Options are shrinking for investors seeking yield.
The first Federal Reserve interest rate cut in a decade has yields on 10-year U.S. Treasury bonds at their lowest levels since 2016. Yields on a record amount of global debt is even dipping into negative territory. In addition, the S&P 500 is near all-time highs, and its cyclically-adjusted price-earnings ratio far exceeds 2007 highs. With stock valuations high and bond yields plummeting, investors looking for yields have few dependable options. Fortunately, each of these stocks has a yield of at least 6% and a "buy" rating from the Morningstar analyst team.
AbbVie (ticker: ABBV)
AbbVie is a global immunology, virology and oncology pharmaceutical company that was spun off from parent company Abbott Laboratories in 2013. Key drug Humira accounts for more than half of AbbVie's sales and revenue. Morningstar analyst Damien Conover says AbbVie's second quarter was solid and its product pipeline, which is weighted heavily toward cancer drugs, should pick up the slack of declining Humira sales over time. AbbVie's recent Allergan (AGN) buyout should also help boost cash flow. AbbVie has a 6.5% dividend yield. Morningstar has a "buy" rating and $102 fair value estimate for ABBV stock.
CenturyLink is the third-largest U.S. telephone service provider. The decline in CenturyLink's legacy landline business is understandably troubling for investors. However, analyst Matthew Dolgin says that while CenturyLink's second quarter wasn't necessarily reassuring, the stock is way too cheap after a nearly 50% one-year drop. CenturyLink cut its dividend by 53% in April, but the stock still pays out an impressive 9.2% yield. Dolgin says management is executing its long-term strategy well and investors will get paid for their patience. Morningstar has a "buy" rating and $18 fair value estimate for CTL stock.
Ford Motor Co. (F)
Analyst David Whiston says the new, streamlined Ford lineup finally consists only of vehicles customers want, eliminating the need for heavy incentives that eat into margins. Ford's autonomous vehicle technology partnership with Volkswagen (VWAPY) will help ease the cost burden of developing driverless models and keep Ford's dividend safe. Whiston says a string of crossover launches in the next two years could be a bullish catalyst. Even after gaining 23.5% year-to-date, Ford stock still pays a 6.3% dividend yield. Morningstar has a "buy" rating and $12 fair value estimate for F stock.
Invesco is one of the largest independent wealth management specialists in the world. Analyst Greggory Warren says the rise of low-cost index funds has made life extremely difficult for active asset managers like Invesco, which is reflected in the stock's 33% one-year decline. With organic revenue growth hard to come by these days, Warren says Invesco's acquisition of $225 billion in assets via its OppenheimerFunds buyout will help offset macro headwinds. Invesco has a 7.5% dividend yield. Morningstar has a "buy" rating and $23 fair value estimate for IVZ stock.
U.S. retail has been a treacherous landscape in the past several years. But after a 51% sell-off in the past year, analyst David Swartz says Macy's underlying value and 7.7% dividend are getting hard to ignore. Swartz says Macy's is struggling to stay relevant in the e-commerce age and has limited options for its 700 full-line stores. However, Macy's is currently trading at a forward earnings multiple of around 6.7, nearly a 50% discount to the overall retail sector. Morningstar has a "buy" rating and $27.50 fair value estimate for M stock.
Macerich Co. (MAC)
Macerich is a retail real estate investment trust that owns 55 million square feet of real estate, including interest in 51 regional U.S. shopping malls. One of the biggest overhangs for Macerich shares in the near-term is its vacant Sears real estate, but analyst Kevin Brown says management reassured investors about Sears properties on its recent earnings call. The company is exploring redeveloping Sears properties for potential use for retail, office space and hotels. Macerich has a 9.8% dividend yield. Morningstar has a "buy" rating and $57 fair value estimate for MAC stock.
Altria Group (MO)
Analyst Philip Gorham says Altria is no longer the U.S. cigarette pure play that it once was. Altria has a 10.2% stake in alcohol giant Anheuser Busch Inbev (BUD), and Gorham says its recent vaping and cannabis investments will likely soon be positive earnings contributors. While U.S. cigarette volumes will continue to fall, Gorham says Altria should be able to offset those declines in the near term by increasing prices. Altria has a 6.9% dividend yield. Morningstar has a "buy" rating and $58 fair value estimate for MO stock.
Williams Companies (WMB)
Williams Companies is a U.S. natural gas infrastructure company. Analyst Stephen Ellis says Williams management is executing well on its strategy of selling non-core assets, simplifying the company's business model, improving its balance sheet and lowering its cost of capital. Ellis says Williams should be able to reach its 4.2 times leverage goal by 2023 while it continues to grow its dividend at around a 5% annual rate. Today, Williams pays a 6.3% dividend yield. Morningstar has a "buy" rating and $28 fair value estimate for WMB stock.
Great high-yield dividend stocks to buy now:
-- AbbVie (ABBV)
-- CenturyLink (CTL)
-- Ford Motor Co. (F)
-- Invesco (IVZ)
-- Macy's (M)
-- Macerich Co. (MAC)
-- Altria Group (MO)
-- Williams Companies (WMB)
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