Buying high-yielding dividend stocks can be scary, even when it's not Halloween. You can be tricked into thinking that a high payout is safe, only to watch management cut it later on. And when those reductions come, not only will your dividend income diminish, but the market will likely bid down the stock price too.
But there are some great dividend stocks to buy right now that not only have high yields but are also considered safe and can make for excellent investments for years to come. Pfizer (NYSE: PFE), Realty Income (NYSE: O), and ExxonMobil (NYSE: XOM) are all solid investments to load up on this Halloween.
Here's why these three passive income providers are better options than your average dividend stock and why the Halloween season is as good a time as any to consider buying.
1. Pfizer
If you're buying shares of Pfizer, you're getting much more than just a high-yielding dividend stock. Its yield of 5.8% at the current share price is certainly one key reason why many investors should consider adding it to their portfolios right now. But another is its extremely low valuation.
The healthcare stock has been struggling in recent years and it's trading around the levels it was at back in 2020. Based on analysts' projections, it's trading at just 10 times next year's earnings. That's incredibly cheap when you consider the average stock in the Health Care Select Sector SPDR Fund trades at a forward price-to-earnings ratio of 22.
Investors aren't willing to pay a premium for Pfizer stock due to the rapidly declining sales of its COVID-19 vaccine and antiviral, and concerns about looming patent cliffs. But the business has been using the windfall profits from its pandemic-era vaccines and treatments to bolster its pipeline and growth prospects through acquisitions, including its mammoth $43 billion purchase of oncology company Seagen, which it closed last year.
There's some short-term uncertainty ahead for Pfizer, but overall, its low valuation provides investors with an excellent margin of safety in case its growth plans don't entirely pan out.
2. Realty Income
Realty Income, too, can make for an excellent income investment. In addition to the 4.9% yield you'll collect at the current share price, what's sweet about this real estate investment trust (REIT) is that, unlike most other dividend stocks, it makes monthly payments.
It also benefits from a lack of customer concentration risk: It leases its vast portfolio of properties to more than 1,500 different tenants. Its occupancy rate is also fairly high at 98.8%. The REIT has a lot of stability, which has allowed it to increase its dividend 127 times since it began trading on the NYSE in 1994.
Through the first half of the year, Realty Income has reported funds from operations per share of $2.01, down slightly from the $2.05 that it posted in the first half of last year. With lots of consistency in its financials, the REIT could be an ideal stock to buy and hold for years.
3. ExxonMobil
Oil giant ExxonMobil's dividend yields 3.2% at recent share prices. That's lower than Realty Income or Pfizer, but still well more than double the S&P 500's average yield of 1.3%.
The oil and natural gas stock can make for a great investment if you want to diversify your portfolio and protect it against inflation. What makes this a sweet stock to own is the dividend growth and stability that it offers. ExxonMobil has increased its payouts for more than 40 consecutive years, even as it has at times faced significant headwinds and the volatility that often comes with fluctuating commodity prices.
In the past four reported quarters, ExxonMobil generated profits totaling $34.2 billion on revenue of $340.7 billion. Even if the business experiences a drop in profitability due to lower oil prices, its size and scale put it in a great position to outperform its peers.
While it may experience some short-term volatility, ExxonMobil should remain a solid buy for the long haul given the world's ongoing need for oil. Despite the rising use of electric vehicles, global oil demand may not reach its peak for another decade, according to a 2024 forecast from Goldman Sachs.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $20,803!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,654!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $404,086!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 21, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group, Pfizer, and Realty Income. The Motley Fool has a disclosure policy.
