Here are some high dividend yield stocks that analysts love.
The U.S. jobs market has recovered substantially from its 2020 lows, and inflation has risen at least temporarily to multiyear highs. But the federal funds interest rate, the rate banks charge each other to borrow money overnight, has been near 0.1% since an emergency rate cut in March 2020. The Federal Reserve signaled that it will not raise rates until next year. In the meantime, dividend stocks are one of the few places for income investors to find meaningful yield. Here are nine of the best high dividend yield stocks to buy today, according to Bank of America.
Exxon Mobil Corp. (ticker: XOM)
Exxon Mobil is the largest U.S. oil major. The oil and gas industry faced tremendous pressures during the 2020 economic shutdown, which triggered a collapse in crude prices. Oil prices have come roaring back in 2021, and Exxon reported its highest quarterly free cash flow in 10 years in the second quarter. Analyst Doug Leggate says the company can use that cash flow to pay down its debt and has named Exxon his top major oil stock pick. Exxon also pays a 6.1% dividend. Bank of America has a “buy” rating and a $90 price target for XOM stock.
Verizon Communications Inc. (VZ)
Verizon Communications is one of the largest U.S. telecom companies. Analyst David Barden says Verizon has the most defensible subscriber base of any of the major U.S. telecoms. He says Verizon has improved its balance sheet via asset sales and that its earnings growth will likely outpace its peers. The stock currently trades at just 9.9 times Barden’s 2022 earnings estimate. Verizon was also one of just a handful of stocks Warren Buffett bought in 2020. Verizon shares pay a 4.7% dividend. Bank of America has a “buy” rating and a $64 price target for VZ stock.
AT&T Inc. (T)
Barden is also bullish on Verizon’s top telecom competitor, AT&T. Barden says AT&T has shifted focus to growing customer relationships. In the most recent quarter, the company reported subscriber additions and revenue numbers that were well above analyst expectations. Still, AT&T shares have lagged in 2021, falling 7% year to date. Barden says investors don’t yet trust AT&T’s positive fundamental momentum because it is a relatively recent phenomenon and it hasn’t yet translated to meaningful operating leverage. AT&T pays a 7.6% dividend. Bank of America has a “buy” rating and a $36 price target for T stock.
Chevron Corp. (CVX)
Oil major Chevron has recently committed to investing $10 billion in “green” initiatives through 2028. At this point, the company projects just $1 billion in cash flow from these projects by 2030. Leggate says the green projects will be a drop in the bucket of the $170 billion in free cash flow he predicts for Chevron from 2021 through 2030. Instead, his bull case for the stock is based on its attractive valuation, its 5.4% dividend and its capital efficiency. Bank of America has a “buy” rating and a $130 price target for CVX stock.
Philip Morris International Inc. (PM)
Philip Morris is one of the largest international tobacco companies and owner of brands such as Marlboro, Parliament and L&M. The tobacco industry has been pressured by regulators for years, but analyst Lisa Lewandowski says Philip Morris is her top stock pick in the tobacco group. Lewandowski says Philip Morris has one of the strongest growth profiles among its consumer staples peers and seems committed to shifting customers away from cigarettes to alternative products. Philip Morris shares pay a 4.9% dividend. Bank of America has a “buy” rating and a $115 price target for PM stock.
International Business Machines Corp. (IBM)
IBM is one of the largest enterprise software and hardware solutions providers. IBM has struggled to modernize its legacy hardware business in the past decade. However, IBM is planning a spin-off of its managed infrastructure services business, and analyst Wamsi Mohan says the spinoff could unlock value in the remaining company. While IBM has failed to generate consistent revenue growth in recent years, the company has generated $9.7 billion in free cash flow over the past four quarters. IBM also pays a 4.8% dividend. Bank of America has a “buy” rating and a $176 price target for IBM stock.
Altria Group Inc. (MO)
Altria is one of the largest tobacco companies in the world. Lewandowski says Altria has a long track record of adapting well to a dynamic U.S. regulatory environment. The company is currently committed to a 10-year plan of “moving beyond smoking,” including heavy investments in noncombustible nicotine products. In the meantime, Altria recently raised its annual dividend by nearly 5% to $3.60, which represents a 7.4% yield. Lewandowski says Altria shares are currently trading at a significant discount to their historical valuation range. Bank of America has a “buy” rating and a $58 price target for MO stock.
Simon Property Group Inc. (SPG)
Simon Property Group is a real estate investment trust that owns and manages a portfolio of properties consisting primarily of regional shopping malls and outlet centers. Analyst Craig Schmidt says Simon’s second-quarter results far exceeded his expectations. He says positive same-store net operating income growth and positive occupancy trends in the second quarter mark a clear bullish inflection point for Simon. Mixed-use property redevelopment is a positive growth catalyst moving forward, and the REIT recently raised its distribution yield to 6.3%. Bank of America has a “buy” rating and a $150 price target for SPG stock.
Kraft Heinz Co. (KHC)
Kraft Heinz is one of the world’s largest consumer packaged food and beverage companies. Kraft Heinz has struggled with growth, and the stock has once again lagged the S&P 500 in 2021. Analyst Bryan Spillane says Kraft is overcoming difficult year-over-year comparisons by raising prices. In addition, he says Kraft Heinz’s recent divestment of Planters coupled with its planned sale of Natural Cheese should improve its balance sheet. Kraft has a 4.4% dividend and trades at just 14 times forward earnings estimates. Bank of America has a “buy” rating and a $46 price target for KHC stock.
Best high dividend stocks to buy:
— Exxon Mobil Corp. (XOM)
— Verizon Communications Inc. (VZ)
— AT&T Inc. (T)
— Chevron Corp. (CVX)
— Philip Morris International Inc. (PM)
— International Business Machines Corp. (IBM)
— Altria Group Inc. (MO)
— Simon Property Group Inc. (SPG)
— Kraft Heinz Co. (KHC)