For many investors, high-yield dividend stocks aren’t the place to be as these companies tend to carry higher risk. This is either because the market is concerned about dividend cuts or it simply doesn’t like the outlook. In any case, stocks yielding more than the market average aren’t typically places many growth-oriented long-term investors want to be.
That said, amid market uncertainty, having a good mix of stocks within a portfolio is important. Balancing out growth and yield can be difficult. Indeed, growth has outperformed value stocks (which tend to have higher yields for some time). But over the long-term, companies with comparatively attractive valuations tend to pay out.
Keep in mind that part of this assessment comes from the fact that these are also companies that various billionaires have been loading up on. Here are three high-yield dividend stocks I think are amazing investments right now:
Altria (NYSE:MO) consistently maintains a low valuation, possibly due to regulatory concerns and declining smoking rates. Despite recent underperformance, the stock has historically generated impressive returns and offered long-term wealth creation. While Altria’s prime days may be in the past, investors can still benefit from its proven success formula.
Altria Group is a strong choice for dividend investors due to its solid fundamentals. With a low forward price-earnings ratio of 9-times, the stock presents an appealing opportunity. Additionally, Altria offers a generous dividend yield of 8.2%.
Despite experiencing a decline in sales of smokable products, Altria is managing a business transformation. While this segment continues to be a significant source of revenue, the company reported an operating cash flow of $8.3 billion last year and $3 billion in Q1 2023. With a projected annualized operating cash flow of $8 to $9 billion, Altria’s dividends are stable and secure.
With its consistent profitability and minimal investment requirements, this robust business generates billions in profits. Moreover, the company is a trusted Dividend King that has increased its payout for over 50 consecutive years.
Occidental Petroleum (OXY)
Occidental Petroleum (NYSE:OXY) is among the top stocks I’ve continued to pound the table on of late. While I usually talk about Devon Energy (NYSE:DVN) for its relatively high yield, Occidental is the key pick because of one man – Warren Buffett.
Renowned investor Warren Buffett continues to acquire shares of Occidental Petroleum, even as the stock price declines. In May, Buffett purchased 3.46 million OXY shares for approximately $200 million. With a total stake of 24.4%, valued at $12.7 billion, Buffett tends to initiate his purchases when the stock price falls below $60 per share.
Occidental has also rebounded from the Anadarko acquisition setback in 2019 and is now on a path to financial stability. The oil giant aggressively paid down $10.5 billion in debt during FY 2022, benefiting from the Russian-Ukraine conflict and an oil price surge.
In FY 2023 Q1, the company repurchased $752 million in common stock. With reduced debt and a focus on increasing shareholder returns over time, this undervalued oil stock is predicted to perform strongly. Analysts have set an average price target of $68, and the stock’s low forward price-earnings ratio of 10-times makes it a bargain. Notably, renowned investor Warren Buffett holds over 24% of Occidental’s outstanding shares — and is increasing his stake.
Verizon Communications (NYSE:VZ) is a divisive stock with investors. Concerns arise due to its presence in a highly competitive industry where differentiation is limited, potentially impacting earnings.
Verizon Communications offers a robust 6.98% dividend yield and has raised dividends for 18 consecutive years. With projected earnings growth of 0.21%, the company maintains the capacity for dividend growth. Analysts anticipate a 25.3% upside in VZ stock within 12 months. Trading at a low 7.28x earnings, Verizon appears undervalued compared to the market, making it an attractive choice for income-oriented investors who are looking towards high-yield dividend stocks.
Verizon’s stock is currently trading near its one-year low at around $34 per share. Some investment research firms have expressed concerns about potential earnings downgrades due to the company’s significant cash outflows for its 5G network expansion. This could impact future dividends and potentially slow down share-price growth.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.