3 Dividend Stocks With 4%+ Yields for Income Investors
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The stock market’s disappointment has been contained, as dividend yields are rising across the market. Many stocks that had low dividend yields due to rising stock prices have seen their dividend yields rise. Even quality companies with solid business models are seeing their dividend yields rise to multi-year highs.
The following three large-cap stocks have strong business models, industry leadership and high dividend yields of over 4%.
Intel (INTC) is the largest manufacturer of personal computer microprocessors, supplying approximately 85% of the world’s microprocessors. Intel also manufactures products such as servers and storage devices that are used in cloud services. Intel employs more than 120,000 people worldwide and currently has a market capitalization of $149 billion. The company’s annual turnover is approximately 67 billion dollars.
On July 28, Intel reported second-quarter earnings for the period ending June 30, 2022. Revenue fell 22% to $15.3 billion and was $2.6 billion below estimates. Adjusted turnover decreased by 17%. Adjusted earnings per share were $0.29, compared to $1.24 a year earlier, and were $0.41 less than expected.
PC-Centric business revenue fell 25% to $7.7 billion in the quarter, primarily due to component shortages and modem retirements. Datacenter and AI Group fell 16 percent to $4.6 billion. Network and Edge Group grew 11% to $2.3 billion on continued recovery from Covid-19. Mobileye and Accelerated Computing Systems and Graphics Group grew by 41% and 5%, respectively. Intel Foundry Services fell 54%.
Intel now expects to see revenue of $65 billion to $68 billion this year, below the $74.4 billion consensus. The company is now forecast to earn $2.60 per share in 2022, down from $4.16 and $3.79 previously.
Although Intel’s profits have been down this year, the company is generating more than enough cash flow to continue raising its dividend. On January 26, 2022, Intel increased its dividend by 5%. Intel generated $11.3 billion in free cash flow in 2021 and returned $8 billion to shareholders last year. Intel stopped increasing its dividend in 2014, but the company has increased it every year since. Overall, the dividend CAGR has been 5.3% since 2012. The yield on shares is currently 4.8%.
3M (MMM) sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has approximately 95,000 employees and serves customers in more than 200 countries.
3M announced on February 8 that it would raise its quarterly dividend by 0.7% to $1.49, extending the company’s dividend growth streak to 64 consecutive years.
3M is facing several lawsuits, including nearly 300,000 claims that earplugs used by its U.S. combat forces and manufactured by a subsidiary were defective. On July 26, 3M announced that Aearo Technologies had filed for bankruptcy as it plans to settle lawsuits over its combat earplugs.
At the same time, the company’s profitability is still strong. In the second quarter, revenue fell 2.8% to $8.7 billion, but was in line with expectations. Adjusted EPS of $2.48 compared to $2.59 in the prior year, but was $0.04 above estimates. Organic growth in the quarter was 1%, offset by a stronger US dollar. The company also announced that it would separate the Health Care segment into an independent entity, which would have had a turnover of 8.6 billion dollars in 2021. The deal is expected to be completed by the end of 2023.
3M provided an updated outlook for 2022, and the company now expects adjusted earnings per share of $10.30 to $10.80 for the year. With an annual dividend payment of $5.96 per share, 3M’s dividend is sufficient to cover earnings per share. 3M is not recession-proof, but the company has proven to be resilient during tough times in the business cycle. Although dividend growth has been faster than profit growth in recent years, 3M’s dividend history is practically unparalleled. When the next recession comes, it is likely that growth will slow, although we will not see the dividend at any point in danger of being cut.
The share yield is currently 4.9%.
Kraft Heinz (KHC) is a processed food and beverage company that owns a product portfolio that includes food products such as condiments, sauces, cheese and dairy products, frozen and chilled meals, and infant diet and nutrition. The company was formed in 2015 from the merger of Kraft Food Group and HJ Heinz Company, led by Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) and 3G Capital.
Kraft Heinz will report its second quarter results on July 27. The company’s net sales were $6.6 billion during the quarter, which was 1% less than in the previous year. This was still slightly better than what the analyst community had expected.
Kraft Heinz’s organic sales increased by 10%. Organic sales growth was possible thanks to price increases, while volumes decreased slightly. Forex headwinds and acquisitions led to a reported decline in revenue.
The company’s earnings per share were $0.70 in the second quarter, which slightly exceeded the consensus estimate. Earnings per share decreased by 10% compared to the previous year’s quarter due to difficult comparisons and adverse exchange rate changes. Kraft Heinz management said it sees organic revenue growing at a single-digit rate in 2022 and forecasts EBITDA of $5.8 billion to $6.0 billion this year.
Kraft Heinz’s brands are strong and familiar to most consumers, and food demand is not cyclical or dependent on economic conditions. The company should therefore be able to remain profitable during economic downturns, as most consumer goods companies do. Kraft Heinz’s brands serve as a competitive advantage.
The company does not have a long dividend history. The dividend looks sustainable at the current level and the dividend ratio is 60%.
The share yield is currently 4.3%.
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