This has been an amazing year for stocks, with a 12.6% rise in the benchmark S&P 500 index. Fortunately for us value-conscious investors, the latest bull run has been mostly constrained to a handful of stocks at the top.
Bristol Myers Squibb(NYSE: BMY), Vici Properties(NYSE: VICI), and AT&T(NYSE: T) are dividend payers in the S&P 500 that haven't kept up with the biggest members of their index. At recent prices, $100 is more than enough to buy a share of each.
At their relatively depressed prices, these stocks offer a 6% average yield. Let's kick their tires to see if investors can rely on them to keep paying and raising their quarterly dividends.
1. Bristol Myers Squibb
Shares of Bristol Myers Squibb are down about 17% this year, thanks to a disturbing charge it recorded in association with recent acquisitions. At recent prices, the stock offers a 6.1% dividend yield and confidence that comes with 15 consecutive years of dividend payout raises.
In the first quarter, the big pharma acquired Karuna Therapeutics, RayzeBio, Mirati Therapeutics, and SystImmune. Instead of adding heaps of intangible assets to its balance sheet, Bristol Myers Squibb recorded a $12.9 billion in-process research and development (IPRD) charge.
A huge IPRD expense will hammer reported earnings this year, but a profit large enough to support future dividend raises could be around the corner. KarXT is an experimental first-in-class antipsychotic treatment that Bristol Myers Squibb acquired from Karuna. As the first totally new treatment option in decades, it could generate blockbuster sales if approved later this year as expected.
KarXT is just one of many experimental drugs in the Big Pharma company's late-stage pipeline that could become commercial successes in the years ahead. Adding some shares to a diversified portfolio now looks like a smart move.
2. Vici Properties
You probably know that the house always wins in Las Vegas casinos, but did you know that companies like MGM Resorts and Caesars Entertainment rarely own the buildings they operate? Instead, they rent them from real estate investment trusts (REITs) like Vici Properties.
Vici Properties' cash flows are very predictable, with inflation-sensitive annual rent escalators built into long-term net leases. The REIT has raised its dividend seven times since becoming a publicly traded company in 2018.
Shares of Vici Properties are down slightly this year and at recent prices offer a 6% dividend yield. Before betting all your chips on this stock, it's important to realize how heavily it relies on its largest tenants. At the moment, MGM Resorts and Caesars are responsible for 74% of total rent payments.
With such a heavy reliance on a pair of casino operators, this stock is far riskier than a well-diversified net lease REIT such as Realty Income. It's not a bad investment, but risk-averse investors want to pass on this high-yield opportunity.
3. AT&T
Shares of AT&T are up this year, but they've underperformed the S&P 500 by rising just 6% since the end of 2023. At recent prices, the underperforming stock offers a 5.9% yield.
In 2022, AT&T slashed its dividend to account for the spinoff of its media assets. Now that it's just a telecommunications company, cash flows should be more reliable.
Last year, AT&T became the last of America's big three 5G network operators to launch a fixed wireless broadband internet service. As a result, total broadband subscriptions stopped declining and started climbing again.
AT&T is managing a large debt load, but as it's a permanent member of America's three-member telecom oligopoly, there's a good chance it can begin raising its dividend payout again in 2025. Buying the stock now and holding it for the long run looks like a smart move for most income-seeking investors.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb, Realty Income, and Vici Properties. The Motley Fool has a disclosure policy.
