Whether you’re a risk-averse or risk-tolerant investor, the beauty of dividend stocks is that there’s something for everyone. Dividends are another way to pump growth into your portfolio in addition to share-price appreciation, and dividend-paying stocks span just about every sector, from healthcare to tech to consumer goods. Not only can high-quality dividend stocks provide you with another stream of income, but you can also use the money from dividends to put back into growing your portfolio.
If you’re overwhelmed by the sheer quantity of dividend stocks to choose from and want to narrow your options down to the best of the best, you’ve come to the right place. Today, we’ll look at two top dividend stocks with above-average yields of more than 3% (the typical stock in the S&P 500 has a dividend yield of about 2%).
Pfizer (NYSE:PFE) has become a household name in recent months because of its highly successful coronavirus vaccine partnership with BioNTech. But the company was already a pharmaceutical giant before the pandemic.
It also has a solid track record of paying and raising its shareholder dividends. At the time of this writing, the dividend stock yields an attractive 3.2%. Trading at less than $50 per share and around 21 times trailing earnings, Pfizer is also one of the most affordable healthcare stocks for long-term investors.
It has seen remarkable balance sheet growth over the past few quarters stemming from revenue generated by its COVID-19 vaccine (marketed as Comirnaty). And the company also has an exceptional lineup of top-selling drugs and vaccines that continue to rake in substantial profits.
The spinoff of its wildly underperforming generics unit Upjohn with Mylan to form Viatris late last year has essentially breathed new life into its balance sheet by allowing the company to focus on its first love, its pharmaceutical business.
Sales of Comirnaty excluded, Pfizer’s second-quarter revenue increased 10% operationally from the year-ago quarter. This healthy growth was driven by a range of factors, including double-digit revenue increases in its oncology, hospital, and rare-disease drug segments; continued high demand for blockbuster drugs like blood thinner Eliquis and Vyndaqel/Vyndamax, which treats transthyretin amyloid cardiomyopathy; and 88% year-over-year revenue growth from its biosimilars products.
If you factor in Comirnaty, revenue increased by a considerably higher rate of 86% operationally from the year-ago quarter. Comirnaty is slated to bring in $33.5 billion in sales this year. Pfizer and BioNTech also have multiple supply deals stretching out over the next few years. Given the rise of new coronavirus variants globally along with the strong possibility that more stockpiles of Comirnaty will be needed by nations around the world to cover the much-anticipated third booster shot, the vaccine is likely to be a long-term source of revenue growth.
Pfizer raised its full-year guidance in its most recent quarterly report and is expected to generate between $78 billion and $80 billion in revenue during the 12-month period. To offer context, the company generated revenue just shy of $42 billion in 2020.
As one of the world’s largest pharmaceutical companies with an established lineup of high-performing businesses and a healthy trajectory of growth ahead, not to mention its sweet dividend, Pfizer is attractive for stock traders of all investing styles and ages.
Verizon‘s (NYSE:VZ) dividend is even higher than Pfizer’s, yielding 4.5% at the time of this writing. The company is one of the three largest wireless carriers in the U.S., with fellow telecommunications giants AT&T and T-Mobile.
2020 was a mixed year for Verizon’s businesses and its balance sheet as the pandemic drove a decline in demand for its products and services. The good news is, the company has reported strong year-over-year growth in both the first and second quarters of 2021, signaling a robust recovery from any lags at the height of the pandemic.
Case in point: Verizon delivered increases in consolidated operating revenue of 4% in the first quarter and 11% in the second quarter. It also generated year-over-year revenue increases in its consumer, business, and media segments of 5%, 1%, and 10%’ respectively, in the first quarter. That was followed by spikes of 11%, 4%, and 50%, respectively, in the second quarter.
Total wireless-service revenue jumped 2% in the first quarter and 6% in the second quarter versus a year ago.
The stock isn’t known for rapid price gains or lightning-fast balance sheet growth. But Verizon is a quintessential value stock, and one of Warren Buffett’s favorites in the tech industry due to its consistent shareholder dividends.
Trading at around 12 times trailing earnings at less than $60 per share, the stock has remarkably attractive valuation to boot. Verizon’s substantial market presence and its record of gradual balance sheet increases, coupled with its attractive dividend, make the stock one that buy-and-hold investors can rely on for sustained portfolio growth for years to come.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.