Volatility has spiked in the stock market, the result of the ongoing Russia-Ukraine conflict as well as the Federal Reserve’s recent decision to raise interest rates for the first time since 2019.
In times of heightened market volatility, high dividend stocks are attractive as they distribute high yields, which can help offset a market downturn.
This article will discuss 3 quality dividend stocks that have high yields above 5%, and safe payouts.
High Dividend Stock: Altria Group (MO)
Altria Group was founded by Philip Morris in 1847. Today, it is a consumer staples giant. It sells the Marlboro cigarette brand in the U.S. and a number of other non-smokeable brands, including Skoal and Copenhagen. The flagship brand continues to be Marlboro, which commands over 40% retail market share in the U.S.
The business environment is challenged for Altria as the U.S. smoking rate has steadily declined for many years. In the 2021 fourth quarter, smokeable product revenue increased by 2.3% year-over-year. This dragged down total revenue, which declined 0.8% for the quarter.
That said, Altria still generates healthy cash flow, which it uses to buy back stock. In addition, the company has steadily cut costs for years. These efforts allow Altria to continue growing earnings-per-share, even while revenue stagnates. Fourth-quarter adjusted EPS came in at $1.09, up 10.1% year-over-year.
Altria remains highly profitable, which fuels its hefty dividend payout. Company management expects 2022 full-year diluted EPS guidance in a range of $4.79 to $4.93.
To generate future growth, Altria is counting on its investments in new product categories. Altria invested billions of dollars in Canadian marijuana producer Cronos Group for a 55% equity stake (including warrants) and a 35% equity stake in e-vapor manufacturer Juul Labs.
High Dividend Stock: Foot Locker (FL)
Foot Locker is an athletic apparel retailer, operating nearly 3,000 stores in 27 countries. Foot Locker generates annual revenue of nearly $9 billion.
The company has a long history of steady growth, although the past few years have been more challenging as the broader retail environment has struggled to compete with e-commerce.
Still, Foot Locker generated fourth-quarter revenue of $2.34 billion, which was up 6.8% year-over-year. This was due in part to a 0.8% comparable sales increase, which was attributable to apparel significantly outpacing the core footwear segment. Earnings-per-share came to $1.67 in Q4, which was 21 cents ahead of estimates.
For the year, earnings came to $7.77 for Foot Locker, a new record by a wide margin. The current year will likely see the company take a step back, as management expects sales to decline by about 5%, with comparable sales expected to decline by 9% this year.
Of course, it should be noted that Foot Locker’s extremely strong 2021 results set up a difficult comparison. And, Foot Locker’s high level of profitability allows the company to return lots of cash to shareholders.
Along with providing fourth-quarter financial results, the company also boosted its dividend by 33% to 40 cents per share quarterly. In addition, the board authorized a new share repurchase program of up to $1.2 billion. Therefore, the dividend appears well-covered, while the share repurchase authorization should help stabilize earnings-per-share.
High Dividend Stock: Gilead Sciences (GILD)
Gilead Sciences is a biotechnology company that operates with a clear focus on antiviral medication and treatments. Its main products include treatments for HIV, Hepatitis B, and Hepatitis C (HBV/HCV), but Gilead has also ventured into other areas such as oncology.
The company generated revenues of $7.2 billion during the quarter, which was above the analyst consensus estimate. The company’s top line declined by 2% compared to the previous year’s quarter. Gilead’s Hepatitis C franchise continued to shrink, but other businesses showed a better performance. Gilead’s COVID therapy Veklury (remdesivir) generated revenues of $1.4 billion during the quarter, making it one of Gilead’s major drugs during the quarter. Biktarvy, Gilead’s biggest drug in terms of sales volumes, continued to grow during the quarter, generating an attractive 19% sales increase.
Gilead generated earnings-per-share of $1.87 during the fourth quarter, which was easily above the consensus estimate.
Gilead has announced its revenue guidance range for 2022 with a midpoint of $24.1 billion, which implies a decline versus the previous year. This is due to the fact that Gilead’s COVID drug Veklury will likely see its sales shrink considerably during the current year as the pandemic-driven demand lessens.
Still, Gilead expects its EPS in a range of $6.20 to $6.70 during the current year. This is well above the company’s dividend payout which is why Gilead raised its dividend by 2.8%, to $0.73 per share, in February. With a 2022 projected dividend payout ratio of 45%, we view Gilead’s dividend as highly secure.
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.
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