Even though interest rates are rising rapidly, the average dividend yield in the S&P 500 Index remains low at around 1.7%. As a result, income investors should focus on higher-yielding securities if they want additional income from their stock portfolios.
The good news is, investors do not have to sacrifice quality when buying higher-yielding stocks. For investors who want even more income, here are 3 high dividend stocks with yields above 5%.
Philip Morris International (PM)
Philip Morris International is a tobacco company that came into being when its parent company Altria (MO) spun off its international operations. Philip Morris sells cigarettes under the Marlboro brand, among others, internationally. Its sister company Altria sells the Marlboro brand (among others) in the U.S.
On October 19th, 2023, Philip Morris reported its Q3-2023 results for the period ending September 30th, 2023. For the quarter, the company posted net revenues of $9.1 billion, up 13.8% year-over-year, or up 9.3% on a currency-neutral basis. Shipment volume was up 2.2% collectively, with cigarette shipment volume down 0.5% and heated tobacco, a much smaller portion of the business, up 18% year-over-year.
The Swedish Mach acquisition has already started contributing to results, leading to the oral products’ shipment volumes growing by about 40x compared to last year. Adjusted EPS equaled $1.67, up 20.3% versus Q3-2022.
Thanks to the recession-resistant business model, Philip Morris has also been able to grow its dividend each year. PM stock has a dividend yield of 5.8%.
Enbridge Inc. (ENB)
Enbridge is an oil & gas company that operates the following segments: Liquids Pipelines, Gas Distributions, Energy Services, Gas Transmission & Midstream, and Green Power & Transmission. Enbridge bought Spectra Energy for $28 billion in 2016 and has become one of the largest midstream companies in North America.
Enbridge reported its third quarter earnings results on November 3. The company generated lower revenues during the quarter, but since commodity prices are mostly a pass-through cost for the company, lower revenues do not necessarily translate into lower profits. During the quarter, Enbridge managed to grow its adjusted EBITDA by 3% year over year. This was possible thanks to expenses dropping faster than revenues during the quarter. Enbridge was able to generate distributable cash flows of US$1.88 billion, or US$0.84 on a per-share basis, which was up by 2% year over year.
Enbridge put more than $10 billion worth of projects into service during the last two years, and more growth projects are under construction. According to management, growth will persist going forward, as Enbridge targets long-term cash flow per share growth of 5%-7%.
Enbridge’s cash generation is not very cyclical, thus the dividend seems safe, even during a recession. Enbridge is one of the largest pipeline operators in North America. Its vast asset footprint serves as a tremendous competitive advantage, as it would take tens of billions of dollars of investments from new market entrants if they wanted to be able to replace Enbridge’s assets.
ENB has increased its dividend for 27 consecutive years, and the stock currently yields 7.8%.
Franklin Resources (BEN)
Franklin Resources is a global asset manager with a long history. The company offers investment management (which makes up the bulk of fees the company collects) and related services to its customers, including sales, distribution, and shareholder servicing. As of September 30th, 2023, assets under management (AUM) totaled $1.374 trillion for the company.
On October 31st, 2023, Franklin Resources reported fourth quarter 2023 results for the period ending September 30th, 2023. (Franklin Resources’ fiscal year ends September 30th.) Total assets under management equaled $1.374 trillion, down $57.3 billion compared to last quarter, as a result of $48.8 billion of net market change, distributions, and other, $6.9 billion of long-term net outflows, and $1.6 billion of cash management net outflows. For the quarter, operating revenue totaled $1.986 billion, up 2% year-over-year. On an adjusted basis, net income equaled $427 million or $0.84 per share compared to $394 million or $0.78 per share in Q3 2022.
Franklin Resources has been acquiring alternative AUM through purchases such as Legg Mason, Lexington Partners, and Alcentra. It also expects to close its acquisition of Putnam Investments, which has $136 billion of AUM, in fourth quarter of calendar 2023. While this does not change the company’s long-term problem, there are opportunities available in the way of synergies and complementary product offerings.
BEN has increased its dividend for 43 consecutive years, placing the stock on the Dividend Aristocrats list. BEN shares have a current dividend yield of 5.0%.
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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