Finding high and durable income producing assets is still possible, but the universe of such picks is clearly shrinking. Yet, if the goal is to capture buybacks and income growth on top of high and protected yields, then things become really difficult. In this article, I have outlined two picks, which still offer all three elements, and thus should be considered by income investors as additions to their portfolios.
Realty Income (O -0.74%) and Altria (MO 0.16%) are both popular stocks for income investors. Realty is one of the largest real estate investment trusts (REITs) in the world, it pays monthly dividends, and it's raised its payout 127 times since its IPO in 1994.
Altria's smoke-free strategy and pricing power make it a compelling option for value-focused investors despite challenges from declining cigarette volumes.
Donald Trump's election victory sent the stock market soaring to new heights as the promise of tax cuts, deregulation, and a business-friendly environment caused a wave of euphoria.
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%.
Altria (MO 0.10%) has a huge 7.1% dividend yield. British American Tobacco (BTI 0.61%) has an even higher yield of roughly 8%.
The power of owning dividend-paying stocks is often underappreciated. Consider, for example, that a study by Hartford Funds and Ned Davis Research found that between 1973 and 2023, companies that grew or initiated dividend payments delivered annualized returns of 10.2%, while dividend non-payers delivered only 4.3% (and an equal-weight S&P 500 fund averaged 7.7%).
Despite its social stigma and terrible health consequences, tobacco is arguably the most lucrative business the world has ever seen. The U.S. Surgeon General first warned the American public about the dangers of smoking on Jan. 11, 1964.
Altria, with a $90 billion market cap and more than 7% dividend yield, remains a valuable long-term investment due to its strong earnings. The company faces a significant regulatory burden and declining industry volumes, posing challenges to its growth. Despite these challenges, Altria continues to achieve robust earnings growth and offers substantial shareholder returns.
There are a lot of things to like about Altria (MO 1.25%), particularly if you are a dividend investor. But there are also a few very important things to be worried about.
The stock price of Altria (NYSE: MO) has risen around 15% in a month, primarily due to a better than anticipated quarterly performance driven by growth in its oral tobacco products. Looking at a slightly longer period, Altria has seen its stock rise nearly 50% from levels of $38 in early 2022 to $56 now.
Market volatility post-election and Fed Chair Powell's remarks led to declines in major indices and specific stocks like Pfizer and Coca-Cola. Diversification in my Dividend Harvesting Portfolio mitigated losses, maintaining a 25.53% return on invested capital despite market retracements. Weekly dividend income is growing, with a projected annualized dividend income of $1,855.76, showcasing the power of reinvestment and compounding.