Three Stocks with Divided Distributions Worth Boosting Immediately
Are you looking to boost your portfolio's exposure to dividend-producing investments? Now's definitely the right time to do so. The Federal Reserve's anticipated interest rate decreases over the next few years will likely pull down dividend yields while also inflating the prices of dividend-yielding stocks. By investing now, you can secure above-average yields on any new dividend stocks before they catch the rising bullish trend.
The question arises, which dividend stocks should be prioritized for investment at the moment? Here's a glance at three top contenders.
1. British American Tobacco
If you believe that the global anti-smoking movement is making significant progress, then you're not entirely wrong. However, its progress is not as fast or substantial as some might anticipate.
The World Health Organization reports that there are still approximately 1.25 billion regular smokers scattered across the globe, a slight decrease from the 2000 count of 1.36 billion. The movement is losing momentum too, with the organization forecasting that there will still be almost 1.2 billion tobacco users by 2030.
In simpler terms, despite the organized and well-funded opposition, smoking remains prevalent. A considerable amount of profit can be earned from this still-growing, $1 trillion global business for years to come.
Enter British American Tobacco (BTI -0.33%).
Though it is a foreign company (for U.S. residents) with the majority of its business being conducted overseas, it is a company you are likely more familiar with than you may realize. This is the parent company to cigarette brands such as Kent, Lucky Strike, and Pall Mall, and its 2017 acquisition of Reynolds added renowned American brands, such as Newport and Camel, to its portfolio. It is even developing alternative products like heated tobacco and a vaping platform.
This diverse portfolio (geographically as well) ensures that British American's revenue stream remains steadfast. Following a modest improvement in organic revenue last year, sales through the first half of 2024 roughly match last year's total revenue at this point. Its bottom line is similarly consistent, ultimately providing the funds required to maintain continuous dividend payouts.
There's no real growth on the horizon here, to be clear. This is solely a dividend strategy. At a forward-looking yield of 8.7% based on a dividend that could potentially last for decades, however, British American Tobacco presents a superior, long-term income opportunity.
2. Bank of America
The reasons against investing in Bank of America (BAC -0.47%) right now are numerous. Chief among them are a slowing economy and falling interest rates, both of which negatively impact a bank's profitability. Additionally, the increasing number of loan delinquencies and defaults; Bank of America's net charge-offs through the first three quarters of the year have increased by 75%. Bank of America's modest forward-looking dividend yield of only 2.5% is not particularly enticing either.
There's a reason, however, that Bank of America shares have risen since late last year despite the cautionary predictions. These concerns are more rhetorical than real.
That's not to suggest that these problems should be disregarded. The economic climate is evolving, and could still worsen.
However, it is more prudent to respond to what is truly happening and what the plausible future may hold, rather than assuming the worst-case scenario is just around the corner. According to analysts, 2025 is expected to see a 4.6% increase in revenue driving per-share profits from this year's projected $3.25 to $3.64.
Suffice it to say, the situation is not nearly as dire as it's being portrayed.
Obviously, this stock's recent uptrend leaves less untapped upside potential. There is still ample room for growth, though. Wall Street's current consensus 12-month price target of $47 per share is still well above Bank of America stock's present price of around $41. Most of these analysts also continue to rate BofA stock as a strong buy despite its recent price increase.
3. Verizon
Last but not least, wireless telecom giant Verizon Communications (VZ -0.10%) should be considered among your list of dividend stocks to increase your holdings in now.
There isn't much growth in store for this company, and by extension, for its shareholders. Pew Research reveals that 97% of American adults already own a mobile phone - primarily smartphones. And while Verizon also continues to operate a landline business, that industry continues to shrink.
Although the company offers institutional-grade (factories, office buildings, etc.) connectivity services and derives benefits from individual customers needing more and more connected devices, much of any growth it generates is driven by merely population growth. By and large, it - and its peers/rivals like AT&T and T-Mobile - are essentially swapping customers.
What Verizon may lack in growth prospects, however, it more than compensates for in reliable dividends.
Basically, consumers are addicted to their mobile devices. Data from Reviews.org indicates that more than half of Americans confess to being addicted to their smartphones, with even more admitting they feel uneasy when they leave home without their phone. Separately, healthcare technology firm Harmony Healthcare IT reports that the average American spends over four hours per day looking at their mobile device screen.
So what? Regardless of their effects on health, these people are unlikely to quit using their devices anytime soon, if ever. They will continue to pay whatever is necessary to stay connected. Verizon merely needs to remain price-competitive, which it has.
The ongoing demand has led to consistent earnings, resulting in dependable income, leading to dependable dividends. In fact, this telecommunications company has diligently paid a quarterly dividend since transforming into the household name it is today in 2000. Moreover, it has increased its annual payout every year for the past 18 years without fail. This impressive growth trend doesn't seem to be slowing down anytime soon.
New investors will be connecting to this dividend-paying entity, while its future dividend yield remains strong at a reliable 6.5%. It's quite challenging to find a better yield from a company of such high stature.
Given the current market conditions and the anticipated interest rate decreases, it might be beneficial to consider diversifying your investment portfolio to include dividend-producing stocks that offer above-average yields. British American Tobacco, for instance, has a continuous dividend payout policy and offers a high dividend yield of 8.7%, making it an attractive choice for income-focused investors. Furthermore, in the realm of finance, considering companies like Bank of America, which has shown resilience despite current challenges and has a projected revenue increase for 2025, could be a wise investment decision for those looking to secure their financial future.
