In a volatile market, dividend stocks tend to be a safer bet, providing consistent, regular income. While growth stocks may appeal for their ability to generate significant returns over time, dividend stocks offer stability.
While not all dividend stocks are created equal, some have an advantage among investors by providing an attractive yield. Here are three dividend stocks that investors might want to scoop up now.
Pfizer: Dividend Yield of 5.7%
With a market cap of $164.8 billion, Pfizer (PFE) is a well-known pharmaceutical company. While Pfizer is best known for its pivotal role in developing the COVID-19 vaccine, its portfolio ranges across various other therapeutic areas, including oncology, immunology, cardiovascular, and rare diseases.
Pfizer stock has gained 0.5% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of 20.8%.
Pfizer's product portfolio is well-diversified, with blockbuster drugs like Vyndaqel (for nerve damage), Eliquis (a blood thinner), Nurtec ODT (for migraine), Ibrance (for breast cancer), Xeljanz (for rheumatoid arthritis), and Prevnar 13 (a pneumococcal vaccine). Its pipeline of new drug candidates, particularly in oncology and immunology, is strong, and Pfizer's strategic acquisitions have increased its potential for future growth.
The company remains appealing to income-seeking investors due to its strong dividend yield of 5.7%, which is higher than the healthcare sector average of 1.6%.
Pfizer distributed $4.8 billion in cash dividends over the first half of 2024. For the past 15 years, the company has consistently increased its dividends. Furthermore, its payout ratio of 58.7% appears to be sustainable, given the earnings growth. Analysts expect Pfizer's earnings to rise 44.2% to $2.65 in 2024, then another 7.8% in 2025.
On Wall Street, Pfizer stock is rated a “moderate buy” overall. Out of the 21 analysts who cover PFE stock, nine rate it a "strong buy," and 12 rate it a “hold.”
Its average price target of $33.26 suggests that the stock can increase by 14.9% over current levels. However, its high target price of $45 implies an upside potential of 55.5% over the next 12 months.
Walgreens Boots Alliance: Dividend Yield of 11%
Walgreens Boots Alliance (WBA) is one of the world's largest retail pharmacy chains, operating across the U.S., Europe, and other international markets. It runs a large network of stores that sell prescription drugs, over-the-counter medications, and health and wellness products.
Valued at $7.8 billion, Walgreens stock has fallen 65.6% YTD, compared to the overall market.
The company has faced challenges in recent years, including fierce competition from retail giants like Amazon (AMZN). Despite these challenges, Walgreens remains a strong dividend-paying stock, with a yield of approximately 11%, significantly higher than the consumer sector average of 1.8%.
In the fiscal third quarter, adjusted earnings fell 36.6% to $0.63 per share, due to a challenging retail environment in the U.S. However, the company distributed $1 billion in cash dividends.
While Walgreen's yield is certainly intriguing, there is something to be concerned about. The forward payout ratio of 54.3% is not particularly high. However, given the decline in earnings, investors should be cautious about whether WBA's dividends can be sustained. Furthermore, analysts predict that earnings will fall by 28.4% in 2024.
On Wall Street, WBA stock is rated a “hold.” Out of the 15 analysts who cover Walgreens, two rate it a "strong buy," 10 rate it a “hold,” one recommends a “moderate sell,” and two suggest that it’s a “strong sell.”
Its average price target of $11.73 suggests that WBA stock can increase by 30.9% over current levels. However, its high target price of $19 implies an upside potential of 112% over the next 12 months.
Altria Group: Dividend Yield of 7.9%
Altria Group (MO), a major tobacco and nicotine product industry player, has long been a favorite among dividend investors. It has an attractive annualized forward dividend yield of 7.9%, which is higher than the consumer sector average.
Valued at $87.6 billion, Altria stock has surged 26.5% YTD, outperforming the broader market.
While the cigarette market has shrunk due to public health initiatives and shifting consumer preferences, Altria has remained resilient, relying on a diversification strategy to maintain profits. It has expanded its offerings to include cannabis, wine, vaping, and smokeless tobacco, among others.
The company paid out $1.7 billion in dividends in the second quarter. Its adjusted earnings remained flat at $1.31 per share. Analysts expect earnings to rise 3.1% in 2024, followed by another 3.8% in 2025.
While its high forward payout ratio of 76.9% raises concerns about Altria's ability to sustain dividend payments, it reassured investors by stating that dividends will be increased by mid-single digits annually until 2028. The company expects earnings to grow by 2.5% to 4% in the second half of the year, depending on macroeconomic conditions.
MO also recently increased its dividend by 4.1% to $1.02 per share, marking the 59th straight dividend increase. The company has been recognized as a Dividend King due to its consistent dividend increases over the past 50 years.
Overall, Altria stock is rated a “hold.” Three of the 10 analysts who cover MO rate it a "strong buy," five rate it a "hold," and two recommend a "strong sell." Altria stock has surpassed its average price target of $48.94. However, its high target of $57 suggests the stock can rally another 11.7% over the next 12 months.
