If you’re a growth investor, an article about overlooked high-yield dividend stocks is not for you. However, with the recent numbers showing that inflation is that dinner party guest that is overstaying its welcome, you may not want to dismiss income-generating stocks too quickly.
Now, if you’re still with me, I’ll also say that this I’m not recommending that you find the dividend stocks with the highest dividend yields and be done with it.
While high-yield dividend stocks are attractive, they’re only one part of a stock’s total return. Not only do you want to ensure that a company’s dividend is safe (and preferably growing), but you also want to buy shares of a company that are going to deliver reasonable capital gains to go along with that dividend.
Of course, if you’re looking to own stocks for the long haul, you’re going to have to deal with a bad year here and there. But over time, owning quality high-yield dividend stocks is a solid strategy for building wealth.
Companies that pay dividends are often blue-chip companies that are at a mature stage in their business cycle. This means they deliver predictable, some may say boring, revenue and earnings. But boring can quickly become beautiful when it’s time for those dividends to be paid.
Here are seven overlooked high-yield dividend stocks for you to consider in 2024.
This isn’t the first time I’ve recommended Pfizer (NYSE:PFE) and it may not be the last. PFE stock is a no-go for many investors based on reasons that have nothing to do with the company’s fundamentals. Fair enough, every investor needs to know where their line is.
And from a total return standpoint, Pfizer has been a tough hold. The stock is down 38.9% in the last 12 months. The reason is simple. The record revenue and earnings per share (EPS) growth the company saw in 2021 and 2022 has normalized. Faced with tougher comps in 2023, Pfizer couldn’t deliver.
But the company reported 7% growth in revenue from its non-Covid products in the third quarter. And, Pfizer projects full-year revenue growth for those products between 6%-8%.
Beyond its current portfolio, Pfizer has a strong pipeline backed by $7.9 billion in internal reserarch and development spending. The pipeline includes many drugs and therapeutics centered around the concept of precision medicine, which focuses on the biological basis of diseases.
Pfizer is expected to post 45% earnings growth in the next 12 months. Still PFE stock trades at an attractive forward price-to-earnings (P/E) ratio of 18x. Investors also get a dividend that has been growing for 14 consecutive years and has a juicy 5.91% yield.
Philip Morris International (PM)
Next on this list of overlooked high-yield dividend stocks is Philip Morris International (NYSE:PM). One reason why the company may be overlooked is that it’s in the category of equities loosely labeled sin stocks.
As you consider the bullish case for Philip Morris, think to the electric vehicle (EV) industry. While this industry has its startups, the legacy automakers weren’t going to allow this threat to their business to emerge without getting a seat at the table.
In the same way, Philip Morris is a key player in the smokeless tobacco categories. Traditional nicotine products continue to have a place in the company’s portfolio. But an increasing amount of revenue is coming from smoke-free products. In its third quarter 2023 earnings report, that category was responsible for 36% of the company’s revenue.
That’s why no matter how you look at it, or disagree with it, Philip Morris is an exceptional defensive stock. PM stock is down 7% in the last 12 months, but analysts are expecting a 15% recovery in the company’s share price. And investors get a juicy dividend that currently yields 5.50% and has increased for 16 consecutive years.
Kenvue (NYSE:KVUE) is the former consumer products division of Johnson & Johnson (NYSE:JNJ). The company formally spun off from J&J in May and began publicly trading at that time. The early returns have been underwhelming with the stock down 18%.
Nevertheless, Kenvue represents the most defensive sector of its former parent company’s portfolio with brand names like Band-Aid, Listerine, and Tylenol. Those popular brands are literally household names and staple items in medicine cabinets.
But should you buy the stock? Earnings are expected to be flat to slightly lower. But analysts have a sense that the sell-off may be overdone. They assign KVUE stock with a $24.27 consensus price target which is 10% higher than the price as of this writing.
And then there’s the dividend which currently has a yield of 3.65%. For now, ratings agencies are giving Kenvue a halo effect from Johnson & Johnson. The stock gets mostly ‘A’ ratings as analysts expect that Kenvue management won’t depart from J&J’s emphasis on the dividend.
The fall rally in oil prices reversed sharply in the last two months of 2023, and with it went the share price of oil stocks like Chevron (NYSE:CVX). The energy sector in general disappointed investors in 2023. In fact, CVX stock earned the dubious distinction of being one of the Dogs of the Dow in 2023.
To be fair, there are many factors that can impact the direction of oil prices. However, despite the state of interest rates, oil prices have been ticking higher. If the Federal Reserve lowers interest rates, for whatever reason, it will be exceptionally bullish for oil.
But won’t that just be a rising tide that lifts all oil stocks? The experts are projecting earnings per share for companies in the oil and gas industry will rise at an average rate of 6.3% for the next 12 months. However, Chevron is expected to grow earnings by over 16% and analysts give CVX stock a consensus price target of $177.61 which is a 22% gain.
In addition to that sector-beating performance, Chevron is a dividend aristocrat that has increased its dividend for 36 consecutive years. The dividend currently has a yield of 4.16%.
United Parcel Service (UPS)
United Parcel Service (NYSE:UPS) clocks in with a dividend yield of 4.07%. And in 2023, that was the only comfort that investors got from owning UPS stock. Shares of the delivery giant are down 11.5% in the last 12 months. The company faced tough comparisons to 2022. A labor dispute didn’t help matters as some customers took their business elsewhere.
But the stock has been trending higher along with the broader market. The company has taken cost-cutting measures and is projecting earnings growth of over 6.8% in the next 12 months. Analysts give the share price about a 5% upside. And on Jan. 10, Stifel Nicolaus reiterated its Buy rating on the stock while bumping its price target to $190.
That’s more exciting. However, for UPS Stock to hit that number, you’re betting on the consumer to stay strong. The December CPI number showed that inflation won’t go quietly, but it also provides some evidence that the consumer continues to spend.
International Business Machines (IBM)
Many growth investors will continue to buy the Magnificent 7 stocks in 2024. That includes stocks like Nvidia (NYSE:NVDA) which may continue to be a great stock.
But as Josh Enomoto explained to InvestorPlace readers, Nvidia may be many things, but it’s not part of the overlooked high-yield dividend stocks club. So, if you’ve stuck with me to this point, you may find International Business Machines (NYSE:IBM) to be an interesting choice.
One reason for that is, ironically, AI. Many investors don’t realize that IBM has been involved in the area of machine learning long before ChatGPT caught the attention of students across the globe. And the company’s recent announcement of its Quantum System Two computer has the opportunity to leap frog the company into a prominent position in the AI space.
That being said, IBM is the only stock on this list that is forecast to have a lower stock price in the next 12 months. But with a dividend that yields over 4% you get a nice benefit while you wait on the stock to move higher.
Armour Residential REIT (ARR)
For many investors, finding high-yield dividend stocks means looking at monthly dividend payers. And that means real estate investment trusts (REITs). Armour Residential REIT (NYSE:ARR) is one of the more intriguing names to look for in 2024.
But it’s not without risk. The company is a mortgage REIT (mREIT) that’s primary revenue is derived from buying government agency securities on people’s mortgages. The environment for mREITs has been terrible to say the least as interest rates have moved higher because the value of existing loans – the kind that Armour buys – is lower.
Thomas Niel explains why the company’s current dividend yield of over 24% may not be sustainable. But REITs are still required to pay at least 90% of their earnings to shareholders in the form of dividends. In 2023, the amount the company is paying in dividends still exceeds the company’s net loss on paper.
That may be a simplistic way of looking at things, but when you’re considering investing in a REIT, it’s all about the dividend. Armour looks like a good choice.
On the date of publication, Chris Markoch had a LONG position in CVX. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.