With the market rattled from various negative events colliding, it’s time to get whatever you can from the market with high-yield dividend stocks to buy. Essentially, waiting for growth-centric names to provide robust capital gains might be a fool’s errand in this ecosystem. Instead, your attention should be directed to businesses that have the earnings to support passive income.
To be fair, after the ridiculous performances that the equities sector pulled off in 2020 and 2021, the idea of shifting to high-yield dividend stocks to buy might be a tad disappointing. Though passive income is always a plus, it’s a lot sexier to see your portfolio rise by 100% or 200%. I get that. At the same time, the convergence of inflation, geopolitical tensions and eroding consumer sentiment is enough to warrant a pivot.
For instance, should the economy fall into a recession as many analysts fear, those companies that provide steady yield tend to perform better than organizations geared strictly for growth. In this case, we’re going to explore balanced high-yield dividend stocks; that is, businesses that give you solid income with relevant revenue streams.
|LYB||LyondellBasell Industries N.V.||$89.73|
|PM||Philip Morris International Inc.||$97.95|
High-Yield Dividend Stocks: Phillips 66 (PSX)
While the hydrocarbon sector continues to be the bane of security analysts who have long called for removing dependencies on belligerent nations, the overriding reality is that fossil fuels lever tremendous energy density. Basically, with a gallon of gasoline, modern combustion-engine technology enables a two-ton SUV to travel 20 or 30 miles down the freeway.
Until that is no longer the case, it’s a reasonable bet that Phillips 66 (NYSE:PSX) is one of the best high-yield dividend stocks to buy. Focused mainly on the midstream and downstream aspects of the oil industry, Phillips 66 is an essential player in our transportation infrastructure. Even with growing demand for clean and sustainable energy alternatives, such a transition will take time.
Like it or not, PSX is relevant not a decade nor even a year from now but today. Backed by a strong performance in the first quarter of 2022 – a highlight being $582 million in net income – PSX is poised to be one of the sustainable high-yield dividend stocks to buy.
A common theme when you assess high-yield dividend stocks to buy – the reasonable names, not the junk fly-by-night operations – is that they tend to be boring. Case in point is applied sciences and industrial giant 3M (NYSE:MMM). Acquiring a rather glaring spotlight in 2020 because of its manufacturing of N95 respirators amid the coronavirus pandemic, 3M has gone relatively quiet.
Unfortunately, its low profile hasn’t prevented MMM stock from suffering a 24% year-to-date loss. However, with the company leveraging a massive global footprint – we’re talking over 60,000 products cutting across various industries and applications – 3M is unlikely to be irrelevant anytime soon.
In fairness, sometimes being a jack of all trades can be less ideal business wise. Still, 3M is one of the more undervalued names among high-yield dividend stocks to buy according to a basket of valuation metrics. As well, the company features consistently strong free cash flow, making it an interesting name on discount.
As one of the world’s largest companies in the plastics, chemicals and refining sectors, LyondellBasell (NYSE:LYB) is involved in a variety of applications, ranging from advanced polymer solutions to crude oil processing to industrial technologies. With hands in so many pertinent areas, LyondellBasell stands poised to weather a potential economic storm.
Interestingly, because the company is so relevant, LYB stock down only 1% YTD. Still, the trailing five days has been a rough one for the chemicals specialist, shedding 8% of market value. Despite the carnage, investors with a long-term outlook should consider adding shares to their portfolio.
As with 3M above, LyondellBasell is undervalued; actually, significantly so compared to the competition. For example, LYB’s forward price-earnings ratio of 6x is more “favorable” than its rivals, where the sector median is 15x forward earnings. LYB isn’t exactly the most exciting name among high-yield dividend stocks but it should steer you right during this storm.
High-Yield Dividend Stocks: NorthWestern Corp (NWE)
Whenever the theme of protection against economic headwinds come up, I like bringing up utility companies. If you’ve followed my work for some time, you probably know what I’m going to say next: bad things happen when people flip the switch and the light doesn’t turn on. It’s just a sociological reality that crimes tend to increase when the power is out.
Still, I’m mentioning NorthWestern Corp (NASDAQ:NWE) on this list of high-yield dividend stocks to buy for the positives. Primarily, in an environment where the purchasing power of the dollar keeps declining, households are expected to cut discretionary spending. You’re not going to cut utilities unless circumstances have gone dire.
Second, its regional focus on Montana, South Dakota and Nebraska could be an advantage as many millennials tired of the metropolitan lifestyle are headed to the northwestern states. Should work from home become a permanent dynamic – for full disclosure, I don’t think so – NWE could be quite a treasure among high-yield dividend stocks to buy.
Philip Morris (PM)
With millennials and Generation Z focused on environmental, social and governance (ESG) ideas, being incredibly cynical, especially with big tobacco firms is a major no-no. Then again, you don’t need to disclose your holdings to the world (unless you are required to for your profession). As uncouth as the topic may be, Philip Morris (NYSE:PM) is a relevant name among high-yield dividend stocks to buy.
According to a study out of Germany’s Institute of Labor Economics, “the propensity to become a smoker increases significantly during an economic downturn.” You can dive into the specifics if you’re curious by clicking the aforementioned link. However, the finding isn’t particularly surprising, given that cigarettes alleviate stress – or should I say, perceived to alleviate stress.
In addition, Philip Morris is heavily involved in the smoke-free products category. Of interest is that its IQOS platform is small and discreet, which matches the current trends among e-cigarette/vaping connoisseurs. While it’s not the most pleasant among high-yield dividend stocks to buy, PM gets the job done.
Billed as a leading midstream service provider connecting prolific supply basins with key market centers, Oneok (NYSE:OKE) specializes in the processing, storage and transportation of natural gas. Of course, with the “special military operation” in eastern Europe and its ongoing destabilization, natural gas has become a geopolitical football. Still, in the interim, this dynamic should benefit companies like Oneok.
One of the intriguing circumstances, though, is that this midstream firm hasn’t enjoyed the upside performance of its peers. On a YTD basis, OKE is down by 9%. At the same time, it does bring up the prospect that Oneok could be a great longer-term buy.
In Q1 2022, the company rang up revenue of $5.44 billion, up over 70% against the year-ago quarter. On net income, the improvement was only marginal but still, at $391 million, it exceeded Q1 2021’s tally by $5 million. With the global energy equation become increasingly tricky, OKE seems a solid bet among high-yield dividend stocks.
High-Yield Dividend Stocks: EPR Properties (EPR)
For the last entry for high-yield dividend stocks to buy, I’m going to dive into the speculative side of the spectrum with EPR Properties (NYSE:EPR). According to its website, EPR is the leading experiential real estate investment trust, specializing in select enduring experiential properties in the real estate industry.
What exactly does that mean? Basically, EPR is focused on properties such as theme parks, vacation resorts and cineplexes, among other high-traffic establishments. While the stock is volatile – it’s dropped nearly 15% in the trailing five days – the underlying business happens to be aligned with contemporary travel trends.
Despite the suffocating impact of inflation, Americans are still very eager to go out and make new memories with friends and family. Therefore, EPR caters to this demand for experiences. Still, you’ve got to be careful. With a dividend yield of 7.3%, it’s the highest on this list but it could be that way for a reason: among analysts, it’s a low-confidence affair.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.