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Tags: high-yield stocks | dividends | philip morris | hasbro | kinder morgan
OPINION

Bob Ciura: 3 High-Dividend Stocks Yielding Over 5%

Bob Ciura: 3 High-Dividend Stocks Yielding Over 5%
(Dreamstime)

Bob Ciura By Friday, 07 April 2023 01:54 PM EDT Current | Bio | Archive

Even though interest rates are rising rapidly, the average dividend yield in the S&P 500 Index remains low at 1.7%. As a result, income investors should focus on higher-yielding securities if they want additional income from their stock portfolios.

The good news is, investors do not have to sacrifice quality when buying higher-yielding stocks. There are many quality high dividend stocks with yields above 5%.

This article will discuss 3 dividend stocks with high yields, that are attractive for income investors right now.

High-Yield Stock: Philip Morris International (PM)

Philip Morris International is a tobacco company that was spun off from its former parent company Altria (MO). Philip Morris sells cigarettes under the Marlboro brand, among others, internationally. It has a large portfolio of tobacco products as well as non-smokeable alternatives.

As a tobacco company, PM is well-insulated from recessions, as demand for tobacco products remains steady even in difficult economic environments.

On February 9th, 2023, Philip Morris reported its Q4-2022 results. For the quarter, the company reported net revenue of $8.2 billion, 0.6% higher compared to Q4-2021. Shipment volume was up 1.2% collectively, with cigarette shipment volume down 2.8% and heated tobacco, a much smaller portion of the business, up 26.1% year-over-year.

Earnings-per-share equaled $1.54, up 14.9% versus the comparable period last year. The increase was driven by net income growth of 11.9% to $2.5 billion and a lower share count due to share buybacks.

Management shared its fiscal 2023 guidance, expecting EPS to be between $6.09 and $6.21. Excluding currency effects and other non-cash items, management expects adjusted EPS to range between $6.25 and $6.37.

PM has increased its dividend for 15 years in a row, each year since it was spun off from Altria. Due to strong cash generation, low capex requirements and the stability of Philip Morris’ business model during recessions the dividend remains relatively well-covered. Shares currently yield 5.3%.

High-Yield Stock: Hasbro (HAS)

Hasbro is one of the largest producers of toys in the world, in addition to family and leisure products. It generates about half of its $6.2 billion in annual revenue from the U.S. and Canada, over 40% from international markets and a small amount from entertainment and licensing.

Hasbro was founded in 1923 in Hasbrouck Heights, New Jersey, and trades with a market capitalization of about $7.8 billion. Hasbro reported fourth quarter earnings on February 16th, 2023, and results were weaker than expected.

Adjusted earnings-per-share came to $1.21, which was eight cents lower than estimated. Revenue was off 16% year-over-year to $1.68 billion, which was fractionally ahead of expectations. The company noted a 22% rise in revenue from its card game segment, called Wizards of the Coast.

The company also said that was more than offset by a 26% decline in toys revenue. Hasbro said higher warehousing costs, higher inventory, and close outs all hit results. The company said it plans on a full-year sales decline of “low single digits” for this year, as well as higher operating margin. Adjusted EBITDA is expected to be flat, with operating cash flow of $600 million to $700 million.

Hasbro has a projected dividend payout ratio of 64% for 2023, which means the dividend is relatively secure. Shares currently yield 5.3%.

High-Yield Stock: Kinder Morgan (KMI)

Kinder Morgan is one of the largest energy companies in the U.S. It is engaged in storage and transportation of oil and gas, and other products. It owns an interest in or operates approximately 83,000 miles of pipelines and 144 terminals. Its pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide (CO2) and more.

Kinder Morgan’s transportation assets operate like a toll road, whereby the company receives a fee for its services, which generally avoids commodity price risk. Approximately 90% of Kinder Morgan’s cash flow is fee-based.

On January 18th, the Kinder Morgan reported its FY 2022 results and announced that its board of directors approved an increase in KMI’s share repurchase authorization from $2.0 billion to $3.0 billion. Since the program’s inception, KMI has repurchased approximately $943 million worth of shares at an average price of $17.40 per share, leaving a remaining capacity of approximately $2.1 billion.

The company also provided its 2023 outlook. It expects to generate net income attributable to KMI of $2.5 billion ($1.12 per share in line with the consensus) and declare dividends of $1.13 per share, a 2% increase from the dividends declared for 2022. The company also budgeted to generate 2023 DCF of $4.8 billion ($2.13 per share) and Adjusted EBITDA of $7.7 billion and to end 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0.

Kinder Morgan operates in the cyclical energy sector, but its business model still enables it to generate fairly stable cash flows. It has a fairly low interest coverage ratio, and its DCF covers its dividend payouts. The stock has a 6.4% dividend yield.
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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BobCiura
Even though interest rates are rising rapidly, the average dividend yield in the S&P 500 Index remains low at 1.7%. As a result, income investors should focus on higher-yielding securities if they want additional income from their stock portfolios.
high-yield stocks, dividends, philip morris, hasbro, kinder morgan
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2023-54-07
Friday, 07 April 2023 01:54 PM
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