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Tags: income investor | retirement savings | dividend stock | Philip Morris | Walgreens Boot Alliance | Kinder Morgan

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

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

Bob Ciura By Monday, 20 February 2023 04:59 PM EST Current | Bio | Archive

The average dividend yield in the S&P 500 Index remains low at 1.6%. 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.

In the 2022 fourth 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.

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 5.2%.

High-Yield Stock: Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance is the largest retail pharmacy in both the United States and Europe. Through its flagship Walgreens business and other business ventures, the company has a presence in more than 9 countries, and has more than 13,000 stores in the U.S., Europe, and Latin America. Walgreens’ competitive advantage lies in its vast scale and network in an important and growing industry.

Healthcare is another sector that is not highly exposed to economic downturns, and Walgreens has generated fairly stable results over the past year. In the most recent fiscal quarter, total sales dipped -1.5% and adjusted earnings-per-share slumped -31% over the prior year’s quarter, from $1.68 to $1.16, mostly due to high COVID-19 vaccinations in the prior year’s period. Despite the difficult comparison to the previous year, earnings-per-share exceeded analysts’ consensus by $0.02. The company has beaten analysts’ estimates for 10 consecutive quarters.

Walgreens reaffirmed its guidance for earnings-per-share of $4.45-$4.65 in fiscal 2023. This means the company is highly profitable, and easily covers its annual dividend payout of $1.92. The stock currently yields 5.3%.

Walgreens has increased its dividend for over 40 consecutive years, placing it on the exclusive Dividend Aristocrats list.

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 reasonable 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 6.1% dividend yield.
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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The average dividend yield in the S&P 500 Index remains low at 1.6%. As a result, income investors should focus on higher-yielding securities if they want additional income from their stock portfolios.
income investor, retirement savings, dividend stock, Philip Morris, Walgreens Boot Alliance, Kinder Morgan
Monday, 20 February 2023 04:59 PM
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