7 High-Yield Dividend Value Stocks to Buy
Dividend stocks provide a reliable income stream.
While near-term fluctuations in the stock market can be unpredictable, dividends are one of the few reliable sources of market returns. High-yielding dividend value stocks can serve as a great foundation for a long-term investment portfolio. One of the best places to start when identifying the best value stocks to buy is to look for companies with a track record of consistently boosting dividends over time. Here's a list of seven stocks to buy with solid dividend yields, price-earnings ratios of under 15 and five-year dividend growth rates of at least 20%, according to Morningstar.
Comerica (ticker: CMA)
Comerica is a bank based in Michigan with more than 90% of its loans derived from commercial lending. Analyst Eric Compton says Comerica is extremely levered to interest rates given nearly 90% of its loans are adjustable rate. That sensitivity has weighed on Comerica shares given the Federal Reserve has cut rates twice this year. Compton says Comerica should be able to out-earn its cost of capital in the long term thanks to its payments and wealth management fee revenue. Comerica pays a 4.1% dividend. Morningtar has a "buy" rating and $78 fair value estimate for CMA stock.
Hanesbrands (HBI)
Hanesbrands is the U.S. market share leader in innerwear, with more than double the share of its nearest competitor. Analyst David Swartz says the innerwear market, which accounted for 63% of Hanesbrands' 2018 revenue, has limited growth prospects. But Hanesbrands has been investing in higher-growth categories. Hanesbrands' 2018 Champion revenue was just $1.36 billion and accounted for 26% of total sales. Management is targeting $2 billion in Champion brand revenue by 2020. The stock pays a 3.8% dividend. Morningstar has a "buy" rating and $27.50 fair value estimate for HBI stock.
Interpublic Group of Companies (IPG)
Interpublic is one of the four largest advertising companies. Analyst Ali Mogharabi says Interpublic should remain a top player in advertising due to its solid organic revenue growth, its steady acquisition strategy, and its increasing focus on high-growth emerging markets and online advertising. Mogharabi says Interpublic should expand its operating margins further over the next several years as it continues its transition from traditional advertising to a diversified solutions company. Interpublic has a 4.5% dividend. Morningstar has a "buy" rating and $26 fair value estimate for IPG stock.
KeyCorp (KEY)
Compton says the KeyCorp acquisition of First Niagara completely changed the company's operating efficiency. First Niagara boosted deposits per branch and local market share, and it also provided KeyCorp with a chance to cross-sell its products. Compton says subsequent acquisitions of technology-based companies HelloWallet and Laurel Road are also savvy long-term moves. Even in a challenging credit environment, KeyCorp can fall back on its fee-income business, which Compton says makes up a meaningful portion of total revenue. KeyCorp pays a 4.2% dividend. Morningstar has a "buy" rating and $21 fair value estimate for KEY stock.
Morgan Stanley (MS)
Despite the current capital market cycle likely approaching its peak, analyst Michael Wong says there's still a lot to like about Morgan Stanley. Wong says management does an excellent job of taking a conservative approach to expenses and guidance. Even in an environment of falling interest rates, lower economic growth expectations and trade uncertainty, Morgan Stanley's return on equity of 12.1% in the first half of 2019 was solid. The stock has a 3.2% dividend. Morningstar has a "buy" rating and $51.50 fair value estimate for MS stock.
Royal Caribbean Cruises (RCL)
Royal Caribbean and its cruise operator peer group have experienced some volatility due to rising geopolitical tensions. However, analyst Jaime Katz says Royal Caribbean continues to build loyalty among its customers due to its innovation, value and overall high-quality vacation experience. Katz predicts cruise pricing should remain relatively stable and says the company's global operation helps mitigate regional weakness in Europe. Royal Caribbean should also benefit from a wave of baby boomer retirements coming years. The stock pays a 2.8% dividend. Morningstar has a "buy" rating and $131 fair value estimate for RCL stock.
Valero Energy Corp. (VLO)
Analyst Allen Good says Valero is a rare stock that is positioned to thrive in "almost any market environment." That relative safety coupled with the stock's 4% (and growing) dividend make it extremely appealing to value investors. Good says Valero's 14 refineries are unique compared to competitors because their complexity allows them to process lower-quality feedstock into high-value product. Capital discipline initiatives have increased free cash flow generation, and Good says long-term investors shouldn't worry about today's lower heavy crude spreads. Morningstar has a "buy" rating and $106 fair value estimate for VLO stock.
Top high-yield dividend value stocks:
-- Comerica (CMA)
-- Hanesbrands (HBI)
-- Interpublic Group of Companies (IPG)
-- KeyCorp (KEY)
-- Morgan Stanley (MS)
-- Royal Caribbean Cruises (RCL)
-- Valero Energy Corp. (VLO)
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