanwhile, plays an important and relatively stable role in the telecom sector. It’s a leading company offering critical services to consumers and corporations, including internet connectivity and mobile devices. It’s arguably as stable and reliable a business as a utility provider, in that AT&T provides its customers with essential services.
And like a utility company, AT&T’s business is fairly stable and slow-growing. It won’t generate massive growth, but it can be depended on for solid financial results. Trading around $24 per share with a $162 billion market cap, the stock’s modest payout ratio of 37% reflects that stability, as earnings support the dividend well.
Although the market hasn’t been especially excited about AT&T this year, with shares down 5%, it’s a cheap-looking dividend stock that may be one of the better options for income investors right now, trading at just eight times its trailing earnings.
Realty Income
Another great option for a dividend portfolio is investing in a top real estate investment trust. A great choice here is Realty Income, one of the largest and most diversified REITs. Diversification is highly valuable since it can limit a REIT’s exposure to any one particular area of the economy.
Realty Income has 1,800 different clients accounting for the 15,500 commercial properties in its portfolio. Not only is its portfolio geographically diverse, with properties across several European countries in addition to its large U.S. presence, but its customers are also spread across 92 different industries.
The REIT’s business is stable enough that it’s one of the few stocks able to offer a high yield while also making monthly payments to investors. Trading around $63 per share with a $59 billion market cap, the company recently announced its 673rd consecutive monthly dividend and has increased its payout 135 times since going public in 1994.
Realty Income has a terrific track record for paying dividends, and at 5.1%, it offers an even higher yield than AT&T’s. So far this year, the REIT is up around 13%.
Campbell’s
The highest-yielding stock on this list is Campbell’s, which currently pays 7.1%. That’s a mouthwatering payout, and it deserves a spot here to ensure it doesn’t get overlooked for the value it offers income investors.
At first glance, investors might scoff at its high yield and dismiss the food stock as too risky. Consumers are eating less, GLP-1 drugs are reducing cravings, and there’s simply not as much demand for the company’s products—or at least that’s the story many investors appear to believe these days, as Campbell’s stock has cratered, losing nearly half its value over the past five years.
But the market may be overreacting here. Campbell’s still offers quality products that meet a variety of needs and wants. There may be a bit more risk with the business as sales have been declining, but the fundamentals aren’t as disastrous as the stock’s performance would suggest.
In its most recent quarter, which ended on May 3, Campbell’s net sales declined, but earnings actually improved as there was less noise weighing down the company’s financials. Trading around $22 per share with a $6.7 billion market cap, earnings per share came in at $0.42, up from $0.22 a year ago—comfortably higher than the $0.39 the company pays out in quarterly dividends.
This year, the company anticipates its organic net sales to decline between 1% and 2%. It’s not great, but not awful either. Trading at just 11 times its trailing earnings, this discounted stock may prove an underrated option for income investors, especially given its high yield.
