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Headlines
- Market Volatility and Dividend Stocks: Despite recent market volatility, certain dividend stocks remain strong performers.
- High-Yield Options: CVS Health, AT&T, and Pfizer offer dividend yields of 4.6% and higher.
- Company Insights: Each company has unique strengths that contribute to their dividend sustainability and growth.
3 High-Yield Dividend Stocks for Steady Income in August and Beyond
The past week has been challenging for many portfolios. On Monday, August 5, the benchmark S&P 500 index began the trading session about 3% lower, resulting in a loss of about 9.4% from its previous peak on July 16.
The recent drop in the S&P 500 index is nearly enough to be considered an official correction. Fear that these losses could escalate into a full-blown market crash is causing apprehension among investors about purchasing stocks. Fortunately, several robust dividend payers offer high yields. At recent prices, shares of CVS Health (CVS -2.55%), AT&T (T -2.38%), and Pfizer (PFE -2.27%) offer dividend yields of 4.6% and higher. Here’s why they are worth considering:
- CVS Health
CVS Health (NYSE:CVS) is widely known for its retail pharmacy chain, but this represents only a small part of the healthcare conglomerate's vertically integrated operation. At recent prices, CVS Health stock offers a 4.6% dividend yield with potential for growth in the years ahead. The company has increased its dividend payout by 142% over the past decade.
In addition to being one of the largest pharmacy chains, CVS Health owns a leading pharmacy benefits management (PBM) business. PBMs play a crucial role in the American healthcare system by determining the level of reimbursement pharmacies receive from health insurance benefits managers for prescription fills.
Furthermore, CVS Health owns Aetna, a large health insurance benefits manager. This integration makes the company a formidable force for generating profits, as its employees can provide many of the benefits Aetna manages.
- AT&T
In 2022, AT&T reduced its dividend to compensate for the sale of its media assets. Currently, it operates as a telecommunications business with steady cash flow driven by mobile and broadband internet subscribers. At recent prices, the stock offers a substantial 5.8% dividend yield.
In 2023, AT&T became the last of America's big three mobile network operators to launch a fixed wireless internet service using a 5G network. Alongside the new fixed wireless option, AT&T's fiber optic internet service ended June with 8.8 million subscribers, a 14% increase from the previous year.
Over the past 12 months, AT&T paid out approximately $8.2 billion in dividends. With increasing broadband revenue driven by both fixed wireless and fiber, management anticipates between $17 billion and $18 billion in free cash flow this year. This is sufficient to significantly reduce the company's debt while maintaining and raising its dividend payout.
- Pfizer
Pfizer (NYSE:PFE), having spun off its consumer goods division a few years ago, now stands as America's largest innovative pharmaceutical company by revenue. At recent prices, it offers a 5.6% yield and the assurance of 15 years of consecutive annual payout increases.
Pfizer’s product lineup expanded significantly when it acquired Seagen, a cancer drug developer, for $43 billion last year. While the acquisition cost was substantial, Pfizer expected Seagen to contribute over $10 billion in annual sales by 2030. With six months of Seagen sales now on the books, Pfizer appears on track to meet this goal.
Pfizer took over sales of four marketed therapies from Seagen, including Padcev, which recently earned approval to treat first-line bladder cancer patients. This led to a 145% year-over-year increase in second-quarter sales of the drug, reaching $394 million. With a range of new treatments to sell, Pfizer has a solid chance of continuing its dividend-raising streak for another 15 years.
