Two Dividend-Yielding Shares Offering above 6% that Retirees Can Securely Maintain and Keep for Extended Periods
Gaining a higher than typical return from dividend payments can occasionally include risks. Stocks delivering high yields might be due for a reduction in their payouts if a company's financial foundation isn't robust enough to sustain its dividend payments. However, this doesn't suggest that all high-yielding stocks are hazardous investments.
Two suitable instances of stocks offering more than 6% and still suitable long-term alternatives for retirees are Pfizer (PFE -0.83%) and Verizon Communications (VZ -0.47%). Despite their high yields, these stocks are not as perilous as they might appear. Let me explain why.
1. Pfizer
Negative forecasts for the future have resulted in Pfizer's stock plunging more than 10% this year, contrary to an otherwise robust year in the marketplaces. The foremost healthcare stock is trading near its 52-week low, and its yield is remarkably high at around 6.8%.
Preserving that dividend is critical for CEO Albert Bourla, who, earlier this year, referred to it as a "sacred cow" for the business, acknowledging its importance for investors depending on the continual income. Pfizer has made uninterrupted dividend payments for 344 consecutive quarters and has been one of the most dependable income stocks in the healthcare sector.
The company recently revised its 2024 projection to a more optimistic outlook due to strong earnings performances. Yet, investors remain anxious about the future, including how it will adapt to a new U.S. administration and the potential repercussions of shifting regulations on its operations, as well as how it will expand while faced with multiple patent cliffs.
The reason I am not concerned about Pfizer is that, regardless of who holds office, there will always be a necessity for perpetual advancements in healthcare. Pfizer has been a pacesetter in this field for decades. Its acquisition of oncology company Seagen last year underscored its strategic growth strategy, as the purchase cost Pfizer $43 billion. It has likewise pursued smaller companies over the years to bolster its pipeline and strengthen its growth prospects.
As for patent cliffs, they are something that every healthcare company with a top-sell drug will inevitably encounter. By focusing on stretching and diversifying its operations, Pfizer is well-positioned to overcome these obstacles. Bourla previously expressed that by 2030, the company may incorporate as much as $25 billion in revenue from new drugs and acquisitions, which will help offset losses due to generics.
The company's earnings numbers have been uneven due to write-downs and fluctuating COVID-19-related sales. However, last quarter, Pfizer produced $6.1 billion in free cash flow, far surpassing what it paid in dividends ($2.4 billion). Although the company is undoubtedly encountering some hurdles, the business is in a much stronger condition than bears might suggest.
2. Verizon Communications
Retirees can anticipate another enticing yield from Verizon, currently generating 6.5%. The telecommunications company has also increased its dividend for 18 consecutive years. The latest boost came in September, when the company upticked its dividend by 1.9%. Although this is not a sizable augmentation, it remains a testament to Verizon's dedication to growing the payout.
It also occurs during a period when the enterprise is not growing rapidly. This year, the company is projecting a growth rate between 2% and 3.5% in its core wireless service business. In the long run, there could be more potential for Verizon to expand. Earlier this year, the company announced designs to acquire Frontier Communications, which will broaden its fiber reach to additional markets. The $20 billion deal would be advantageous to both Verizon's top and bottom lines as soon as it concludes. Frontier shareholders approved the deal, and it's slated to complete in early 2026.
Verizon is a market leader in telecom, but the stock has failed to impel investors in recent years as rising interest rates have made investors skeptical of capital-intensive ventures. As rates continue to decrease and investors demand safety, it might only be a matter of time before shares of Verizon commence to rally. Although the stock is not at its lowest for the year, it still contains an impressive value. Investors can acquire it today for less than 9 times next year's anticipated profits (based on analyst forecasts).
- In order to maintain its robust dividend payouts, Pfizer has been actively investing in its healthcare sector operations, with notable acquisitions like the purchase of Seagen last year. This strategic move not only strengthens Pfizer's growth prospects but also positions it well to navigate through patent cliffs and other challenges.
- Despite the current 2% to 3.5% growth rate in its core wireless service business, Verizon Communications is continually exploring financial opportunities, such as the proposed acquisition of Frontier Communications, which could significantly expand its fiber reach and boost both its top and bottom lines.
