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When many people think of making money with stocks, they automatically think of a company’s price appreciation. That makes sense; it’s simple and easy to understand: buy a stock at one price, sell it at a higher price and make money. Simple enough.
Even though it doesn’t get your attention capital gainsDividends can also be a great way to build wealth. It is also often a less stressful way to make money with stocks. You don’t have to worry about stock price movements – which are usually unpredictable and irrational – you just have to be patient and trust that you will make your quarterly (and sometimes monthly) payouts.
The following two companies are great options if you’re looking for consistent passive income that you can rely on for the long term. They all have high dividend yields and companies that have stood the test of time.
1. Altria Group
Altria (NYSE:MO) itself may not be the biggest household name, but some of the brands it owns – such as Marlboro, Black & Mild and Copenhagen – certainly are. It is the largest tobacco company in the country, with a 46.9% market share in cigarettes alone.
Altria recently announced a dividend increase, marking its 55th consecutive year. It is one of the few companies to be given the esteemed title of Dividend King (companies with at least 50 years of dividend increases).
Altria’s current quarterly dividend is $1.02, with a forward yield of about 8.1%. It’s routinely one of the highest returns you’ll find on an S&P 500 stock. Even as shares are up 20% this year, returns remain near the top.
As a tobacco leader, Altria has felt the impact of declining smoking rates, with U.S. adult smoking rates at historic lows. Volume has taken a hit, but the addictive nature of tobacco products has allowed Altria’s pricing power to offset some of this.
It’s by no means a sustainable long-term strategy to “just raise prices when volume drops,” but it will buy Altria for a while as it tries to become less dependent on cigarettes. While it has had some missteps in its smoke-free segment (see: the Juul disaster), its new product, NJOY, is gaining traction.
In the latest quarter, NJOY consumables shipment volume increased 14.7% from the previous quarter, and NJOY device shipments increased 80%. These figures helped increase the retail share by 1.3 share points to 5.5%. The retail share seems small, but it is progress for a product that has only been in Altria’s portfolio since June 2023.
Altria’s net profit in the first half of this year was more than $5.9 billion, while it paid out $3.4 billion in dividends during that period. As if more than fifty years of consecutive dividend increases weren’t reassuring enough, the payout ratio should reassure investors that they don’t have to worry about over-delivering on their dividend.
With a dividend yield of approximately 8%, investors can expect approximately $80 in dividend payments annually.
2. AT&T
AT&T (NYSE:T) has had its fair share of problems in recent years, but this year has seen a noticeable turnaround in share prices. The share price is up over 26% (through October 8), which is the most impressive run in a long time.
Part of AT&T’s recent success has been its refocus on its core telecom business. The company recently sold its 70% stake in DIRECTV, marking the end of a painful attempt to enter the media and entertainment industry. In retrospect, these ambitions only landed AT&T in deep debt and distracted from what really mattered.
One of the biggest takeaways from AT&T’s media push was that it had to cut its dividend by almost half in early 2022 to free up cash flow. The quarterly dividend fell to $0.28 after the cut and remains there today. Still, it has an impressive yield of around 5.1%.
Since AT&T refocused its telecom business, both postpaid phone subscribers and fiber subscribers have grown. In the latest quarter, AT&T added 1.6 million postpaid phone subscribers, with average revenue per user (ARPU) increasing to $56.42. It added 1.1 million fiber customers, with ARPU rising $2.30 to $69.
AT&T’s payout ratio is just over 64%, which is similar to the historical average, minus a few years during the COVID-19 pandemic.
AT&T’s financial results are returning to health and the company is paying down some of its massive long-term debt. There were some concerns that another dividend cut could be in the works, but AT&T’s free cash flow ($4.6 billion in the last quarter) shows the company can keep this up and possibly even raise it in the future can consider.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: If you had invested $1,000 when we doubled in 2010, you would have $21,022!*
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Apple: If you had invested $1,000 when we doubled in 2008, you would have $43,329!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $393,839!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
*Stock Advisor returns October 7, 2024
Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has one disclosure policy.
Looking for consistent passive income? These two high-yield dividend stocks are great options. was originally published by The Motley Fool